Notes on market failure and the Paretian (Kaldor-Hicks) relevance and irrelevance of unfavourable externalities

The following are notes that have been distributed by me over the last few years to students in Environmental Economics at The University of Queensland. They give particular attention to whether externalities are Pareto or Kaldor-Hicks relevant from a policy point of view. Externalities are Kaldor-Hicks or Pareto irrelevant if no change is possible for which gainers could compensate losers. Both absolute and marginal externalities may be Kaldor-Hicks relevant. Infra-marginal negative externalities are often, but not always, Kaldor-Hicks irrelevant. There are at least two cases where such externalities can be relevant. First, the absolute impact of the negative externality may be so great that the source of the externality should be eliminated. Secondly, if the externality arises from production, its nature may depend on the type of production technique adopted. Although for the technique adopted, an infra-marginal negative externality occurs. That is Paretian irrelevant given that choice of this technique is the only available possibility, alternative techniques may actually be available in practice. Some of these may generate even smaller total external effects and be socially preferable. Both cases are outlined and illustrated in these notes. The analysis reveals the dangers of relying on marginalism for deciding on environmental policy. Total (external) effects are often of great social and economic importance and appropriate social choices cannot be made on the basis of marginalism alone.

Testing for Market Power in Multiple-Input, Multiple-Output Industries: The Australian Grains and Oilseeds Industries

Recent empirical studies have found significant evidence of departures from competition in the input side of the Australian bread, breakfast cereal and margarine end-product markets. For example, Griffith (2000) found that firms in some parts of the processing and marketing sector exerted market power when purchasing grains and oilseeds from farmers. As noted at the time, this result accorded well with the views of previous regulatory authorities (p.358). In the mid-1990s, the Prices Surveillence Authority (PSA 1994) determined that the markets for products contained in the Breakfast Cereals and Cooking Oils and Fats indexes were "not effectively competitive" (p.14). The PSA consequently maintained price surveillence on the major firms in this product group. The Griffith result is also consistent with the large number of legal judgements against firms in this sector over the past decade for price fixing or other types of non-competitive behaviour. For example, bread manufacturer George Weston was fined twice during 2000 for non-competitive conduct and the ACCC has also recently pursued and won cases against retailer Safeway in grains and oilseeds product lines.

Cdc25B activity is regulated by 14-3-3

In the G2 phase cell cycle checkpoint arrest, the cdc25-dependent activation of cyclin B/cdc2, a critical step in regulating entry into mitosis, is blocked. Studies in yeast have demonstrated that the inhibition of cdc25 function involves 14-3-3 binding to cdc25, In humans, two cdc25 isoforms have roles in G2/M progression, cdc25B and cdc25C, both bind 14-3-3, Abrogating 14-3-3 binding to cdc25C attenuates the G2 checkpoint arrest, but the contribution of 14-3-3 binding to the regulation of cdc25B function is unknown. Here we demonstrate that high level over-expression of cdc25B in G2 checkpoint arrested cells can activate cyclin B/cdc2 and overcome the checkpoint arrest. Mutation of the major 14-3-3 binding site, S323, or removal of the N-terminal regulatory domain are strong activating mutations, increasing the efficiency with which the mutant forms of cdc25B not only overcome the arrest, but also initiate aberrant mitosis, We also demonstrate that 14-3-3 binding to the S323 site on cdc25B blocks access of the substrate cyclin/cdks to the catalytic site of the enzyme, thereby directly inhibiting the activity of cdc25B, This provides direct mechanistic evidence that 14-3-3 binding to cdc25B can regulate its activity, thereby controlling progression into mitosis.

International market selection: Developing a model from Australian case studies

This paper develops a theory that firms seek out new country markets on the basis of expected commercial returns. These expectations depend on judgements about the attractiveness of the market and the firm's competitive position in it, which in turn are influenced by informants. It is the number and strengths of these informants that will underlie the probability of a country being identified and assessed as a new market by any firm.

Immunization with tumor-associated epitopes fused to an endoplasmic reticulum translocation signal sequence affords protection against tumors with down-regulated expression of MHC and peptide transporters

Treatment of human cancers with an inherent antigen-processing defect due to a loss of peptide transporters (TAP-1 and TAP-2) and/or MHC class I antigen expression remains a considerable challenge. There is now an increasing realization that tumor cells with down-regulated expression of TAP and/or MHC class I antigens display strong resistance to cytotoxic T lymphocyte (CTL)mediated immune control, and often fail to respond to the conventional immunotherapeutic protocols based on active immunization with tumor-associated epitopes (TAE) or adoptive transfer of tumor-specific T cells, In the present study, we describe a novel approach based on immunization with either genetically modified tumor cells or naked DNA vectors encoding TAE fused to an endoplasmic reticulum (ER) signal sequence (ER-TAE) which affords protection against challenge by melanoma cells with down-regulated expression of TAP-1/2 and MHC class I antigens. In contrast, animals immunized with a vaccine based on TAE alone showed no protection against tumor challenge. Although MHC-peptide tetramer analysis showed a similar frequency of antigen-specific CTL in both ER-TAE- and TAE-immunized mice, functional analysis revealed that CTL activated following immunization with ER-TAE displayed significantly higher avidity for TAE when compared to animals immunized with the TAE alone, These observations provide a new strategy in anti-cancer vaccine design that allows activation of a highly effective and well-defined CTL response against tumors with down-regulated expression of TAP and MHC class I antigens.