The Action Principle in Market Mechanics

This paper explores the possibility that asset prices, especially those traded in large volume on public exchanges, might comply with specific physical laws of motion and probability. The paper first examines the basic dynamics of asset price displacement and finds one can model this dynamic as a harmonic oscillator at local "slices" of elapsed time. Based on this finding, the paper theorizes that price displacements are constrained, meaning they have extreme values beyond which they cannot go when measured over a large number of sequential periods. By assuming price displacements are also subject to the principle of stationary action, the paper explores a method for measuring specific probabilities of future price displacements based on prior historical data. Testing this theory with two prevalent stock indices suggests it can make accurate forecasts as to constraints on extreme price movements during market "crashes" and probabilities of specific price displacements at other times.Comment: 21 page

Tax Compliance as a Wicked System

This Article proposes a new typology and framework for tax compliance systems. Traditionally-competing approaches such as deterrence theory, behaviorist theory, and game theoretic models taken together suggest that tax compliance is perhaps a new type of system—a “wicked system”—that is only partially comprehensible by understanding the traditional theories alone. If correct, previously competing theories become simply different limiting cases of the same underlying “wicked system.” The Article concludes with a discussion of the framework’s limitations and presents initial solutions and challenges for future work

There is No Spoon: Reconsidering the Tax Compliance Puzzle

For over 40 years theorists have sought the effects of tax audits on voluntary compliance rates by studying individual taxpayer motivations. Yet no single theory has produced a taxpayer incentive model that both comports with experience and explains the effects of audits on compliance. This quandary is often termed the “tax compliance puzzle.” Consequently, some theorists have called for more capacious models that make room for the panoply of individual compliance motivations. This Article proposes that a more complex model is unnecessary. To the contrary, complex compliance and enforcement data can result from extremely simple behavioral rules of individual taxpayers and government examiners interacting over time. This Article describes an agent-based computational model that uses a single, simple rule of action for each taxpayer and examiner. The model produces three interesting effects supporting the conclusion that there may be no tax compliance puzzle to solve. First, the results comport with known U.S. compliance and audit rates. Second, the results suggest that while audit probability influences individual compliance decisions, it has negligible effects on system-level compliance patterns. Third, the results support the theory that the perceived strength of the tax authority correlates directly—but nonlinearly—with voluntary compliance rates. The model is not complete enough to determine conclusively that this last effect is due to perceived strength of the tax authority alone and might be due instead to factors such as social norms and other behaviorist theories

Constraints on IRS Control: An Alternative Approach to Tax Gap Analysis

A tax authority wants to take actions it knows will foster the greatest degree of voluntary taxpayer compliance to reduce the “tax gap.” This paper suggests that even if a tax authority could attain a state of complete knowledge, there are constraints on whether and to what extent such actions would result in reducing the macro-level tax gap. These limits are not merely a consequence of finite agency resources. They are inherent in the system itself. To show that this is one possible interpretation of the tax gap data, the paper formulates known results in a different way by analyzing tax compliance as a population with a single covariate. This leads to a standard use of the logistic map to analyze the dynamics of non-compliance growth or decay over a sequence of periods. This formulation gives the same results as the tax gap studies performed over the past fifty years in the U.S. given the published margins of error. Limitations and recommendations for future work are discussed, along with some implications for tax policy

