Pluralism in economics: from epistemology to hermeneutics

The objective of this paper is to bring elements from the philosophical movement of hermeneutics and pragmatism to the discussion on methodology in economics, with a specific concern on the theory of truth. Our aim is to present the concept of the hermeneutic space, developed by the philosopher Richard Rorty, as a rational justification for pluralism in economics. We consider the hermeneutic space an interesting concept which should allow us to overcome the void left by the incapacity of epistemological theories to explain the evolution of sciences. It defends the idea that our culture, values and ways of interpreting things are what build the sciences, not any closed epistemological method. In this sense, pluralism is nothing more than letting the hermeneutic space work, without epistemological barriers, and understanding that this is desirable for the future development of economics as a science. This approach differs from all other methodological justifications for pluralism because it does not rely on any epistemological method, but assumes that the hermeneutic space can entirely fulfill the gap created by them

Essays on decision sciences: exploring cognition, information processing, and complexity

This thesis provides three original contributions to the field of Decision Sciences. The first contribution explores the field of heuristics and biases. New variations of the Cognitive Reflection Test (CRT--a test to measure "the ability or disposition to resist reporting the response that first comes to mind"), are provided. The original CRT (S. Frederick [2005] Journal of Economic Perspectives, v. 19:4, pp.24-42) has items in which the response is immediate--and erroneous. It is shown that by merely varying the numerical parameters of the problems, large deviations in response are found. Not only the final results are affected by the proposed variations, but so is processing fluency. It seems that numbers' magnitudes serve as a cue to activate system-2 type reasoning. The second contribution explores Managerial Algorithmics Theory (M. Moldoveanu [2009] Strategic Management Journal, v. 30, pp. 737-763); an ambitious research program that states that managers display cognitive choices with a "preference towards solving problems of low computational complexity". An empirical test of this hypothesis is conducted, with results showing that this premise is not supported. A number of problems are designed with the intent of testing the predictions from managerial algorithmics against the predictions of cognitive psychology. The results demonstrate (once again) that framing effects profoundly affect choice, and (an original insight) that managers are unable to distinguish computational complexity problem classes. The third contribution explores a new approach to a computationally complex problem in marketing: the shelf space allocation problem (M-H Yang [2001] European Journal of Operational Research, v. 131, pp.107--118). A new representation for a genetic algorithm is developed, and computational experiments demonstrate its feasibility as a practical solution method. These studies lie at the interface of psychology and economics (with bounded rationality and the heuristics and biases programme), psychology, strategy, and computational complexity, and heuristics for computationally hard problems in management science.

Assorted topics in monetary economics

Esta tese é uma coleção de quatro artigos em economia monetária escritos sob a supervisão do Professor Rubens Penha Cysne. O primeiro desses artigos calcula o viés presente em medidas do custo de bem-estar da inflação devido a não se levar em conta o potencial substitutivo de moedas que rendem juros, como depósitos bancários.[1] O segundo se concentra na questão teórica de se comparar os escopos dos tradicionais modelos money-in-the-utility-function e shopping-time através do estudo das propriedades das curvas de demanda que eles geram.[2] O terceiro desses trabalhos revisita um artigo clássico de Stanley Fischer sobre a correlação entre a taxa de crescimento da oferta monetária e a taxa de acumulação de capital no caminho de transição.[3] Finalmente, o quarto diz respeito à posição relativa de cada uma de seis medidas do custo de bem-estar da inflação (uma das quais é nova) em relação às outras cinco, e uma estimativa do erro relativo máximo em que o pesquisador pode incorrer devido a sua escolha de empregar uma dessas medidas qualquer vis-à-vis as outras.[4] This thesis collects four papers on monetary economics written under the supervision of Professor Rubens Penha Cysne. The first of these papers assesses the bias occuring in welfare-cost-of-inflation measures due to failing to take into consideration the substitution potential of interest-bearing monies such as bank deposits.[1] The second one tackles the theoretical issue of comparing the generality of the money-in-the-utility-function- and the shopping-time models by studying the properties of the demand curves they generate.[2] The third of these works revisits a classic paper by Stanley Fischer on the correlation between the growth rate of money supply and the rate of capital accumulation on the transition path.[3] Finally, the fourth one concerns the relative standing of each one of six measures of the welfare cost of inflation (one of which is new) with respect to the other five, and an estimate of the maximum relative error one can incur by choosing to employ a particular welfare measure in place of the others.[4] [1] Cysne, R.P., Turchick, D., 2010. Welfare costs of inflation when interest-bearing deposits are disregarded: A calculation of the bias. Journal of Economic Dynamics and Control 34, 1015-1030. [2] Cysne, R.P., Turchick, D., 2009. On the integrability of money-demand functions by the Sidrauski and the shopping-time models. Journal of Banking & Finance 33, 1555-1562. [3] Cysne, R.P., Turchick, D., 2010. Money supply and capital accumulation on the transition path revisited. Journal of Money, Credit and Banking 42, 1173-1184. [4] Cysne, R.P., Turchick, D., 2011. An ordering of measures of the welfare cost of inflation in economies with interest-bearing deposits. Macroeconomic Dynamics, forthcoming.

