On the Optimality of Optimistic Responsiveness

Synchronous consensus protocols, by definition, have a worst-case commit latency that depends on the bounded network delay. The notion of optimistic responsiveness was recently introduced to allow synchronous protocols to commit instantaneously when some optimistic conditions are met. In this work, we revisit this notion of optimistic responsiveness and present optimal latency results. We present a lower bound for Byzantine Broadcast that relates the latencies of optimistic and synchronous commits when the designated sender is honest and while the optimistic commit can tolerate some faults. We then present two matching upper bounds for tolerating f faults out of n = 2f +1 parties. Our first upper bound result achieves optimal optimistic and synchronous commit latencies when the designated sender is honest and the optimistic commit can tolerate some faults. Our second upper bound result achieves optimal optimistic and synchronous commit latencies when the designated sender is honest but the optimistic commit does not tolerate any faults. The presence of matching lower and upper bound results make both of the results tight for n = 2f + 1. Our upper bound results are presented in a state machine replication setting with a steady state leader who is replaced with a view-change protocol when they do not make progress. For this setting, we also present an optimistically responsive protocol where the view-change protocol is optimistically responsive too

A bargaining model with uncertainty and varying outside opportunities

The main purpose of this paper is to propose an alternative way of explaining – within the bargaining theory framework – the stylised fact of flat wages and employment bearing all the adjustment to shocks. Standard models predict this behaviour under the assumptions of a constant elasticity production function and a reservation wage independent of shocks. Once the latter is removed, however, the result holds no more. The proposed two-stage model, in which the second stage involves negotiations over employment after the state of nature is revealed, would allow to recover it as a consequence of the uncertainty agents face when bargaining over wages in the first stage. The model nests other formulations and allows for Pareto efficient and inefficient outcomes, depending on union power, agents' beliefs and the observed state of nature.

Timeless perspective vs. discretionary monetary policy in forward-looking models

This paper reviews the distinction between the timeless perspective and discretionary modes of monetary policymaking, the former representing rule-based policy as formalized by Woodford (1999). In models with forward-looking expectations, this distinction is important because discretionary policymaking> produces a second inefficiency distinct from the familiar inflationary bias. The authors present calculations of the quantitative magnitude of this second inefficiency and find in all of the cases examined that the unconditional average performance of timeless perspective policymaking is at least as good as that provided by optimal discretionary behavior.Monetary policy

The limitations of markets: Background essay

Business leaders and voting citizens as well as policy makers are influenced in their decision-making by the idea that a “perfectly free” market can produce a social optimum (a “best of all possible worlds”). Because this idea is so influential, it is important to understand the conditions that must be met for the theory to work. The theoretic prediction of the optimality of market outcomes presupposes a number of requirements, which can be grouped into three broad categories: (1) the assumption of perfectly functioning markets; (2) market-oriented patterns of motivation and behavior, on the part of both individuals and firms; and (3) the universal existence and scope of markets.optimality, market imperfections, public goods, externalities, transaction costs, market power, human needs, equity

MONOTONICITY IMPLIES STRATEGY-PROOFNESS FOR CORRESPONDENCES

We show that Maskin monotone social choice correspondences on sufficiently rich domains satisfy a generalized strategy-proofness property, thus generalizing Muller and Satterthwaite''s (1977) theorem to correspondences. From the point of view of Nash implementation theory, the result yields a partial characterization of the restrictions entailed by Nash implementability. Alternatively, the result can be viewed as a possibility theorem on the dominant-strategy-implementability of monotone SCCs via set-valued mechanisms for agents who are completely ignorant about the finally selected outcome. It is shown by examples that stronger strategy-proofness properties fail easily.

Robust Classification for Imprecise Environments

In real-world environments it usually is difficult to specify target operating conditions precisely, for example, target misclassification costs. This uncertainty makes building robust classification systems problematic. We show that it is possible to build a hybrid classifier that will perform at least as well as the best available classifier for any target conditions. In some cases, the performance of the hybrid actually can surpass that of the best known classifier. This robust performance extends across a wide variety of comparison frameworks, including the optimization of metrics such as accuracy, expected cost, lift, precision, recall, and workforce utilization. The hybrid also is efficient to build, to store, and to update. The hybrid is based on a method for the comparison of classifier performance that is robust to imprecise class distributions and misclassification costs. The ROC convex hull (ROCCH) method combines techniques from ROC analysis, decision analysis and computational geometry, and adapts them to the particulars of analyzing learned classifiers. The method is efficient and incremental, minimizes the management of classifier performance data, and allows for clear visual comparisons and sensitivity analyses. Finally, we point to empirical evidence that a robust hybrid classifier indeed is needed for many real-world problems.Comment: 24 pages, 12 figures. To be published in Machine Learning Journal. For related papers, see http://www.hpl.hp.com/personal/Tom_Fawcett/ROCCH

A presumptive pigovian tax on gasoline : analysis of an air pollution control program for Mexico City

Without continuous monitoring of emissions, a pollution control agency needs to evaluate abatement options itself. Apart from making activities cleaner, it should also stimulate reductions in the level of activity in polluting sectors. The author develops an analytical framework to show that a tax on a variable input, such as gasoline, is useful for this purpose. It encourages individuals and firms to sacrifice trips when they would prefer those sacrifices to those of higher spending on abatement. The instrument exploits privately held information about which trips can be saved at a low social cost. Other weaknesses of a program based on indirect instruments - as opposed to one induced by a theoretically conceived pollution tax - remain. One of these is that the agency may have poorer information than individuals and firms about the status of vehicles and the effectiveness of individual abatement options. Such an information gap - which could be bridged by a true pollution tax - is abstracted from the analysis. The author shows that the tax rate that belongs in a cost-effective pollution control program is independent of the price elasticity of demand for the polluting good. But the higher the demand elasticity, the higher are the costs of not including a presumptive tax on the polluting good in the tool kit of the pollution control agency. The author estimates the cost savings available when an optimal gasoline tax is included in an otherwise well-composed program, appropriately accounting for the welfare costs ofdemand consumption. He shows that the targeted emission reductions can be obtained at 11 percent lower costs, saving $64 million annually, when the demand conservation induced by the gasoline tax allows some other, more expensive abatement options to remain unused. He proposes an ad valorem gasoline tax of about 25 percent, when no separate value is associated with the collection of revenue or with avoidance of noise, congestion, accidents, and road damage. In Mexico City alone, the tax would collect$350 million a year. After recent price increases, implicit tax rates in Mexico City are higher than suggested by the author's analysis. Higher rates may or may not be justified due to the benefits of demand conservation not accounted for in the analysis.Energy and Environment,Pollution Management&Control,Environmental Economics&Policies,Economic Theory&Research,Transport and Environment

Scenario Analysis with Recursive Utility: Dynamic Consumption Plans for Charitable Endowments

We determine optimal consumption paths under a series of returns scenarios for charitable endowments with distinct tastes over investment risk and inter-temporal substitution. Charities typically prefer smooth consumption paths but are investment-risk tolerant. Using a recursive, Kreps-Porteus utility function, we model the optimal disbursement from an infinitely-lived charitable trust, then, allowing a general form for the returns density, we apply stochastic dominance relations to estimate income/substitution effects whereby a change in future returns influences the current consumption rate. The elasticity of intertemporal substitution rather than risk aversion is key: optimal consumption rises or falls as the elasticity diverges from one.recursive utility; stochastic dominance; inter-temporal choice