Mechanism Choice

This chapter reviews the literature on the selection of regulatory policy instruments, from both normative and positive perspectives. It first reviews the mechanism design literature to identify normative objectives in selecting among the menu or toolbox of policy instruments. The chapter then discusses the public choice and positive political theory literatures and the variety of models developed to attempt to predict the actual selection of alternative policy instruments. It begins with simpler early models focusing on interest group politics and proceeds to more complicated models that incorporate both supply and demand for policy, the role of policy entrepreneurs, behavioral and cognitive choice, and public perceptions and mass politics. It compares these theories to empirical experience. The chapter examines literature in law, economics, political science, and related fields, and it draws examples from US, European, and international regulation. It concludes with suggestions for future research. Document is the author\u27s manuscrip

Three alternative (?) stories on the late 20th-century rise of game theory

The paper presents three different reconstructions of the 1980s boom of game theory and its rise to the present status of indispensable tool-box for modern economics. The first story focuses on the Nash refinements literature and on the development of Bayesian games. The second emphasizes the role of antitrust case law, and in particular of the rehabilitation, via game theory, of some traditional antitrust prohibitions and limitations which had been challenged by the Chicago approach. The third story centers on the wealth of issues classifiable under the general headline of "mechanism design" and on the game theoretical tools and methods which have been applied to tackle them. The bottom lines are, first, that the three stories need not be viewed as conflicting, but rather as complementary, and, second, that in all stories a central role has been played by John Harsanyi and Bayesian decision theory.game theory; mechanism design; refinements of Nash equilibrium; antitrust law; John Harsanyi

Renegotiation of Concession Contracts in Latin America.

We construct a regulation model in which renegotiation occurs due to the imperfect enforcement of concession contracts. This enables us to provide theoretical predictions for the impact, on the probability of renegotiation of a concession, of regulatory institutions, institutional features, economic shocks and of the characteristics of the concession contracts themselves. Then we use a data set of nearly 1000 concessions awarded in Latin America and the Caribbean countries from 1989 to 2000, covering the sectors of telecommunications, energy, transport and water, to test these predictions. Finally, we derive some policy implications of our theoretical and empirical work.Renegotiation, Concession contracts, Regulation, LDCs.

An historical explanation of the development of occupational health and safety and the important position it now occupies in society

Scientific and social (economic and ethical) dimensions of occupational health and safety (OH&S) are discussed. Three broad stages in the development of ethics in Western society are analysed in order to assist in understanding the arrival of moral relativism and constructivism under postmodernism. Against this background three recent stages in the emergence of OH&S are outlined and OH&S is shown to be of key importance to sustainable development. Comment is made about the prospects for survival, under moral relativism, of the duty of care ethic which lies at the heart of OH&S and which has until the present time catalysed professionally responsible innovation and change. It is argued that (1) because OH&S tools and techniques called up in legislation are scientific in nature and apply equally to all under law, and (2) because OH&S is increasingly understood as a profitability strategy, ongoing duty of care appeals for reform may continue to be effective even against the corrosive malaise of moral relativism. OH&S workers are reminded of the contribution their profession can make to safe and civil society and to sustainable development and their responsibility for upholding and promoting the ethical dimension expressed through duty of care

"Institutional Prerequisites of Financial Fragility within Minsky's Financial Instability Hypothesis: A Proposal in Terms of 'Institutional Fragility'"

The relevancy of Minsky's Financial Instability Hypothesis (FIH) in the current (and still unfolding) crisis has been clearly acknowledged by both economists and regulators. While most papers focus on discussing to what extent the FIH or Minsky's Big Bank/Big Government interpretation is appropriate to explain and sort out the crisis, some authors have also emphasized the need to consider the institutional foundations of Minsky's work (Whalen 2007, Wray 2008, Dimsky 2010). The importance of institutions within the FIH was strongly emphasized by Minsky himself, who assigned them the function of constraining the development of financial fragility. Yet only limited literature has focused on the institutional aspects on Minsky's FIH. The reason for this may be that they were mainly dealt with by Minsky in his latest papers, and they have remained, to some extent, incomplete, unclear, and even ambiguous. In our view, a synthesis of Minsky's proposals, along with a clarification and theoretical justification, remains to be done. Our objective in this paper is to contribute to this theoretical project. It leads us to propose that the notion of "institutional fragility" can constitute a useful perspective to complement and justify the endogenous development of financial fragility within the FIH. Eventually, this view may contribute to the debate about international financial governance.Financial Crisis; Financial Fragility; Institutional Fragility; International Financial Governance

Intertemporal Choice of Fuzzy Soft Sets

This paper first merges two noteworthy aspects of choice. On the one hand, soft sets and fuzzy soft sets are popular models that have been largely applied to decision making problems, such as real estate valuation, medical diagnosis (glaucoma, prostate cancer, etc.), data mining, or international trade. They provide crisp or fuzzy parameterized descriptions of the universe of alternatives. On the other hand, in many decisions, costs and benefits occur at different points in time. This brings about intertemporal choices, which may involve an indefinitely large number of periods. However, the literature does not provide a model, let alone a solution, to the intertemporal problem when the alternatives are described by (fuzzy) parameterizations. In this paper, we propose a novel soft set inspired model that applies to the intertemporal framework, hence it fills an important gap in the development of fuzzy soft set theory. An algorithm allows the selection of the optimal option in intertemporal choice problems with an infinite time horizon. We illustrate its application with a numerical example involving alternative portfolios of projects that a public administration may undertake. This allows us to establish a pioneering intertemporal model of choice in the framework of extended fuzzy set theorie

Mechanism Choice

Mechanism choice can generally be described as the selection of some way to structure rules for social behavior. Nobel Laureate Eric Maskin recently described a mechanism as “an institution, procedure, or game for determining outcomes” (Maskin 2008: 568). In the realm of public law, mechanism choice is synonymous with “instrument choice” or policy design. The selection of the policy instrument can be as important to success or failure as the intended policy outcome. Good intentions or objectives are not enough: the choice of tools matters. A large and growing literature in instrument choice and mechanism design examines both the normative criteria for correcting market failures, matching optimal instruments to different types of problems, minimizing costs, and overcoming incomplete information; and also the positive political factors that may influence the actual selection of instruments, and the pattern of such choices across issue areas, governance systems, and time. Public policy instruments are selected and designed by public bodies –legislatures, executive agencies, and courts – that are comprised of individuals with their own policy preferences, and that are subject to pressures from private interests through lobbying, campaign contributions, and elections. Thus, it is no surprise to the student of public law that the mechanisms actually selected to implement public policy are not necessarily the ones that best pursue the public interest. This chapter begins with a brief summary of normative mechanism choice, including the legal literature on instrument choice and the economics literature on mechanism design. It then moves to a more detailed discussion of positive mechanism choice, also called public choice, political economy, or positive politics. This positive literature explores how political institutions and pressures shape the selection of mechanisms to implement policy, notably when the selected instrument departs from the normative ideal. The positive study of mechanism choice not only informs how political processes shape policy outcomes, but also sheds useful insights into those processes themselves.

Leonid Hurwicz, Eric S. Maskin and Roger B. Myerson: Mechanism Design Theory

Scientific Background, The Nobel Prize in Economic Sciences 2007. Economic transactions take place in markets, within firms and under a host of other institutional arrangements. Some markets are free of government intervention while others are regulated. Within firms, some transactions are guided by market prices, some are negotiated, and yet others are dictated by management. Mechanism design theory provides a coherent framework for analyzing this great variety of institutions, or "allocation mechanisms", with a focus on the problems associated with incentives and private information.Mechanism Design; Asymmetric Information