Three essays on education from the perspective of the economics of public setor

This work consists of three essays organized into chapters that seek to answer questions at first sight unrelated, but with one common denominator, which is the scarcity of public resources devoted to education, overall, especially in lower education. . The first chapter deals with the scarcity of resources devoted to education in a context of population aging. Two hypotheses were tested for Brazilian municipalities on the relationship between the aging of the population and educational expenditure. The first, already proven in the literature, is that there is an intergenerational conflict for resources and the increase of the share of elderly in the population reduces the educational expenditure. The second, proposed here for the first time, is that there should be reduction of competition for resources if there is a relationship of co-residence between young and old. The results indicated that an increase in the share of elderly reduces the educational expenditure per youth. But the results also illustrate that an increase in the share of elderly co-residing with youth (family arrangement more common in Latin American countries) raises the educational expenditure, which reflects a reduction of competition for resources between generations. The second chapter assesses the allocative efficiency of investments in Higher Education. Using the difference between first-year and last-year students’ scores from Enade aggregated by HEI as a product in the Stochastic Production Function, is possible to contribute with a new element in the literature aimed at estimating the production function of education. The results show that characteristics of institutions are the variables that best explain the performance of students, and that public institutions are more inefficient than the private ones. Finally, the third chapter presents evidence that the allocation of public resources in early childhood education is important for a better future school performance. In this chapter was calculated the effects of early childhood education on literacy scores of children attending the 2nd grade of elementary school. The results using OLS and propensity score matching show that students who started school at the ages to 5, 4, and 3 years had literacy scores between 12.22 and 19.54 points higher than the scores of those who began school at the ages 6 years or late. The results also suggest that the returns in terms of literacy scores diminish in relation to the number of years of early childhood education.

Why economics should be a modest and reasonable science

Unlike the methodological sciences such as mathematics and decision theory, which use the hypothetical-deductive method and may be fully expressed in complex mathematical models because their only truth criterion is logical consistency, the substantive sciences have as their truth criterion the correspondence to reality, adopt an empirical-deductive method, and are supposed to generalize from and often unreliable regularities and tendencies. Given this assumption, it is very difficult for economists to predict economic behavior, particularly major financial crises.

Avaliação de floresta nativa do bioma Mata Atlântica: uma aplicação da metodologia de custo de reposição

O presente trabalho investigou o valor de uma floresta nativa no bioma Mata Atlântica. Para isso, utilizou-se da metodologia de custo de reposição. Além disso, buscou-se explicitar os principais fatores determinantes desse valor, bem como seus impactos. Foram formuladas quatro hipóteses de pesquisa, a saber, i) o nível de degradação da área não influencia o custo total de reposição da floresta nativa; ii) relevos mais acidentados das áreas a serem restauradas não influenciam o custo total de reposição da floresta nativa; iii) a distância da área a ser restaurada em relação ao centro urbano mais próximo não influencia o custo total de reposição da floresta nativa; e iv) a distância da área a ser restaurada em relação ao viveiro produtor de mudas não influencia o custo total de reposição da floresta nativa. Para chegar aos resultados foram realizados testes simples de diferença de médias para as variáveis qualitativas. Os resultados encontrados foram de que pode-se rejeitar a hipótese de que relevos mais acidentados das áreas a serem restauradas não influenciam o custo total de reposição da floresta nativa. No entanto, não se rejeitam as hipóteses de que a distância da área a ser restaurada em relação ao centro urbano mais próximo não influencia o custo total de reposição da floresta nativa e de que a distância da área a ser restaurada em relação ao viveiro produtor de mudas não influencia o custo total de reposição da floresta nativa. Após essa primeira aproximação, é realizada uma série de regressões, utilizando o modelo clássico de mínimos quadrados ordinários (MQO). Fez-se uma análise de sensibilidade dos resultados obtidos. O levantamento de dados foi obtido por meio da realização de uma pesquisa (questionário) a uma série de entidades do setor. Foram testadas as quatro hipóteses. De acordo com os testes realizados, pode-se dizer que a hipótese 2 sobre o impacto de um relevo mais acidentado das áreas a serem restauradas no custo total de reposição da floresta nativa se mostrou não significativa em todos os modelos. No entanto, a hipótese 1 do impacto do nível de degradação sobre o valor do projeto foi rejeitada em todos os modelos. A hipótese 3 do impacto da localização da área em relação ao centro urbano sobre o valor do projeto foi rejeitada em dois modelos e a hipótese 4 de que a distância da área a ser restaurada em relação ao viveiro produtor de mudas não influencia o custo total de reposição da floresta nativa foi rejeitada em um modelo. Chegou-se ao resultado de R$22 mil/hectare para o custo de reposição de uma floresta nativa do bioma Mata Atlântica. Esse tipo de estudo foi contextualizado no desenvolvimento feito pela economia ambiental ao longo do tempo, ressaltando suas principais características. Nas conclusões destaca-se os principais pontos do trabalho e são discutidas uma série de implicações teóricas e gerenciais do presente estudo, bem como apresentadas sugestões para novos estudos nessa área.

