The Permanent Income Hypothesis: A Test on Czech Privatisation

Since the late eighties, economists have been regarding the transition from command to market economies in Central and Eastern Europe with intense interest. In addition to studying the transition per se, they have begun using the region as a testing ground on which to investigate the validity of certain classic economic propositions. In his research, comprising three articles written in English and totalling 40 pages, Mr. Hanousek uses the so-called "Czech national experiment" (voucher privatisation scheme) to test the permanent income hypothesis (PIH). He took as his inspiration Kreinin's recommendation: "Since data concerning the behaviour of windfall income recipients is relatively scanty, and since such data can constitute an important test of the permanent income hypothesis, it is of interest to bring to bear on the hypothesis whatever information is available". Mr. Hanousek argues that, since the transfer of property to Czech citizens from 1992 to 1994 through the voucher scheme was not anticipated, it can be regarded as windfall income. The average size of the windfall was more than three month's salary and over 60 percent of the Czech population received this unexpected income. Furthermore, there are other reasons for conducting such an analysis in the Czech Republic. Firstly, the privatisation process took place quickly. Secondly, both the economy and consumer behaviour have been very stable. Thirdly, out of a total population of 10 million Czech citizens, an astonishing 6 million, that is, virtually every household, participated in the scheme. Thus Czech voucher privatisation provides a sample for testing the PIH almost equivalent to a full population, thus avoiding problems with the distribution of windfalls. Compare this, for instance with the fact that only 4% of the Israeli urban population received personal restitution from Germany, while the number of veterans who received the National Service Life Insurance Dividends amounted to less than 9% of the US population and were concentrated in certain age groups. But to begin with, Mr. Hanousek considers the question of whether the public percieves the transfer from the state to individual as an increase in net wealth. It can be argued that the state is only divesting itself of assets that would otherwise provide a future source of transfers. According to this argument, assigning these assets to individuals creates an offsetting change in the present value of potential future transfers so that individuals are no better off after the transfer. Mr. Hanousek disagrees with this approach. He points out that a change in the ownership of inefficient state-owned enterprises should lead to higher efficiency, which alone increases the value of enterprises and creates a windfall increase in citizens' portfolios. More importantly, the state and individuals had very different preferences during the transition. Despite government propaganda, it is doubtful that citizens of former communist countries viewed government-owned enterprises as being operated in the citizens' best interest. Moreover, it is unlikely that the public fully comprehended the sophisticated links between the state budget, state-owned enterprises, and transfers to individuals. Finally, the transfers were not equal across the population. Mr. Hanousek conducted a survey on 1263 individuals, dividing them into four monthly earnings categories. After determining whether the respondent had participated in the voucher process, he asked those who had how much of what they received from voucher privatisation had been (a) spent on goods and services, (b) invested elsewhere, (c) transferred to newly emerging pension funds, (d) given to a family member, and (e) retained in their original form as an investment. Both the mean and the variance of the windfall rise with income. He obtained similar results with respect to education, where the mean (median) windfall for those with a basic school education was 13,600 Czech Crowns (CZK), a figure that increased to 15,000 CZK for those with a high school education without exams, 19,900 CZK for high school graduates with exams, and 24,600 CZK for university graduates. Mr. Hanousek concludes that it can be argued that higher income (and better educated) groups allocated their vouchers or timed the disposition of their shares better. He turns next to an analysis of how respondents reported using their windfalls. The key result is that only a relatively small number of individuals reported spending on goods. Overall, the results provide strong support for the permanent income hypothesis, the only apparent deviation being the fact that both men and women aged 26 to 35 apparently consume more than they should if the windfall were annuitised. This finding is still fully consistent with the PIH, however, if this group is at a stage in their life-cycle where, without the windfall, they would be borrowing to finance consumption associated with family formation etc. Indeed, the PIH predicts that individuals who would otherwise borrow to finance consumption would consume the windfall up to the level equal to the annuitised fraction of the increase in lifetime income plus the full amount of the previously planned borrowing for consumption. Greater consumption would then be financed, not from investing the windfall, but from avoidance of future repayment obligations for debts that would have been incurred without the windfall.

