A future for Kyoto?

This text is based on the English translation of extracts from a report to an advisory economic group to the French Prime Minister (Conseil d'Analyse Economique). This report was presented on July 2002 and published in 2003, (Guesnerie(2003). These extracts have been chosen and reorganised to provide an assessment of the future of the Kyoto protocol, as emphasized in the title. The sections successively treat: the present flaws of the Kyoto protocol, the improvement in design that can be thought of, the issues underlying the durability of Kyoto-like arrangements. The main lessons of the analysis are stressed again in conclusion.Kyoto protocol ; less developed countries ; price versus quantity ; fossil fuels ; trade and environment

Macroeconomic and monetary policies from the "eductive" viewpoint

The "eductive" viewpoint provides a theoretically sophisticated analysis as well as an intuitively plausible shortcut to the study of expectational coordination in economic models. From the review of expectational criteria in a class of dynamical models of macroeconomic theory, the paper shows how such an "eductive" viewpoint completes and deepens rather than contradicts standard analysis. It however argues that the "eductive" approach, when correctly implemented, challenges the conditions of learning in infinite-horizon models with infinitely-lived agents. In particular, in a simple monetary model adopting such a framework, Taylor rules may be stabilizing, in the demanding sense under scrutiny, but only within a small window for the reaction coefficient.expectational coordination ; dynamical models ; infinitely lived agents ; cashless economy ; inflation ; adaptive and "eductive" learning ; Taylor rules ; central banks

Strategic substitutabilities versus strategic complementarities: Towards a general theory of expectational coordination?

This paper contrasts the views of expectational coordination in a stylised economic model under two polar assumptions: Strategic Complementarities (StCo) dominate or on the contrary are dominated by Strategic Substitutabilities (StSu). Although in the StCo case, "uniqueness" often "buys" "eductive stability", the two issues are strikingly different in the second case. Furthermore if, in the first case, incomplete information often improves "expectational coordination", it may have the converse effect in the StSu case. It is finally argued that, in macroeconomic contexts, StSu often unambiguously dominate StCo, even in a large class of models with Keynesian features, and even in an aggregate framework that magnifies the StCo effects. The "remains" of StCo in general cases are discussed.Strategic Complementarities (StCo) ; Strategic Substitutabilities (StSu)

On the modernity of Walras

This text is to appear in a volume produced at the occasion of the 100th anniversary of Léon Walras death. The first part (introduction) answers one initial demand (to the solicited authors), i.e the evaluation of Walras influence on their own research and more generally on contemporary research. The second part “Between the Capitol Hill and the Tarpeian Rock?” goes further into the discussion of the contemporary status of the intellectual schemes inherited from the development of the walrasian program. The third part argues that part of the questions raised by Walras, f.e those concerning the mechanics of price adjustments, have not yet received satisfactory answers. It then argued that a post-walrasian program, with a strong focus on the explanation of market expectations, is on the agenda.Léon Walras ; walrasian program ; market expectations

Macroeconomic And Monetary Policies From The Eductive Viewpoint

The quality of the coordination of expectations, a key issue for monetary policy, obtains from different, but interrelated, channels: both the credibility of the central bank intervention and the ability of decentralized agents to coordinate on a dynamical equilibrium matter. For both purposes, it is important to understand how agents learn. Indeed, many studies on monetary policy focus on learning processes involving evolutive, real-time learning rules (such as adaptive learning rules). The eductive viewpoint, as illustrated in previous works, partly abstracts from the real-time dimension of learning, with the aim of more directly capturing the systems’ coordination-friendly characteristics. The paper first presents the analytical philosophy of expectational coordination underlying the eductive viewpoint. Following the review, the paper explores the differences between the traditional viewpoint and this competing viewpoint as they relate to standard monetary policy analysis. This exploration is tentative, yet promising.

