Self-organized evolution in socio-economic environments

We propose a general scenario to analyze social and economic changes in modern environments. We illustrate the ideas with a model that incorporating the main trends is simple enough to extract analytical results and, at the same time, sufficiently complex to display a rich dynamic behavior. Our study shows that there exists a macroscopic observable that is maximized in a regime where the system is critical, in the sense that the distribution of events follow power-laws. Computer simulations show that, in addition, the system always self-organizes to achieve the optimal performance in the stationary state.Comment: 4 pages RevTeX; needs epsf.sty and rotate.sty; submitted to Phys Rev Let

Who should make corporate law? : EC legislation versus regulatory competition

This paper makes a case for the future development of European corporate law through regulatory competition rather than EC legislation. It is for the first time becoming legally possible for firms within the EU to select the national company law that they wish to govern their activities. A significant number of firms can be expected to exercise this freedom, and national legislatures can be expected to respond by seeking to make their company laws more attractive to firms. Whilst the UK is likely to be the single most successful jurisdiction in attracting firms, the presence of different models of corporate governance within Europe make it quite possible that competition will result in specialisation rather than convergence, and that no Member State will come to dominate as Delaware has done in the US. Procedural safeguards in the legal framework will direct the selection of laws which increase social welfare, as opposed simply to the welfare of those making the choice. Given that European legislators cannot be sure of the ‘optimal’ model for company law, the future of European company law-making would better be left with Member States than take the form of harmonized legislation

Optimal Supervisory Policies and Depositor-Preferences Laws.

When supervisors have imperfect information about the soundness of banks, they may be unaware of insolvency problems that develop in the interval between on-site examinations. Supervising banks more often will alleviate this problem but will increase the costs of supervision. This paper analyzes the trade-offs that supervisors face between the cost of supervision and their need to monitor banks effectively. We first characterize the optimal supervisory policy, in terms of the time between examinations and the closure rule at examinations, and compare it with the policy of an independent supervisor. We then show that making this supervisor accountable for deposit insurance losses in general reduces the excessive forbearance of the independent supervisor and may also improve on the time between examinations. Finally, we extend our analysis to the impact of depositor-preference laws on supervisors' monitoring incentives and show that these laws may lead to conflicting effects on the time between examinations and closure policy vis-a-vis the social optimum.Deposit Insurance; Depositor Preference; Supervision.

Laws and Social Norms: Unintended Consequences of Obesity Laws

Traditional law and economic analysis considers how laws directly incentivize socially optimal behaviors. Meanwhile, a growing theoretical literature posits that beyond deterrence or incentives, laws also communicate normative judgments that can have effects unanticipated by classical predictions. This Article presents empirical evidence supporting the broader legal theory that laws can express social values, leading to shifts in social norms. Using data on adolescent peer networks in the United States, I find that where anti-obesity policies are stricter, social stigma increases for obese girls, though obesity rates do not necessarily decrease. These results are robust and consistent with a model in which the obese, in an anti-obesity policy environment, are negatively perceived as exerting less effort in their health than their non-obese peers. I explore implications of this stigma

Laws and Social Norms: Unintended Consequences of Obesity Laws

Traditional law and economic analysis considers how laws directly incentivize socially optimal behaviors. Meanwhile, a growing theoretical literature posits that beyond deterrence or incentives, laws also communicate normative judgments that can have effects unanticipated by classical predictions. This Article presents empirical evidence supporting the broader legal theory that laws can express social values, leading to shifts in social norms. Using data on adolescent peer networks in the United States, I find that where anti-obesity policies are stricter, social stigma increases for obese girls, though obesity rates do not necessarily decrease. These results are robust and consistent with a model in which the obese, in an anti-obesity policy environment, are negatively perceived as exerting less effort in their health than their non-obese peers. I explore implications of this stigma

Accidental Politicians: How Randomly Selected Legislators Can Improve Parliament Efficiency

We study a prototypical model of a Parliament with two Parties or two Political Coalitions and we show how the introduction of a variable percentage of randomly selected independent legislators can increase the global efficiency of a Legislature, in terms of both the number of laws passed and the average social welfare obtained. We also analytically find an "efficiency golden rule" which allows to fix the optimal number of legislators to be selected at random after that regular elections have established the relative proportion of the two Parties or Coalitions. These results are in line with both the ancient Greek democratic system and the recent discovery that the adoption of random strategies can improve the efficiency of hierarchical organizations.Comment: 19 pages, 7 figures, new improved and longer versio

PREVENTABLE FOOD BORNE ILLNESS WITH DOSE-RESPONSE DAMAGES: OPTIMAL SHARING OF PREVENTION BETWEEN CONSUMERS AND PROCESSORS AND THE EFFECT OF PRODUCT LIABILITY

As public concern for food safety burgeons concerned policy makers search for ways to manage the risk inherent to food consumption. Product liability laws may serve as efficient means to induce socially optimal levels of care or may efficiently complement regulation of potentially injurious activities. However, two characteristics common to many food borne illness cases are often not considered in the standard liability economics model that yields these prescriptions: dose-response damage functions and victim damage prevention. This paper explores how dose-response relationships common to the biology and epidemiology of food borne illness may effect the shape of resulting social welfare functions and privately chosen prevention efforts under different liability rules when both processor and consumer affect damages. Dose-response damage functions yield social objectives with multiple local optima that may dictate diametrically opposite policy prescriptions in terms of prevention sharing between consumer and processor. Small changes in the relative efficacy of either party's preventative effort may dictate discrete changes in the socially optimal prescription. Similarly, legal rules that fail to recognize both parties' contribution to damage (e.g., strict processor or consumer liability) or incorrectly define due care standards for processor negligence or contributory negligence may cause private decisions to differ discretely from socially optimal behavior.Food borne illness, dose-response, liability, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety,

The Economic Theory of Illegal Goods: The Case of Drugs

This paper concentrates on both the positive and normative effects of punishments that enforce laws to make production and consumption of particular goods illegal, with illegal drugs as the main example. Optimal public expenditures on apprehension and conviction of illegal suppliers obviously depend on the extent of the difference between the social and private value of consumption of illegal goods, but they also depend crucially on the elasticity of demand for these goods. In particular, when demand is inelastic, it does not pay to enforce any prohibition unless the social value is negative and not merely less than the private value. We also compare outputs and prices when a good is legal and taxed with outputs and prices when the good is illegal. We show that a monetary tax on a legal good could cause a greater reduction in output and increase in price than would optimal enforcement, even recognizing that producers may want to go underground to try to avoid a monetary tax. This means that fighting a war on drugs by legalizing drug use and taxing consumption may be more effective than continuing to prohibit the legal use of drugs.