Dysfunctional Non-Market Institutions and the Market

There is a widespread belief that when significant market failure occurs, there are strong incentives for non-market institutions to develop which go at least part of the way to remedying the deficiency. We demonstrate that this functionalist position is not in general valid. In particular, we examine a situation where insurance is characterized by moral hazard. We show that when market insurance is provided, supplementary mutual assistance between family and friends (unobservable to market insurers) -- a form of non-market institution -- will occur and may be harmful. This example suggests that non-market institutions can arise spontaneously even though they are dysfunctional.

Randomization with Asymmetric Information

It is by now well-known that, in the presence of moral hazard or adverse selection, randomization of insurance premia and benefits may be Pareto efficient. This paper: i) provides a typology of the various forms that randomization may take; ii) derives necessary and/or sufficient conditions for the desirability of these various forms of randomization; iii) obtains some simple characterization theorems of the efficient random policies; iv) gives some intuition behind the results; and v) considers why randomization appears to occur less often in practice than the theory suggests it should.

The Basic Analytics of Moral Hazard

This paper develops the basic analytics of moral hazard, for the two-outcome case where either a fixed damage accident occurs or it does not. The analysis focuses on the relationship between the insurance premium paid and the insurance benefits received in the event of an accident, and is conducted in benefit-premium space. The central message of the paper is that even when the underlying functions, the expected utility function and the function relating the accident probability to accident-prevention effort, are extremely well-behaved, the indifference curves and feasibility set (the set of insurance contracts which at least break even) are not-indifference curves need not be convex and feasibility sets never are; price-and income- consumption lines may be discontinuous; and effort is not in general a monotonic or continuous function of the parameters of the insurance policies provided. Part I of this paper establishes these results, while Part II discusses sane of their implications. The bad behavior of indifference curves and the feasibility set profoundly affects the nature and existence of a competitive equilibrium. We illustrate this, though we do not provide a thorough analysis. We also show that our canonical model of an insurance market with moral hazard can be reinterpreted to provide a model of loans with bankruptcy, or of work incentives.

Moral Hazard and Optimal Commodity Taxation

The central result of this paper is that when moral hazard ispresent,competitive equilibrium is almost always (constrained) inefficient. Moral hazard causes shadow prices to deviate from market prices. To remedy this market failure, the government could introduce differential commodity taxation. Moral hazard causes people to take too little care to prevent accidents. The corresponding dead-weight loss can be reduced by subsidizing (taxing) those goods the consumption of which encourages (discourages) accident avoidance.At the (constrained) optimum, the sum of the deadweight losses as-sociated with moral hazard, on the one hand, and differential commodity taxation, on the other, is minimized.

Establishing the potential for using routine data on Incapacity Benefit to assess the local impact of policy initiatives

<i>Background</i>: Incapacity Benefit (IB) is the key contributory benefit for people who are incapable of work because of illness or disability. <i>Methods</i>: The aims were to establish the utility of routinely collected data for local evaluation and to provide a descriptive epidemiology of the IB population in Glasgow and Scotland for the period 2000–05 using data supplied by the Department for Work and Pensions. <i>Results</i>: Glasgow's IB population is large in absolute and relative terms but is now falling, mainly due to a decrease in on flow. Claimants, tend to be older, have a poor work history and suffer from mental health problems. The rate of decline has been greater in Glasgow than Scotland, although the rate of on flow is still higher. <i>Conclusions</i>: Department for Work and Pensions (DWP) data can be used locally to provide important insights into the dynamics of the IB population. However, to be truly useful, more work needs to be undertaken to combine the DWP data with other information

Labor Turnover, Wage Structure and Moral Hazard: The Inefficiency of Competitive Markets

A multiperiod, general equilibrium model of the labor market is developed in which risk-averse workers are faced with job-related uncertainty and labor turnover is costly. If a worker is unlucky and suffers a bad job match, he quits and joins another firm, hoping that he will like its work environment more. Because the quality of a job match is unobservable, workers cannot insure against the risk of a bad match. The firm provides implicit insurance against job dissatisfaction, typically by paying workers more than their net marginal products in their early years with the firm and less subsequently. Since the probabilities of the insured-against events (the quit rates over time) are affected by the amount of such insurance provided, this implicit insurance is characterized by moral hazard. Individuals quit when in the absence of insurance they would not. The equilibrium contract balances out efficiency in risk bearing with efficiency in turnover incentives. We show that the equilibrium contract is not (constrained) efficient and indicate why

Moral Hazard and Optimal Commodity Taxation

This paper demonstrates that in an economy with moral hazard and more than one commodity, competitive equilibrium is not constrained-efficient. To correct the market failure, differential commodity taxation is necessary. A general optimal tax formula is derived, and special cases are discussed

Aggregate Land Rents, Expenditure on Public Goods, and Optimal City Size

I. An example, 473.--II. The generality of the Henry George Theorem, 477.--III. On using land rents as a measure of the benefits from public goods, 490.--IV. Competitive attainability of a Pareto optimal distribution of economic activity, 496.--V. Concluding comments, 498

Aggregate Land Rents and Aggregate Transport Costs

This paper explores the relationship between aggregate land rents and aggregate transport costs for land markets in which locations differ solely in terms of accessibility

C–H activation: A critical evaluation of a published method and its application towards inherently chiral calix[4]arenes

C–Hactivation offers an intriguing access into inherently chiral calix[4]arenes, but has been little explored in the literature. In this article, we report our investigation into a published C–H activation method that uses carbamates to direct a palladium catalyzed C–Hactivation and subsequent reaction withN-bromosuccinimide. However,we show that this report is unfortunately flawed on a number of points. An earlier reported study revealed the more likely SEAr mechanism of the bromination reaction, which did not involve palladium catalysis. We nevertheless employed the SEAr bromination in an attempt to form inherently chiral calix[4]arenes, using a chiral (+)-menthyl carbamate as a directing group. Unfortunately, although the reaction was high yielding, the diastereomers formed were inseparable and we were unable to quantify their ratio. Subsequent removal of the chiral (+)-menthyl carbamate, returned a small positive optical rotation, suggesting that at least a level of asymmetric induction was achieved in the bromination to afford a non-racemic product