Selling a Single Item with Negative Externalities

We consider the problem of regulating products with negative externalities to a third party that is neither the buyer nor the seller, but where both the buyer and seller can take steps to mitigate the externality. The motivating example to have in mind is the sale of Internet-of-Things (IoT) devices, many of which have historically been compromised for DDoS attacks that disrupted Internet-wide services such as Twitter. Neither the buyer (i.e., consumers) nor seller (i.e., IoT manufacturers) was known to suffer from the attack, but both have the power to expend effort to secure their devices. We consider a regulator who regulates payments (via fines if the device is compromised, or market prices directly), or the product directly via mandatory security requirements. Both regulations come at a cost---implementing security requirements increases production costs, and the existence of fines decreases consumers' values---thereby reducing the seller's profits. The focus of this paper is to understand the \emph{efficiency} of various regulatory policies. That is, policy A is more efficient than policy B if A more successfully minimizes negatives externalities, while both A and B reduce seller's profits equally. We develop a simple model to capture the impact of regulatory policies on a buyer's behavior. {In this model, we show that for \textit{homogeneous} markets---where the buyer's ability to follow security practices is always high or always low---the optimal (externality-minimizing for a given profit constraint) regulatory policy need regulate \emph{only} payments \emph{or} production.} In arbitrary markets, by contrast, we show that while the optimal policy may require regulating both aspects, there is always an approximately optimal policy which regulates just one

Financial Markets Functioning Well in a Pandemic

Promoting the relevance of academic research in the design, implementation, and evaluation of financial market regulation. Through events, analysis, and commentary, the program on financial markets regulation aims to elevate the role evidence-based decision making in the policy development process. Bringing the rigor of peer-reviewed research to decision-makers can mitigate the bias and conflicts that underlie many proposed regulatory actions, and lead to more balanced consideration of competing interests and perspectives among financial market participants. To achieve this, each initiative is focused on raising awareness of where evidence in support of financial market policy is needed, promoting regulator engagement with academic experts, and creating incentives for academics to apply their expertise to policy issues by measuring the relevance of their contributions to regulatory outcomes.Five reasons to be cautiously optimistic about their continued resiliency NCAA officials did their part in addressing COVID-19 fears, but cancelling the 64-team tournament didn't extinguish March Madness. It is alive and well in financial markets. Each day delivers upsets and unexpected developments, leaving commentators struggling to keep up with their recycled vocabularies. Superficial headlines abound. Markets reel. Stocks plunge. S&P gives back gains. Trillions wiped out. Investors riled. It is hard to find information of substance. Like being on the scene of a tragic accident, onlookers can't get beyond the surface images. Perhaps the most intelligent thing I've read all week came, aptly, from the WSJ's Intelligent Investor columnist Jason Zweig. He reminded his audience of enduring good advice from Warren Buffet's mentor, Benjamin Graham. [1] Buy-and-hold investors shouldn't be spooked by down markets. Sharp price declines provide an opportunity to buy wisely. And if you are trying to time the market (a.k.a., a speculator), be forewarned that in games of chance, casinos are the winners. All of this trading is great for market-makers on Wall Street. It is likely that the news driving markets could get worse as the "what-if" tree grows. The economic and social consequences of the recently announced travel ban and unprepared healthcare system is the current focus. I worry most about a potential leadership crisis. Imagine an election year where candidates face significant mortality risk. The coronavirus has shown to play favorites among the aged, which includes three presidential candidates and septuagenarian leaders of Congress. And some of them have revealed they may already be infected with hubris ... about the risks. But prospects aren't entirely bad. Financial markets have actually handled the pandemic remarkably well. As we head into a new week of market uncertainty, there are several reason to be optimistic about their continued resiliency.Salem Cente

Credit at Times of Stress: Latin American Lessons from the Global Financial Crisis - Working Paper 289

The financial systems in emerging market economies during the 2008–09 global financial crisis performed much better than in previous crisis episodes, albeit with significant differences across regions. For example, real credit growth in Asia and Latin America was less affected than in Central and Eastern Europe. This paper identifies the factors at both the country and the bank levels that contributed to the behavior of real credit growth in Latin America during the global financial crisis. The resilience of real credit during the crisis was highly related to policies, measures and reforms implemented in the pre-crisis period. In particular, we find that the best explanatory variables were those that gauged the economy’s capacity to withstand an external financial shock. Key were balance sheet measures such as the economy’s overall currency mismatches and external debt ratios (measuring either total debt or short-term debt). The quality of pre-crisis credit growth mattered as much as its rate of expansion. Credit expansions that preserved healthy balance sheet measures (the “quality” dimension) proved to be more sustainable. Variables signalling the capacity to set countercyclical monetary and fiscal policies during the crisis were also important determinants. Moreover, financial soundness characteristics of Latin American banks, such as capitalization, liquidity and bank efficiency, also played a role in explaining the dynamics of real credit during the crisis. We also found that foreign banks and banks which had expanded credit growth more before the crisis were also those that cut credit most. The methodology used in this paper includes the construction of indicators of resilience of real credit growth to adverse external shocks in a large number of emerging markets, not just in Latin America. As additional data become available, these indicators could be part of a set of analytical tools to assess how emerging market economies are preparing themselves to cope with the adverse effects of global financial turbulence on real credit growth.Latin America, credit growth, global financial crisis, emerging markets, financial resilience, vulnerability indicators

Climate change, environmental protection and the rebsp: Relation rights and obligations

Imagine if breakthrough energy techonologies were developed and diffused globally, permitting economic and social development without worsening climate change. We will be living in Ecotopia, the ideal society described by Ernest Callenbach in his eponymous novel. We can see in this novel that although ecotopians have restored a more primitive way of life, the use of some technological devices and tools has not been completely abandoned because they are helpful in order to get a sustainable and green society. The stable-state system described in Ecotopia is a perfect balance between human beings and environment, and there are impressive means to persue their ideal of pollution-free sources of energy, such as solar energy, earht heat, tides and wind, which not affect biosphere (Ramiro Avilés, 2001).Programa Consolider "El tiempo de los derechos" (HURI-AGE

The fall of Enron and its implications on the accounting profession

The collapse of Enron and its aftermath has put unprecedented focus on the accounting profession and its role in the self-regulatory system

Organised crime and the state in Spain

This thesis seeks to explore the reasons why a particular form of ‘organised crime’, namely illicit enterprise, exists and flourishes in Spain. In explaining this phenomenon thus far, journalists, academics and police (and other) officials tend to point to the fact that the country possesses a number of characteristics, or a set of competitive advantages, that make Spain simply ideal for this kind of criminal activity. Predominantly, these include factors such as the location and geography of Spain, the nature of Spain’s industry and economy and the presence of immigrant communities. These factors will be explored in the thesis and their usefulness as explanatory factors of illicit enterprise will be assessed. The thesis will argue that, although the conventional explanations often used to account for this phenomenon have some validity, they are essentially too superficial, and thus insufficient, to provide a comprehensive understanding. Stimulated by the wider literature on organised crime, the thesis therefore hypothesises that other key explanations relating to certain weaknesses and vulnerabilities in the political, judicial, legal, and law enforcement spheres, which are open to exploitation by criminal groups, are essential in understanding Spain’s particular susceptibility to illicit enterprise. The hypothesis will be tested by exploring and analysing factors such as corruption and a lack of transparency and accountability in the political, and other, realms; a lack of political and public attention given to the problem of illicit enterprise; some legal and judicial deficiencies; and some apparent complexities surrounding law enforcement and policing structures. The thesis contends that the essential explanation for Spain’s particular susceptibility to illicit enterprise lies in these vulnerabilities