Assessing Strategic Risk

In recent decades, the concept of subjective probability has been increasingly applied to an adversary’s choices in strategic games. A careful examination reveals that the standard construction of subjective probabilities does not apply in this context. We show how the difficulty may be overcome by means of a different construction, and provide an axiomatic fondation for it.

When All is Said and Done, How Should You Play and What Should You Expect ?

Modern game theory was born in 1928, when John von Neumann published his Minimax Theorem. This theorem ascribes to all two-person zero-sum games a value - what rational players may expect - and optimal strategies - how they should play to achieve that expectation. Seventy-seven years later, strategic game theory has not gotten beyond that initial point, insofar as the basic questions of value and optimal strategies are concerned. Equilibrium theories do not tell players how to play and what to expect; even when there is a unique Nash equilibrium, it is not at all clear that the players “should” play this equilibrium, nor that they should expect its payoff. Here, we return to square one : abandon all ideas of equilibrium and simply ask, how should rational players play, and what should they expect. We provide answers to both questions, for all n-persons games in strategic form.

Investment Stimulation, with Some Reference to Housing

This paper is a follow-up on Section 5 of Drèze, Malinvaud et al.’s 1994 position paper on “Growth and Employment : The Scope for a European Initiative”, in favour of policies aiming to sustain demand through investments, without aggravating public deficits. We build on several recent papers to investigate further the argument. We first briefly review a non-standard theoretical model based upon contemporaneous thinking about incompleteness of markets, and its econometric validation. This analysis suggests that policies aimed at stimulating aggregate activity and supporting more optimistic expectations may be needed to achieve faster growth in economies suffering from persistent underutilistion of resources. We next elaborate on the principle of employment subsidies, with reference to housing. At times of severe unemployment, a correct evaluation of investment projects must take into account the wedge between the private and the social cost of labour. This labour cost distortion generates a discouting distortion. We briefly discuss both and derive implications for investment stimulation policies. We also review the main problems of implementation of a European investment program and report on a preliminary attempt at checking the applicability to housing in Wallony.

Technical Development, Competition from Low-Wage Economies and Low-Skilled Unemployment

The market position of less educated workers is weak and deteriorating, both in the US and in Europe, due in particular to technological development and growing competition from low-wage economies. In continental Europe, the resistance of relative wages of less-skilled workers has been an aggravating factor. It is possible to reconcile labour costs low enough to promote full employment with reasonable incomes for low-skilled workers and proper incentives for economic efficiency ? Constructive measures start with practical education and training, then go on to promote the demand and institutionalised supply of proximity services. Reliance on the price mechanism point towards measures reducing or eliminating the wedge between labour costs to employers and net marginal earnings of employees. A basic policy choice must be made between two avenues: minimum wages, unemployment benefits and employment subsidies concentrated on the low end of the the wage scale; or flexible wages, no durable unemployment benefits, but a "participation income" issued on an individual basis to all adult members of the labour force. The merits of the second avenue hinge crucially on the prospects for implementing flexible wages. Union-wage and insider-outsider theories of wages determination cast doubts - but would need to be verified specially for low skill levels. Short of making that choice, reductions or exemptions of employers' contributions to social security constitute a natural, urgently needed, first step. Such measures appear indispensable to the sustainability of free trade between countries with highly dissimilar levels of social protection

What, if anything, have we learned from the rise of unemployment in Belgium, 1974-1983

info:eu-repo/semantics/publishe