Análise dos aspectos envolvidos na condução de contratos de terceirização de tecnologia da informação

Terceirização de Serviços de Tecnologia da Informação (TI) é uma prática crescente entre organizações de diversos portes e setores, onde uma relação entre contratante e contratado usualmente regida por contratos. Contratos são dispositivos destinados a regular obrigações e direitos entre as partes. Em função da impossibilidade das partes preverem todas as contingências futuras e também devido à imprecisão da linguagem escrita, contratos são usualmente reconhecidos em Economia como sendo fundamentalmente incompletos. Disso se origina a possibilidade de classificar contratos como predominantemente formais, aqueles cuja estrutura escrita apresenta mecanismos de completude suficiente para conduzir o relacionamento entre as partes, e predominantemente relacionais, aqueles cuja estrutura formal é insuficiente para coordenar o relacionamento, e que demandam mecanismos adicionais de comunicação e interação para que o relacionamento entre as partes ocorra de adequadamente em torno do objeto contratado. Dentre os mecanismos usados em contratos formais para sinalizar às partes os comportamentos desejados, inclui-se a estrutura de incentivos. Pouco se estudou sobre o efeito que a combinação de estruturas de incentivos e mecanismos relacionais tem sobre o andamento dos contratos. Este estudo analisa os efeitos de mecanismos formais de estruturas de incentivos e os mecanismos relacionais sobre o andamento do contrato, usando como contexto o cenário de contratações de serviços de terceirização de Tecnologia da Informação (TI). Como resultados dos três capítulos principais deste estudo, configurados no formato de artigos acadêmicos, são apresentados altos poderes explicativos das interações entre estruturas de incentivos, governança relacional, comportamento do contratado e expectativa de sucesso dos contratos. Da mesma forma, antecedentes e resultantes são analisados e discutidos. Do ponto de vista da contribuição para a prática gerencial, o trabalho como um todo contribui para melhorar decisões de contratação de serviços de TI, formulação de contratos mais efetivos, e apoio na escolha dos mecanismos de contratação mais adequados ao contexto do contratante.

Managerial turnover and leverage under a takeover threat

How do shareholders perceive managers who lever up under a takeover threat? Increasing leverage conveys good news if it reflects management's ability to enhance value. It conveys bad news, though, if inefficient managers are more pressured to lever up. This paper demonstrates that negative (positive) updating prevails when takeover costs are small (large). Managers who leve r up to end a takeover threat thus may commit to an increase in the firm's value and yet increase their chances of being replaced by their shareholders. The model predicts that intraindustry leverage is less dispersed when takeover costs are low.

Implications of ernbodied technological change for development economics

Employing a embodied technologic change model in which the time decision of scrapping old vintages of capital and adopt newer one is endogenous we show that the elasticity of substitutions among capital and labor plays a key role in determining the optimum life span of capital. In particular, for the CD case the life span of capital does not depend on the relative price of it. The estimation of the model's long-run investment function shows, for a Panel data set consisting of 125 economies for 25 years, that the price elasticity of investment is lower than one; we rejected the CD specification. Our calibration for the US suggests 0.4 for the technical elasticity of substitution. In order to get a theoretical consistent concept of aggregate capital we derive the relative price profile for a shadow second-hand market for capital. The shape of the model's theoretical price curve reproduces the empírical estimation of it. \lVe plug the calibrate version of the long-run solution of the model to a cross-section of economies data set to get the implied TFP, that is, the part of the productivity which is not explained by the model. We show that the mo dei represent a good improvement, comparing to the standard neoc!assical growth model with CD production function and disembodied technical change, in accounting the world diversity in productivity. In addition the model describes the fact that a very poor economy can experience fast growth based on capital accumulation until the point of becoming a middle income economy; from this point on it has to rely on TFP increase in order to keep growing.

