Political economics and normative analysis

The approaches and opinions of economists often dominate public policy discussion. Economists have gained this privileged position partly (or perhaps mainly) because of the obvious relevance of their subject matter, but also because of the unified methodology (neo-classical economics) that the vast majority of modern economists bring to their analysis of policy problems and proposed solutions. The idea of Pareto efficiency and its potential trade-off with equity is a central idea that is understood by all economists and this common language provides the economics profession with a powerful voice in public affairs. The purpose of this paper is to review and reflect upon the way in which economists find themselves analysing and providing suggestions for social improvements and how this role has changed over roughly the last 60 years. We focus on the fundamental split in the public economics tradition between those that adhere to public finance and those that adhere to public choice. A pure public finance perspective views failures in society as failures of the market. The solutions are technical, as might be enacted by a benevolent dictator. The pure public choice view accepts (sometimes grudgingly) that markets may fail, but so, it insists, does politics. This signals institutional reforms to constrain the potential for political failure. Certain policy recommendations may be viewed as compatible with both traditions, but other policy proposals will be the opposite of that proposed within the other tradition. In recent years a political economics synthesis emerged. This accepts that institutions are very important and governments require constraints, but that some degree of benevolence on the part of policy makers should not be assumed non-existent. The implications for public policy from this approach are, however, much less clear and perhaps more piecemeal. We also discuss analyses of systematic failure, not so much on the part of markets or politicians, but by voters. Most clearly this could lead to populism and relaxing the idea that voters necessarily choose their interests. The implications for public policy are addressed. Throughout the paper we will relate the discussion to the experience of UK government policy-making.

Industrial Structure, Trade and Regional Economics : Market Segmentation

We consider a general equilibrium model a la Bhaskar (Review of Economic Studies 2002): there are complementarities across sectors, each of which comprise (many) heterogenous monopolistically competitive firms. Bhaskar's model is extended in two directions: production requires capital, and labour markets are segmented. Labour market segmentation models the difficulties of labour migrating across international barriers (in a trade context) or from a poor region to a richer one (in a regional context), whilst the assumption of a single capital market means that capital flows freely between countries or regions. The model is solved analytically and a closed form solution is provided. Adding labour market segmentation to Bhaskar's two-tier industrial structure allows us to study, inter alia, the impact of competition regulations on wages and - financial flows both in the regional and international context, and the output, welfare and financial implications of relaxing immigration laws. The analytical approach adopted allows us, not only to sign the effect of policies, but also to quantify their effects. Introducing capital as a factor of production improves the realism of the model and refi nes its empirically testable implications.

Where is the economics in spatial econometrics?

Spatial econometrics has been criticized by some economists because some model specifications have been driven by data-analytic considerations rather than having a firm foundation in economic theory. In particular this applies to the so-called W matrix, which is integral to the structure of endogenous and exogenous spatial lags, and to spatial error processes, and which are almost the sine qua non of spatial econometrics. Moreover it has been suggested that the significance of a spatially lagged dependent variable involving W may be misleading, since it may be simply picking up the effects of omitted spatially dependent variables, incorrectly suggesting the existence of a spillover mechanism. In this paper we review the theoretical and empirical rationale for network dependence and spatial externalities as embodied in spatially lagged variables, arguing that failing to acknowledge their presence at least leads to biased inference, can be a cause of inconsistent estimation, and leads to an incorrect understanding of true causal processes.

Comparing the early research performance of PhD graduates in labor economics in Europe and the USA

This paper analyzes the early research performance of PhD graduates in labor economics, addressing the following questions: Are there major productivity differences between graduates from American and European institutions? If so, how relevant is the quality of the training received (i.e. ranking of institution and supervisor) and the research environment in the subsequent job placement institution? The population under study consists of labor economics PhD graduates who received their degree in the years 2000 to 2005 in Europe or the USA. Research productivity is evaluated alternatively as the number of publications or the quality-adjusted number of publications of an individual. When restricting the analysis to the number of publications, results suggest a higher productivity by graduates from European universities than from USA universities, but this difference vanishes when accounting for the quality of the publication. The results also indicate that graduates placed at American institutions, in particular top ones, are likely to publish more quality-adjusted articles than their European counterparts. This may be because, when hired, they already have several good acceptances or because of more focused research efforts and clearer career incentives.