The design of post-Kyoto climate schemes: selected questions in analytical perspective

The paper starts from a proposition of institutional design for climate policies made previously by David Bradford and labelled GPGP (Global Public good Purchase). The scheme is compared with other possible post- Kyoto schemes that are, or not, "Kyoto compatible". The comparison puts the emphasis on the participation issue, (free riding, ratchet effect), and on the desirable flexibility of the schemes. It argues that the incidence of climate policies on the final price of fossil fuels is a key and difficult issue which has not received, untill now, the amount of required attention.institutional design ; fossil fuels prices ; ratchet effect ; quantity versus prices ; tax incidence

Expectational coordination failures and Market outcomes' volatility

The first part of this text reviews the standard economic viewpoint on expectational coordination, a viewpoint that the recent events have challenged. The second part reviews different existing directions assessments of the rational expectations hypothesis that have been made to-date. The third part shows how such a critical assessment, along the lines of the so-called "eductive" learning approach, radically modifies our view of three key problems : the economic role of speculation, the informational efficiency of markets and, last but not least, the ability of agents with long horizon to anticipate the future. The fourth part stresses what has been achieved so far well as the future challenges of the approaches advocated in this paper.expectational coordination ; rational expectations hypothesis

General equilibrium, coordination and multiplicity on spot markets

This is a slightly revised English version of a paper published in the "Revue d'Economie Politique" 112 (5) sept-oct 2002. The text reviews recent work on expectational coordination in general equilibrium models of the Walrasian tradition. It evokes briefly the multiplicity questions associated with infinite horizon models and the issues associated with "eductive learning". It examines in a more systematic way the coordination difficulties that would arise in finite horizon models with spot multiplicity and discusses the relationship between coordination and incompleteness.General equilibrium models ; coordination ; multiplicity

The geometry of global production and factor price equalisation

We consider a production economy where commodities are partitioned into irreproducible factors and reproducible goods, and the production technologies have constant returns to scale. We examine the geometry of the efficient frontier of the global production set and derive theorems of nonsubstitution type. We complement the geometric viewpoint by an algebraic characterization of the efficient frontier, that put emphasis on the "factors values" of goods. We analyse the connections between the prices of goods and the prices of factors. In particular, we show that if the number of goods is at least twice as large as the number of factors, then, generically, the prices of goods uniquely determine the prices of factors.constant returns to scale ; global production set ; non-substitution ; factor values ; factor price equalisation

Expectational coordination in simple economic contexts: concepts and analysis with emphasis on strategic substitutabilities.

We consider an economic model that features : 1. a continuum of agents 2. an aggregate state of the world over which agents have an infinitesimal influence. We first review the connections between the eductive viewpoint that puts emphasis for example on strongly rational expectations equilibrium and the standard game-theoretical rationalizability concepts. Besides the Cobweb tâtonnement outcomes, which mimic an eductive reasoning subject to homogenous expectations, we define, characterize (and prove the convexity of) the sets of rationalizable states and point-rationalizable states, which respectively incorporate heterogenous point-expectations and heterogenous stochastic expectations. In the case where our model displays strategic complementarities, we find unsurprisingly that all the eductive criteria under scrutiny support rather similar conclusions, particularly when the equilibrium is unique. With strategic susbstitutabilities, the success of expectational coordination, in the case where a unique equilibrium does exists, relates with the absence of cycles of order 2 of the Cobweb mapping : in this case, again, heterogenity of expectations does not matter. However, when cycles of order 2 do exist, our different criteria predict different set of outcomes, although all are tied with cycles of order 2. Under differentiability assumptions, the Poincaré-Hopf method leads to global results for strong rationality of equilibrium. At the local level, the different criteria under scrutiny can be adapted to the analysis of expectational coordination. They leads to the same stabilty conclusions, only when there are local strategic complementarities or strategic substitutabilities. However, so far as the analysis of local expectational coordination is concerned, it is argued and shown that the stochastic character of expectations can most often be forgotten.expectational coordination ; rational expectations ; iterative expectational stability ; eductive stability ; strong rationality ; strategic complementarities ; strategic substitutabilities