Approach to management of the Mokau coal resource

The Mokau Coalfield, North Taranaki, New Zealand contains about 73 million tonnes of mineable coal which may be required to fire a 1000 MW thermal power station. Planning for development of the coalfield is at an early stage and current investigations are oriented towards coal resource measurement and infrastructure requirements. The predominantly rural environment of the Mokau Coalfield region will suffer a number of impacts if coal development is to proceed at the proposed scale. Early recognition of these impacts, together with recognition of possible constraints on development, is desirable so that development planning may maximise environmental benefits. Traditionally coal development does not incorporate environmental information until the late feasibility stage of planning. It is however desirable to initiate environmental management planning at an early stage of coal resource development planning. Early inclusion of environmental aspects is possible and an approach to environmentally aware management of the Mokau coal resource is illustrated. The approach relies on development of a materials balance for both mining and use sectors of the development. The materials balance details inputs to the development (i.e. resource requirements) and identifies all outputs as primary product, increased inventory or residuals. A planning framework is described whereby environmental factors are incorporated into mainstream planning at the pre-feasibility stage. A number of potential impacts and constraints are identified in this largely indicative study. Before all impacts and constraints can be identified a more detailed study, using the methods developed here, is warranted

Dairy Cattle Genetics by Environment Interaction Mismatch Contributes to Poor Mitigation and Adaptation of Grazing Systems to Climate Change Actions in the Peruvian High Andes: A Review

The high Andes of Peru includes fragile ecosystems. Nevertheless, it plays important ecosystem functions (e.g., biodiversity, water supply for the lowlands, CO2 sinks in soil, etc). More than 80% of the livestock population of Peru is farmed in this area, supporting the livelihood of approximately 1’400,000 poor families, who are vulnerable to climate change (CC). Climate change in the high Andes is occurring at accelerated rates, compared to lowlands regions. Prevalent factors in the high Andes, such as hypoxia, high UV radiation, climatic extremes, large variation between maximum and minimum temperatures, seasonality in rainfall (determining highly seasonal forage growth) and CC, not only increase the feed and water needs of animals, but also affect animal production, reproduction, rumen function and welfare, making them more vulnerable to CC. During the last three decades, livestock farming in the high Andes has undergone transformation. The farming of camelids and creole species has been almost replaced by smallholder dairying, which have a higher environmental footprint. Institutions promoting dairying neglect the fitness requirement for the animal genetics to perform in such environments. Recent work of the New Zealand Peru Dairy Support Project (NZPDSP; 2016‒2020) demonstrated that rapid and significant improvements in animal productivity and profitability of dairying can be achieved by promoting adoption of simple and low-cost husbandry practices. Nevertheless, further improvements are constrained by the unfitness of the current animal genetics. Here, based on a literature review and experience from the NZPDSP, we propose a search for dairy cattle genetics that contributes to mitigation and adaptation to CC, while enhancing the livelihoods of the poor

Smallholder Dairy Farmers in the Peruvian Andes Fulfilling the Role of Extension Agents

Dairy farming in the Peruvian Andes is mostly undertaken by smallholder farmers (4-6 cows/family) and of relatively recent development. In fact, over the last 2 decades dairy farming at high altitudes (3,500‒4200 masl) has grown rapidly, replacing the camelids and sheep farming that once predominated. Dairying growth has been catalysed by subsides from state and private organizations. It promotes high input systems based on feedlot technology. Compared to sheep and camelids farming, dairying at the Andes does not have yet an inherent local/indigenous knowledge associated to it. High altitude Andean ecosystems pose many constraints for dairy farming (hypoxia and high UV radiation, high variation between day and night temperatures, short rainy season, and hence shortage of feed and water; and not less importantly, accelerated climate change (CC)). Under these conditions, not only are productivity and profitability low, but there are high negative environmental impacts and poor animal welfare. In Peru, institutionalised research and extension (R&E) services are precarious. Research tackling current issues of high-altitude livestock farming is almost inexistent, whereas extension in support of farmers is dispersed, poorly funded, of short duration (a few months), focused on transfer of technology suitable to intensive farming systems, and has a high turnover of staff. A systems approach to address the complexity of Andean livestock farming development is lacking. The initiatives from the institutions promoting farming are directed to remediate recurrent problems (e.g., cold stress) or prioritise high cost, low impact activities (e.g., genetic improvement). Here, we present the successful experience of the New Zealand Peru Dairy Support Project (NZPDSP) to promote the adoption of improved low input pastoral dairying husbandry principles, where trained smallholder farmers play a key role as agents of change