Two heads may not be better than one : corporate board structure, managerial self-dealing,and common agency

This paper compares the effects on corporate performance and managerial self-dealing in a situation in which the CEO reports to a single Board that is responsible for both monitoring management and establishing performance targets to an alternative in which the CEO reports to two Boards, each responsible for a different task. The equilibrium set of the common agency game induced by the dual board structure is fully characterized. Compared to a single board, a dual board demands less aggressive performance targets from the CEO, but exerts more monitoring. A consequence of the first feature is that the CEO always exerts less effort toward production with a dual board. The effect of a dual board on CEO self-dealing is ambiguous: there are equilibria in which, in spite of the higher monitoring, self-dealing is higher in a dual system. The model indicates that the strategic interdependence generated by the assignment of different tasks to different boards may yield results that are far from the desired ones.

Credible managerial vision

We develop a model in which managers choose whether or not to reveal their “vision” for the future of their companies. Visionary managers are valuable because they generate incentives for workers to develop profitable innovations for the firm. However, managerial vision is not necessarily credible. After workers have invested in developing ideas, there is no a priori reason for a manager to keep her earlier promises when new contingencies arise and make it profitable to change the firm’s strategic direction. We show that credible managerial vision will arise in equilibrium when managers have career concerns. In order to credibly implement their visions, managers issue public “mission statements” to motivate workers. Mission statements are not legally binding contracts and their value comes solely from their effects on managerial opportunities outside the firm. Among the new implications of the model, we show that managerial vision is more likely to be credible in industries in which managerial turnover is high and in which the managerial skill premium is high. Differently from the related literature that take managerial biases as exogenous, we show not only that biases increase workers’ incentives, but also that the need to provide incentives to workers increases managers’ incentives to become credible visionaries.

Diretor da London School of Economics, Craig Calhoun, é recebido pela FGV/DAPP durante visita institucional

O Diretor da London School of Economics and Political Science (LSE), Craig Calhoun, foi recebido na terça-feira (29) pelo Presidente da Fundação Getulio Vargas, Carlos Ivan Simonsen Leal, durante visita institucional à FGV. Pela manhã, os presidentes das duas instituições tiveram uma reunião com a presença do Secretário-Executivo da LSE, Hugh Martin, do Diretor da DAPP, Marco Aurélio Ruediger, do Diretor da EPGE (Escola Brasileira de Economia e Finanças), Rubens Cysne, da Diretora-Executiva da Editora FGV, Marieta de Moraes Ferreira, e do Prof. Antônio Carlos Porto Gonçalves, também da EPGE. No encontro, foi discutido o maior intercâmbio de alunos entre a LSE e a FGV e em projetos de pesquisa. À tarde, Calhoun realizou uma visita à sede da DAPP, onde participou de uma reunião de apresentação dos métodos de monitoramento e análise de rede desenvolvidos pela DAPP. Participaram da reunião, além do Diretor da DAPP, os pesquisadores Roberta Novis, Amaro Grassi e Pedro Lenhard.

Assesment of port governance in Brazil: a managerial perspective on the port of Santos

The role of maritime transportation within international trade was drastically revamped during the inception of the globalization process, which enhanced the contribution of ports in world economy as main logistics gateways for global production and trade. As a result, the relationship between ports and governments has changed. Devolution ideologies that had been applied in other industries decades ago were now being considered by governments for the port industry. Many central governments sought to extract themselves from commercial activities of ports and devolving this responsibility to local governments, communities or private entities. The institution of devolution programs also changed the governance structures of ports further influencing port performance. Consequently, the recent worldwide trend towards devolution in the port industry has spawned considerable variety of governance models that are now set in place around the world. While some countries opt for more decentralized structures others prefer to retain a centralization of powers. In this way some governments consider local features and national integration more than others, which ultimately influence the success of a port reform implementation. Nevertheless, the prime intent of governments is now to maximize the efficiency and performance of their domestic ports. This issue intends to examine the changed port governance environment in Brazil by determining how and why imposed port reforms of the Brazilian federal government have been affecting the overall performance of the national port system, over the last decades, using the Port of Santos as a sample upon an exploratory study. For that, the study will use a contingency theory-based framework – the Matching Framework - that views port performance as a function of the fit among the dimensions of external operating environment, strategy and structure of a port organization. In essence, the greater the fit among these dimensions the better the expected performance of a port will be, and vice-versa. Port managers, government officials and academics alike shall be interested in this document.