Energy : promotheus bound or unbound ? A conceptual approach

This paper is a revised version of an article originally published in French by VertigO-La revue électronique en sciences de l’environnement (Flipo, 2004a).International audienceMost contemporary debates surrounding technological development refer to the myth of Prometheus, which tells of how Prometheus stole fire from the gods to give it to humankind. This fire, or energy, is the means through which human beings are able to exercise greater power over their environment…and over one another. The myth, as told by Plato, describes how fire gave rise to hubris and caused great wars between human beings. Hence the two perspectives adopted in the contemporary debate on technology; some wish to see Prometheus act freely, thus allowing humanity to exercise the greatest powers possible over nature, and others would rather see Prometheus “chained once again,” judging that his power has become too great. However, less well known is the continuation of the myth: chaos impelled Zeus to send Hermes down to earth to bring dikè, justice, back to humanity, thus re-establishing peace. Indeed, the essential part of the myth is found in this often forgotten second part and not in whether or not Prometheus should be freed or chained. This article intends to draw from the lessons in this myth to analyze the geopolitics of contemporary energy. Following Ivan Illich’s analysis, it will be shown that moderation, or balance—as opposed to hubris, which describes excessiveness—is one of the necessary conditions underlying all global plans having peace as their objective. At stake in the energy debate is none other than the question of the distribution of power. This means not only debating questions of aggregate economic well-being but also legal questions (the right to development, the rights of future generations, etc.)La plupart des débats contemporains autour du développement technique font référence au mythe de Prométhée. Prométhée a volé le feu pour le donner aux hommes, et le feu, c'est l'énergie, le moyen de démultiplier le pouvoir des hommes sur leur milieu… et sur leur prochain. Le mythe, tel qu'il est rapporté par Platon, affirme en effet que le feu provoqua l'hubris et de grandes guerres chez les hommes. D'où la polarisation du débat contemporain sur la technique entre ceux qui veulent laisser Prométhée agir librement, de manière à ce que les Hommes disposent de pouvoirs aussi grands que possible pour agir sur la nature, et ceux qui voudraient plutôt " ré enchaîner " Prométhée, jugeant que son pouvoir est devenu trop grand. Ce que l'on connaît moins est la suite du mythe : le désordre conduisit Zeus à envoyer Hermès pour remettre Dikè, la justice, entre leurs mains, qui permit de ramener la paix. Nous montrons que l'essentiel du mythe est dans cette seconde partie souvent oubliée, et non autour de la question de savoir s'il faut libérer ou enchaîner Prométhée. Cet article entend tirer parti des leçons de ce mythe pour analyser la géopolitique de l'énergie contemporaine. A la suite des analyses d'Ivan Illich, nous entendons montrer que la sobriété, ou juste mesure, par opposition à l'hubris, l'illimité, est l'une des conditions nécessaires de tout projet global ayant la paix pour objectif. Ce qui est mis en jeu avec le débat sur l'énergie n'est autre que la question de la répartition du pouvoir. Cela suppose de mettre en débat non seulement des questions de bien-être économique agrégé, mais aussi des questions de droit (droit au développement, droits des générations à venir etc.

Financial Opening: Evidence and Policy Options

This paper evaluates the empirical evidence of increasing the chances of financial crises induced by opening up developing countries to short-term capital inflows, and appraises the various proposals made for mitigating the severity of financial crises. We point out that there is solid evidence that financial opening increases the chance of financial crises. There is more tenuous evidence that financial opening contributes positively to long-run growth. Hence, there may be a complex trade off between the adverse intermediate run and the beneficial long run effects of financial opening. The literature is abounded with proposals aimed at improving this intertemporal trade-off, reducing the costs of financial crises. A version of the Lucas critic may limit the welfare gain of these proposals. Hence, a better understanding of the structural characteristics leading to exposure and crises is the key for designing a successful restructuring of the global capital market. Some of the reforms may fall short of success due to coordination failure: they may be effective only if they were adopted comprehensively by all the relevant financial centers. Finally, some of the proposals may be too optimistic, ignoring the time inconsistency and political economy considerations, as well as presuming the ability to verify unambiguously the quality of adjustment.

Financial Super-Markets: Size Matters for Asset Trade

This paper presents a new theoretical framework to analyze=20 financial markets in an international context. We build a two-country=20 macroeconomic model in which agents are risk averse, assets are imperfect=20 substitutes, the number of financial assets is endogenous, and cross-border= =20 asset trade entails transaction costs. We show that demand effects have=20 important implications for the link between market size, asset prices and=20 financial market development. These effects are consistent with the=20 existing empirical evidence. Due to co-ordination failures, the extent of=20 financial market incompleteness is inefficiently high. We also analyze the= =20 impact of domestic transaction costs and issuing costs on financial markets= =20 and returns.

