A Multi-Level Choice Theory

The Great Recession has called into question many tenets of Neo-classical Microeconomics. Neo-classical theory allows each agent only one fixed type, homo economicus, while not denying other possible types as in adverse selection. We propose that economic agents not only choose their market basket but also their types. Agents are members of groups and each group has social norms to which the agent more or less conforms. His/her market behavior trades off private well being which responds to prices but also social well being which responds to norms. We show how deviation from norms are determined. We also discuss other anomalies in the light of this model.

A Stage Model of Developing an Inclusive Community

The Community Inclusion model described in this paper characterizes the stages through which a diverse group of people living within the same community develops into an inclusive community. The model is described in terms of its usefulness in the assessment of a community’s current stage of inclusion, and determining the interventions needed to address lack of inclusion. Examples from Sweden (EU) and the United States (USA) will be used to demonstrate how the model works. Particular focus will be on the relationship between stage of inclusion and collective community action for economic development.Inclusion, cultural psychology, monocultural, symbolic difference, critical mass

Price Competition and Product Differentiation when Consumers Care for the Environment

Increasing environmental awareness may affect the pleasure of consuming a good for which an environmental friendly substitute is available. When deciding to buy differentiated products, a compromise is sometimes made between preferred characteristics of the good and its environmental properties. In this paper we investigate the market implication of product differentiation when customers are concerned about environmental aspects of the good. We use the spatial duopoly model to determine how environmental concern affects prices, product characteristics and market shares of the competing firms. Our analysis is based on a two-stage game where at the first stage each firm chooses the characteristic of its product. At the second stage each firm chooses its price. The unique equilibrium prices and market shares are affected by consumer awareness of the environment and by the higher costs for producing those goods. As for the Nash equilibria in the characteristics we find three equilibria depending on the parameter constellation. In order to find out whether the market functions in an optimal way we determined the choice of environmental characteristics by a welfare maximizing authority. The result of this analysis is that characteristics differ under private decision making and social one. It can be shown, however, that it is possible to choose environmental policy instruments in order to stimulate private firms to produce the social optimal qualities.Price competition, Quality competition, Environmental awareness, Environmentally friendly products

Cultural Rights and Civic Virtue

This paper addresses the potential tension between two broadly stated policy objectives: the preservation of distinctive cultural traditions, often through the mechanism of formal legal rights, and the fostering of civic virtue, a sense of local community and the advancement of common civic enterprises. Many political liberals argued that liberal societies have an obligation to accommodate the cultural traditions of various sub groups through legal rights and a redistribution of social resources. The “right to cultural difference” is now widely (if not universally) understood to be a basic human right, on par with rights to religious liberty and racial equality. Other theorists writing in the liberal, civic republican, and urban sociology traditions expounded on the necessity of civic virtue, community and common enterprises initiated and executed at the local or municipal level of government or private association. These theorists argued that common projects, shared norms and social trust are indispensable elements of effective democratic government and are necessary to the altruism and public spiritedness that in turn secure social justice. These two policy goals therefore may at times be in conflict. This conflict is especially severe in larger culturally diverse cities, where social trust and civic virtue are most needed and often in shortest supply. Policies designed to counter cosmopolitan alienation and anomie by fostering civic virtue, social trust and common social norms will inevitably conflict with the cultural traditions and sub group identification of some minority groups. The paper argues that such conflicts are often best confronted on the field of political debate and policy analysis, not in the language of civil rights. Rights discourse, with its inherent absolutism, is ill suited to the type of subtle tradeoffs that these conflicts often entail.Law, Rights, Multiculturalism

Government Debt, Agent Heterogeneity and Wealth Displacement in a Small Open Economy

The consequences of government debt on capital formation, financial wealth and labor are investigated in a small open economy with demographic heterogeneity. Two alternative types of demographics are considered: one with intragenerational heterogeneity of the ''savers-spenders'' (SS) type, and one with intergenerational heterogeneity of the OLG type. The effects of debt and the financial crowding out morphology strictly depend on the type of demographic heterogeneity. While in the SS economy debt crowds out capital, increases net foreign assets and contracts labor, in the OLG economy it generates the exact opposite results. Our results differ substantially from those observed in a closed economy, where the type of demographic heterogeneity plays no qualitative role for the effects of debt on wealth and factor employment.The consequences of government debt on capital formation, financial wealth and labor are investigated in a small open economy with demographic heterogeneity. Two alternative types of demographics are considered: one with intragenerational heterogeneity of the ''savers-spenders'' (SS) type, and one with intergenerational heterogeneity of the OLG type. The effects of debt and the financial crowding out morphology strictly depend on the type of demographic heterogeneity. While in the SS economy debt crowds out capital, increases net foreign assets and contracts labor, in the OLG economy it generates the exact opposite results. Our results differ substantially from those observed in a closed economy, where the type of demographic heterogeneity plays no qualitative role for the effects of debt on wealth and factor employment.Non-Refereed Working Papers / of national relevance onl