Problem of Tragedy and Tragic Consciousness in Russia at the turn of the 19th Century

This project intertwines philosophical and historico-literary themes, taking as its starting point the concept of tragic consciousness inherent in the epoch of classicism. The research work makes use of ontological categories in order to describe the underlying principles of the image of the world which was created in philosophical and scientific theories of the 17th century as well as in contemporary drama. Using these categories brought Mr. Vilk to the conclusion that the classical picture of the world implied a certain dualism; not the Manichaean division between light and darkness but the discrimination between nature and absolute being, i.e. God. Mr. Vilk begins with an examination of the philosophical essence of French classical theatre of the XVII and XVIII centuries. The history of French classical tragedy can be divided into three periods: from the mid 17th to early 19th centuries when it triumphed all over France and exerted a powerful influence over almost all European countries; followed by the period of its rejection by the Romantics, who declared classicism to be "artificial and rational"; and finally our own century which has taken a more moderate line. Nevertheless, French classical tragedy has never fully recovered its status. Instead, it is ancient tragedy and the works of Shakespeare that are regarded to be the most adequate embodiment of the tragic. Consequently they still provoke a great number of new interpretations ranging from specialised literary criticism to more philosophical rumination. An important feature of classical tragedy is a system of rules and unities which reveals a hidden ontological structure of the world. The ontological picture of the dramatic world can be described in categories worked out by medieval philosophy - being, essence and existence. The first category is to be understood as a tendency toward permanency and stability (within eternity) connected with this or that fragment of dramatic reality. The second implies a certain set of permanent elements that make up the reality. And the third - existence - should be understood as "an act of being", as a realisation of permanently renewed processes of life. All of these categories can be found in every artistic reality but the accents put on one or another and their interrelations create different ontological perspectives. Mr. Vilk plots the movement of thought, expressed in both philosophical and scientific discourses, away from Aristotle's essential forms, and towards a prioritising of existence, and shows how new forms of literature and drama structured the world according to these evolving requirements. At the same time the world created in classical tragedy fully preserves another ontological paradigm - being - as a fundamental permanence. As far as the tragic hero's motivations are concerned this paradigm is revealed in the dedication of his whole self to some cause, and his oath of fidelity, attitudes which shape his behaviour. It may be the idea of the State, or personal honour, or something borrowed from the emotional sphere, passionate love. Mr. Vilk views the conflicting ambivalence of existence and being, duty as responsibility and duty as fidelity, as underlying the main conflict of classical tragedy of the 17th century. Having plotted the movement of the being/existence duality through its manifestations in 17th century tragedy, Mr. Vilk moves to the 18th century, when tragedy took a philosophical turn. A dualistic view of the world became supplanted by the Enlightenment idea of a natural law, rooted in nature. The main point of tragedy now was to reveal that such conflicts as might take place had an anti-rational nature, that they arose as the result of a kind of superstition caused by social reasons. These themes Mr. Vilk now pursues through Russian dramatists of the 18th and early 19th centuries. He begins with Sumarakov, whose philosophical thought has a religious bias. According to Sumarakov, the dualism of the divineness and naturalness of man is on the one hand an eternal paradox, and on the other, a moral challenge for humans to try to unite the two opposites. His early tragedies are not concerned with social evils or the triumph of natural feelings and human reason, but rather the tragic disharmony in the nature of man and the world. Mr Vilk turns next to the work of Kniazhnin. He is particularly keen to rescue his reputation from the judgements of critics who accuse him of being imitative, and in order to do so, analyses in detail the tragedy "Dido", in which Kniazhnin makes an attempt to revive the image of great heroes and city-founders. Aeneas represents the idea of the "being" of Troy, his destiny is the re-establishment of the city (the future Rome). The moral aspect behind this idea is faithfulness, he devotes himself to Gods. Dido is also the creator of a city, endowed with "natural powers" and abilities, but her creation is lacking internal stability grounded in "being". The unity of the two motives is only achieved through Dido's sacrifice of herself and her city to Aeneus. Mr Vilk's next subject is Kheraskov, whose peculiarity lies in the influence of free-mason mysticism on his work. This section deals with one of the most important philosophical assumptions contained in contemporary free-mason literature of the time - the idea of the trinitarian hierarchy inherent in man and the world: body - soul - spirit, and nature - law - grace. Finally, Mr. Vilk assess the work of Ozerov, the last major Russian tragedian. The tragedies which earned him fame, "Oedipus in Athens", "Fingal" and "Dmitri Donskoi", present a compromise between the Enlightenment's emphasis on harmony and ontological tragic conflict. But it is in "Polixene" that a real meeting of the Russian tradition with the age-old history of the genre takes place. The male and female characters of "Polixene" distinctly express the elements of "being" and "existence". Each of the participants of the conflict possesses some dominant characteristic personifying a certain indispensable part of the moral world, a certain "virtue". But their independent efforts are unable to overcome the ontological gap separating them. The end of the tragedy - Polixene's sacrificial self-immolation - paradoxically combines the glorification of each party involved in the conflict, and their condemnation. The final part of Mr. Vilk's research deals with the influence of "Polixene" upon subsequent dramatic art. In this respect Katenin's "Andromacha", inspired by "Polixene", is important to mention. In "Andromacha" a decisive divergence from the principles of the philosophical tragedy of Russian classicism and the ontology of classicism occurs: a new character appears as an independent personality, directed by his private interest. It was Katenin who was to become the intermediary between Pushkin and classical tragedy.