Habit Persistence and Welfare Gains from International Asset Trade

We introduce habit formation in a model that studies the link between international trade in financial assets, economic growth, and welfare. As with time separable preferences asset trade increases the mean growth rate, but it also increases growth-volatility. We demonstrate that the welfare gain from asset trade is lower with habit persistence in consumption. This reflects that the habit-forming households perceive the higher growth-volatility as a higher cost to obtain increased average growth. Calibrating the model to data for North America and Western Europe, we find that habit persistence lowers welfare gains of financial integration by about 40-50 %.Habit formation; financial integration; growth; welfare

Financial Super-Markets: Size Matters for Asset Trade

The paper presents a two-country macroeconomic model in which the number of financial assets is endogenous. Imperfect substitutability of assets and international transaction costs give a comparative advantage to large markets, because of demand effects. Agents have more incentives to undertake risky investments on those markets; they can also diversify risk at a lower cost. Prices of financial assets are higher in the large area because asset markets are broader. We also analyse the impact of domestic transaction costs and issuing costs on financial markets and returns. Our theory has important implications for the pattern of international trade in risky assets.International macroeconomics, asset trade, transaction costs, incomplete markets

International Diversification, Growth, and Welfare with Non-Traded Income Risk and Incomplete Markets

We ask how the potential benefits from cross-border asset trade are affected by the presence of non-traded income risk in incomplete markets. We show that the mean consumption growth may be lower with full integration than in financial autarky. This can occur because: the hedging demand for risky high-return projects may fall as the investment opportunity set increases, and precautionary savings may fall as the unhedgeable non-traded income variance decreases upon financial integration. We also show that international asset trade increases welfare if it increases the risk-adjusted growth rate. This is always the case in our model, but the effect may be close to negligible. The welfare gain is smaller the higher the correlation between the domestic non-traded income process and foreign asset returns.Incomplete markets;financial integration;growth;welfare

Technology Transfer and Domination: Creation and Expansion, Adoption and Elimination

The intent of this thesis is to explore possible indicators to the (re)production of dominance in technology transfer to developing countries, through the expandatory and eliminatory implications of scale and the principles of scaleability. The study investigates the sociocultural preconditions for technological creation through systems of mental repersentation, and the relationship of conceptualizing the world and worldmaking through the expandatory and eliminatory implications of scale, which is demonstrated by reviewing Henry Ford’s establishment of a rubber production town in the Amazon. In addition, the study applies a critical sociocognitive discourse analysis of the World Bank report ‘The Innovation Paradox’ to capture how systems of mental representations and underlying ideological structures may operate to problematize and describe issues and subjects in biased ways. The study concludes that the (re)production of dominance may occur, especially due to the expandatory and eliminatory implications of scale, and particularly when technology transfers are oriented around adoption

The Otisfield News: April 18,1946

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Specialization and Diverging Manufacturing Structures: The Aftermath of Trade Policy Reforms in Developing Countries

Trade barriers have been declining around the world over the last five decades. Countries reduced their tariffs unilaterally as well as concertedly in the framework of regional integration agreements. As a consequence, trade flows among economies have substantially intensified. According to economic theory, this should have had a significant impact on the countries’ specialization patterns. However, to our knowledge, there is no direct robust econometric evidence on the effect of trade policy on the overall degree of countries’ specialization. This paper aims at filling this gap in the literature. We focus on ten Latin American countries members of the LAIA (Latin American Integration Association) over the period 1985-1998. These countries are natural case studies because in the last two decades they implemented road and comprehensive trade liberalization programs, both generally and preferentially, starting from relatively high tariff protection levels. Our econometric results suggest that reducing own MFN tariffs is associated with increasing manufacturing production specialization. Furthermore, we find that preferential trade liberalization and differences in the degree of unilateral openness have resulted in increased dissimilarities in manufacturing production structures across countries. These results are robust to the specialization measure being used, the correction for groupwise heteroscedasticity, cross-sectional correlation, serial correlation and endogeneity biases, and the inclusion of indicators to account for the real exchange misalignment prevailing in the region during the period under examination.Specialization, Trade Policy, Latin America

Globalization and Emerging Markets: With or Without Crash?

This paper develops a theory of financial crisis based on the demand side of the economy. We analyze the impact of financial and trade globalizations on asset prices, investment and the possibility of self-fulfilling financial crashes. In a two-country model, we show that financial and trade globalizations have different effects on asset prices, investment and income in the emerging market and in the industrialized country. Whereas trade globalization always has a positive effect on the emerging market, financial globalization may not, especially when trade costs are high. For intermediate levels of financial transaction costs and high levels of trade costs, pessimistic expectations can be self-fulfilling and may lead to a collapse in demand for goods and assets of the emerging market. Such a crash in asset prices is accompanied by a current account reversal, a drop in income and investment and more market incompleteness. We show that countries with lower income are more prone to such demand-based financial crashes. Our model can replicate the main stylized facts of financial crashes in emerging markets. Our results strongly suggest that emerging markets should liberalize trade in goods before trade in assets.