2,318 research outputs found
Competitive market for multiple firms and economic crisis
The origin of economic crises is a key problem for economics. We present a
model of long-run competitive markets to show that the multiplicity of
behaviors in an economic system, over a long time scale, emerge as statistical
regularities (perfectly competitive markets obey Bose-Einstein statistics and
purely monopolistic-competitive markets obey Boltzmann statistics) and that how
interaction among firms influences the evolutionary of competitive markets. It
has been widely accepted that perfect competition is most efficient. Our study
shows that the perfectly competitive system, as an extreme case of competitive
markets, is most efficient but not stable, and gives rise to economic crises as
society reaches full employment. In the economic crisis revealed by our model,
many firms condense (collapse) into the lowest supply level (zero supply,
namely bankruptcy status), in analogy to Bose-Einstein condensation. This
curious phenomenon arises because perfect competition (homogeneous
competitions) equals symmetric (indistinguishable) investment direction, a fact
abhorred by nature. Therefore, we urge the promotion of monopolistic
competition (heterogeneous competitions) rather than perfect competition. To
provide early warning of economic crises, we introduce a resolving index of
investment, which approaches zero in the run-up to an economic crisis. On the
other hand, our model discloses, as a profound conclusion, that the
technological level for a long-run social or economic system is proportional to
the freedom (disorder) of this system; in other words, technology equals the
entropy of system. As an application of this new concept, we give a possible
answer to the Needham question: "Why was it that despite the immense
achievements of traditional China it had been in Europe and not in China that
the scientific and industrial revolutions occurred?"Comment: 17 pages; 3 figure
The Okun Misery Index in the European Union Countries from 2000 to 2009
The study is composed of four main parts and a summary. The first part, introduction, discusses various measures of the economic system's efficiency that are used in practice. Part two emphasises that the GDP per capita according to purchasing power parity still remains the most popular among those measures. Further, it presents the ranking of the European Union countries taking that measure into account, the research period being 1999-2009. Part three points out that it is also the level of poverty (misery) that determines the economic system's efficiency. That level can be measured by means of various indicators, among others, the so called HPI-2 index calculated by the UN. It will be the Okun misery index, however, computed as the sum of inflation and unemployment rates that will be presented as an alternative being of interest from the macroeconomic point of view. The ranking of the European Union member states according to that measure in the 2000-2004 and 2005-2009 periods will be provided in part four. The article will end in a summary containing synthetic conclusions drawn from earlier observations.Opracowanie składa się z czterech części zasadniczych i podsumowania. W punkcie pierwszym omówiono różnorodne mierniki sprawności systemu gospodarczego wykorzystywane w praktyce. W części drugiej podkreślono, iż nadal najpopularniejszym z nich jest PKB per capita według parytetu siły nabywczej. Zgodnie z tym miernikiem przedstawiono ranking państw Unii Europejskiej w latach 1999-2009. W punkcie trzecim podkreślono, że o sprawności systemu gospodarczego decyduje także poziom ubóstwa. Może być on mierzony różnymi wskaźnikami, m.in. tzw. indeksem HPI-2 obliczanym przez ONZ. Jako ciekawą z makroekonomicznego punktu widzenia alternatywę ukazano jednak miarę wskaźnika ubóstwa Okuna obliczanego poprzez zsumowanie stopy inflacji i stopy bezrobocia. Ranking państw Unii Europejskiej według tej miary w okresach 2000-2004 oraz 2005-2009 zaprezentowano w części czwartej. Całość zamknięto podsumowaniem, w którym zawarto syntetyczne wnioski z przeprowadzonych obserwacji
Why are Prices Sticky? Evidence from Business Survey Data
This paper offers new insights on the price setting behaviour of German retail firms using a novel dataset that
consists of a large panel of monthly business surveys from 1991-2006. The firm-level data allows matching changes
in firms' prices to several other firm-characteristics. Moreover, information on price expectations allow analyzing
the determinants of price updating. Using univariate and bivariate ordered probit specifications, empirical menu
cost models are estimated relating the probability of price adjustment and price updating, respectively, to both
time- and state- dependent variables. First, results suggest an important role for state-dependence; changes in
the macroeconomic and institutional environment as well as firm-specific factors are significantly related to the
timing of price adjustment. These findings imply that price setting models should endogenize the timing of price
adjustment in order to generate realistic predictions concerning the transmission of monetary policy. Second, an
analysis of price expectations yields similar results providing evidence in favour of state-dependent sticky plan
models. Third, intermediate input cost changes are among the most important determinants of price adjustment
suggesting that pricing models should explicitly incorporate price setting at different production stages. However, the results show that adjustment to input cost changes takes time indicating "additional stickiness" at the last stage of processing
The Elusive Rentier Rich: Piketty's Data Battles and the Power of Absent Evidence
The popularity of Thomas Piketty?s research on wealth inequality has drawn attention to a curious question: why was widening wealth inequality largely neglected by mainstream economists in recent decades? To explore and explain that neglect, I draw on the writing of the early neoclassical economist John Bates Clark, who introduced the notion of the marginal productivity of income distribution at the end of the nineteenth century. I then turn to Piketty?s Capital in order to analyze the salience of marginal productivity theories of income today. I suggest that most of the criticism and praise for Piketty?s research is focused on data that are accessible and measurable, obscuring attention to questions over whether current methods for measuring economic capital are defensible or not. My overarching aim is to explore how ?absent? data in economics as a whole help to reinforce blind spots within mainstream economic theory
A Model of Vertical Oligopolistic Competition
This paper develops a model of successive oligopolies with endogenous market entry, allowing for varying degrees of product differentiation and entry costs in both markets. Our analysis shows that the downstream conditions dominate the overall profitability of the two-tier structure while
the upstream conditions mainly affect the distribution of profits. We compare the welfare effects of upstream versus downstream deregulation policies and show that the impact of deregulation may be overvalued when ignoring feedback effects from the other market. Furthermore, we analyze how different forms of vertical restraints influence the endogenous market structure and show when they are welfare enhancing
Whither Capitalism? Financial externalities and crisis
As with global warming, so with financial crises – externalities have a lot to answer for. We
look at three of them. First the financial accelerator due to ‘fire sales’ of collateral assets -- a
form of pecuniary externality that leads to liquidity being undervalued. Second the ‘risk-
shifting’ behaviour of highly-levered financial institutions who keep the upside of risky
investment while passing the downside to others thanks to limited liability. Finally, the
network externality where the structure of the financial industry helps propagate shocks
around the system unless this is checked by some form of circuit breaker, or ‘ring-fence’.
The contrast between crisis-induced Great Recession and its aftermath of slow growth in the
West and the rapid - and (so far) sustained - growth in the East suggests that successful
economic progress may depend on how well these externalities are managed
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