Information and the Change in the Paradigm in Economics

Nobel Prize lecture.Asymmetric Information;

On the Use of Information in Repeated Insurance Markets

We analyze the use of information in a repeated oligopolistic insurance market. To sustain collusion, insurance companies might refrain from changing their pricing schedules even if new information about risks becomes available. We therefore provide an explanation for the existence of "unused observables" that is information whic

Interview with Kenneth Arrow

Arrow argues that the biggest failures of economic theory are: our failure to explain the business cycle; the missing explanations for the size of fluctuations of prices; our failure to explain the causes of growth and of the spread of innovation. He then discusses several of the existing alternatives to the rational expectations paradigm. He tells the story of his dissertation, and how Koopmans wanted to decline his Nobel Prize.Finally, he discusses health care reform, and malaria in Africa.Health Care; Business Cycles; Fluctuations

Modeling the Use of Nonrenewable Resources Using a Genetic Algorithm

This paper shows, how a genetic algorithm (GA) can be used to model an economic process: the interaction of profit-maximizing oil-exploration firms that compete with each other for a limited amount of oil. After a brief introduction to the concept of multi-agent-modeling in economics, a GA-based resource-economic model is developed. Several model runs based on different economic policy assumptions are presented and discussed in order to show how the GA-model can be used to gain insight into the dynamic properties of economic systems. The remainder outlines deficiencies of GA-based multi-agent approaches and sketches how the present model can be improved.

Adverse Selection in the Annuity Market with Sequential and Simultaneous Insurance Demand

This paper investigates the effect of adverse selection on the private annuity market in a model with two periods of retirement. In order to introduce the existence of limited-time pension insurance, we assume that for each period of retirement separate contracts can be purchased. Demand for the two periods can be decided either sequentially or simultaneously. We show that different risk-groups prefer different types of contracts, and that only the sequential contracts, which are favourable for the long-living individuals, represent an equilibrium.annuity markets, adverse selection, uncertain lifetimes, equilibrium

The Welfare State, Redistribution and the Economy, Reciprocal Altruism, Consumer Rivalry and Second Best

Democratic countries with substantial inequality and where people believe that success depends on connections and luck induce political support for high tax rates and generous welfare states. Traditional wisdom is that such policies harm the economy, but there is not much evidence that countries with a large welfare state and substantial redistribution have worse economic performance and welfare. One important reason is that governments have been careful to invoke the principles of reciprocity and mutual obligations in the design of the welfare state. Unemployment benefits conditioned on work experience, no misconduct and search effort harm the economy less. Indeed, conditional benefits may even boost employment in an economy with efficiency wages. A second reason is that people care about relative incomes and become unhappy if others earn and consume much more than they do. This explains why people do not seem to get happier, even though societies grow richer and richer. With such consumer rivalry the government wishes to correct for the rat race, even if there is no need for redistribution, by taxing labour. A third reason is that in modern economies many distortions are present and removing one at a time may worsen economic performance. Conversely, increasing tax progression in economies with non-competitive labour markets induces wage moderation and boosts employment. A final reason is that countries with large welfare states typically introduce various progrowth policies as well.mutual obligations, altruism, relative incomes, happiness, redistributive taxation, demand management, second best, design of welfare state

On the Use of Information in Repeated Insurance Markets

We analyze the use of information in a repeated oligopolistic insurance market. To sustain collusion, insurance companies might refrain from changing their pricing schedules even if new information about risks becomes available. We therefore provide an explanation for the existence of "unused observables" that is information whichrepeated games; insurance markets; oligopoly; unused observables

Impact of financial crisis on loans growth and performance: A study on Affin Bank Berhad

This paper studies the impact of financial crisis on loans growth and performance of Affin Bank Berhad. The study found that the 1997/98 financial crisis had a negative impact on the Bank’s loan growth and net income. The current subprime crisis had not affected the Bank’s loan growth and net income in 2007 and 2008