The economics of power and control

John Hardman Moore outlines his joint research with Oliver Hart, looking at the economics of power and control and the foundations of contractual incompleteness

Revealed cardinal preference

I prove that as long as we allow the marginal utility for money (lambda) to vary between purchases (similarly to the budget) then the quasi-linear and the ordinal budget-constrained models rationalize the same data. However, we know that lambda is approximately constant. I provide a simple constructive proof for the necessary and sufficient condition for the constant lambda rationalization, which I argue should replace the Generalized Axiom of Revealed Preference in empirical studies of consumer behavior. 'Go Cardinals!' It is the minimal requirement of any scientifi c theory that it is consistent with the data it is trying to explain. In the case of (Hicksian) consumer theory it was revealed preference -introduced by Samuelson (1938,1948) - that provided an empirical test to satisfy this need. At that time most of economic reasoning was done in terms of a competitive general equilibrium, a concept abstract enough so that it can be built on the ordinal preferences over baskets of goods - even if the extremely specialized ones of Arrow and Debreu. However, starting in the sixties, economics has moved beyond the 'invisible hand' explanation of how -even competitive- markets operate. A seemingly unavoidable step of this 'revolution' was that ever since, most economic research has been carried out in a partial equilibrium context. Now, the partial equilibrium approach does not mean that the rest of the markets are ignored, rather that they are held constant. In other words, there is a special commodity -call it money - that reflects the trade-offs of moving purchasing power across markets. As a result, the basic building block of consumer behavior in partial equilibrium is no longer the consumer's preferences over goods, rather her valuation of them, in terms of money. This new paradigm necessitates a new theory of revealed preference.

An Optimised Illustrative Investment Model Of The Economics Of Integrated Returns From CCS Deployment In The UK/UKCS

NORTH SEA STUDY OCCASIONAL PAPER No. 118

The Economics of CO2-EOR Cluster Developments in the UK Central North Sea/ Outer Moray Firth

NORTH SEA STUDY OCCASIONAL PAPER No. 123

A balance of questions: what can we ask of climate change economics?

The standard approach to the economics of climate change, which has its best known implementation in Nordhaus's DICE and RICE models (well described in Nordhaus's 2008 book, A Question of Balance) is not well equipped to deal with the possibility of catastrophe, since we are unable to evaluate a risk averse representative agent's expected utility when there is any signi cant probability of zero consumption. Whilst other authors attempt to develop new tools with which to address these problems, the simple solution proposed in this paper is to ask a question that the currently available tools of climate change economics are capable of answering. Rather than having agents optimally choosing a path (that differs from the recommendations of climate scientists) within models which cannot capture the essential features of the problem, I argue that economic models should be used to determine the savings and investment paths which implement climate targets that have been suggested in the physical science literature.

A critical analysis of dimensions and curve fitting practice in economics

When dealing with sustainability we are concerned with the biophysical as well as the monetary aspects of economic and ecological interactions. This multidimensional approach requires that special attention is given to dimensional issues in relation to curve fitting practice in economics. Unfortunately, many empirical and theoretical studies in economics, as well as in ecological economics, apply dimensional numbers in exponential or logarithmic functions. We show that it is an analytical error to put a dimensional unit x into exponential functions ( a x ) and logarithmic functions ( x a log ). Secondly, we investigate the conditions of data sets under which a particular logarithmic specification is superior to the usual regression specification. This analysis shows that logarithmic specification superiority in terms of least square norm is heavily dependent on the available data set. The last section deals with economists’ “curve fitting fetishism”. We propose that a distinction be made between curve fitting over past observations and the development of a theoretical or empirical law capable of maintaining its fitting power for any future observations. Finally we conclude this paper with several epistemological issues in relation to dimensions and curve fitting practice in economics

Abstract splines in Krein spaces

"Vegeu el resum a l'inici del document del fitxer adjunt."

Deliberative ecological economics: emergence and research issues

We discuss the recent emergence of "deliberative ecological economics", a field that highlights the potential of deliberation for improving environmental governance. We locate the emergence of this literature in the long concern in ecological economics over the policy implications of limited views of human action and its encounter with deliberative democracy scholarship and the model of communicative rationality as an alternative to utilitarianism. Considering criticisms over methods used and the focus of research in deliberative decision-making, we put forward a research agenda for deliberative ecological economics. Given the promising potential of deliberative processes for improving the effectiveness and legitimacy of environmental decision-making, work in this area could help advance both theory and practice in environmental governance.

Reconsideration of dimensions and curve fitting practice in economics ellaborating on Georgescu-Roegen’s economic methodology

This paper is to examine the proper use of dimensions and curve fitting practices elaborating on Georgescu-Roegen’s economic methodology in relation to the three main concerns of his epistemological orientation. Section 2 introduces two critical issues in relation to dimensions and curve fitting practices in economics in view of Georgescu-Roegen’s economic methodology. Section 3 deals with the logarithmic function (ln z) and shows that z must be a dimensionless pure number, otherwise it is nonsensical. Several unfortunate examples of this analytical error are presented including macroeconomic data analysis conducted by a representative figure in this field. Section 4 deals with the standard Cobb-Douglas function. It is shown that the operational meaning cannot be obtained for capital or labor within the Cobb-Douglas function. Section 4 also deals with economists "curve fitting fetishism". Section 5 concludes thispaper with several epistemological issues in relation to dimensions and curve fitting practices in economics.