Mandatory vs. Voluntary Approaches to Food Safety

Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety,

Risk-sharing and Liability in the Control of Stochastic Externalities

This paper analyzes alternative policies for controlling stochastic externalities, considering both the incentive and the risk-sharing effects of each. When polluter actions are unobservable so that regulation is not possible, alternative liability rules including zero, partial, and full liability are compared. When actions are observable, then regulation is possible, and the use of regulation is compared to the use of liability. The principal-agent paradigm provides the analytical approach used to determine the efficient policy choice. The effect of the availability of insurance is also addressed. This paper concludes with a discussion of the implications of the analysis for the control of stochastic marine pollution.Environmental Economics and Policy, Resource /Energy Economics and Policy, Risk and Uncertainty,

IMPACTS OF INCREASED CLIMATE VARIABILITY ON THE PROFITABILITY OF MIDWEST AGRICULTURE

Approximate profit functions are estimated using time-series, cross-sectional, county level data for 12 midwest states. Measures of climate variability are included in the profit functions. Simulated impacts of climate changes on profits are derived. Results show that inclusion of measures of climate variation are important for measuring the impact of changes in mean temperature and precipitation levels. Failure to account for the impact of differences in variability leads to an overestimate of damages. If global warming increases diurnal variation, such increases would have negative impacts on the profitability of midwest agriculture.climate change, climate variability, Midwest, profit function, Farm Management,

PREVENTION AND TREATMENT IN FOOD SAFETY: AN ANALYSIS OF CONCEPTUAL ISSUES

Foodborne illness, damage functions, optimal regulation, Food Consumption/Nutrition/Food Safety,

RATIONAL ROOTS OF "IRRATIONAL" BEHAVIOR: NEW THEORIES OF ECONOMIC DECISION-MAKING

The neoclassical paradigm has proven to be a rich approach for evaluating a variety of issues for individual and social decision-making. However, an increasing body of literature suggests that actual behavior systematically violates the neoclassical utility model. This paper reviews a number of alternative models for decision-making. Results from the literature show several examples of apparently "irrational" behavior that can be explained in terms of these alternative motivations. The paper also extends the received literature by examining in some detail the implications of one such model which is based on the psychological feeling of ambivalence. The paper demonstrates that ambivalence has the potential for explaining the appearance of intransitive choices, the use of rules of thumb in decision-making and the large discrepancies between stated willingness-to-pay and willingness-to-accept, all of which have been observed in various settings. There are potentially great rewards from innovative research that expands the neoclassical paradigm to incorporate additional motivational factors in decision-making.Institutional and Behavioral Economics,

CONTRACTS-EQUITABLE LIEN ON PARTNERSHIP ASSETS

The plaintiff and X, now deceased, entered into a partnership agreement whereby each was given the option, upon the death of the other, to wind up the partnership affairs according to law or to purchase the deceased\u27s interest. On X\u27s death, plaintiff exercised the option to purchase. In this suit plaintiff seeks to have a certain agreement construed as a deed and to quiet title. Defendants, as legal representatives of X, answered and filed cross bills claiming a lien on all partnership assets or decedent\u27s partnership interest for the balance due on the purchase price. Defendants allege that the language of the agreement contemplated the creation of such a lien. From a judgment for the plaintiff, defendants appeal. Held, affirmed. The language of the agreement did not show an intent to charge the property as security for the obligation. Wiltse v. Schaeffer, (Mich. 1950) 42 N. w. (2d) 91

LANDLORD AND TENANT-LIABILITY OF LANDLORD TO PERSONS ON THE PREMISES-BREACH OF COVENANT TO REPAIR

Plaintiff, a carpenter, hired by tenant, suffered personal injuries in a fall caused by a defective railing on the rear porch of premises leased by defendant to tenant. By the terms of the lease, tenant was given exclusive possession of the premises, while defendant agreed to keep the rear porch in repair. Defendant had failed to repair the railing on being notified of its defective condition. From a judgment holding defendant liable to plaintiff for the injuries sustained; defendant appealed. Held, reversed. In the absence of control of the premises, a lessor is not liable in tort for personal injuries because of his breach of an agreement to make repairs. Huey v. Barton, 328 Mich. 584, 44 N.W. (2d) 132 (1950)

TAXATION-FEDERAL INCOME TAX-PERIOD FOR DEDUCTION OF EMBEZZLEMENT LOSSES

This action was brought against the United States for a refund of income taxes paid. Plaintiff taxpayer claimed she was entitled to a deduction in 1941 for losses resulting from the embezzlement of funds by a trustee which were discovered in that year. The Commissioner of Internal Revenue disallowed the claimed deduction because the acts constituting the embezzlement had taken place during prior years. Held, judgment for defendant. Embezzlement losses are deductible in the years in which the defalcations take place, not in the years such defalcations are discovered. Alison v. United States, (D.C. Pa. 1951) 97 F. Supp. 959

CORPORATIONS-MAJORITY SHAREHOLDER\u27S FRAUD IN THE PURCHASE OF STOCK

Whether or not there has been fraud in the purchase of property, due to either affirmative statements or mere non-disclosure, may well depend upon the relation of the purchaser to the vendor. The recent case of Speed v. Transamerica Corporation presents two questions relative to this problem in the purchase of corporation shares: first, whether the price quoted in an offer to purchase can ever be the basis of an action for fraud and deceit; and second, whether the majority shareholder of a corporation occupies a fiduciary relation to minority shareholders in the purchase of their stock. Defendant was the majority stockholder of the Axton-Fisher Tobacco Company and had, pursuant to its written offer, purchased stock of plaintiff, a minority stockholder in such company, at a price quoted in the offer. From the evidence presented in a deceit action brought by plaintiff, the court found that the defendant had devised a scheme whereby it intended to acquire the holdings of the minority shareholders at a price much less than the real value thereof and thereafter to capture for itself the appreciated value of the leaf tobacco inventory of Axton-Fisher by liquidation. The court felt that in making the offer the defendant had impliedly represented the price quoted to be fair, when in the presence of an existing intent to liquidate, the true value of the shares was far greater. The offer, therefore, viewed as a representation as to value, was false and as such was held to be a misrepresentation upon which a common law action for fraud and deceit could be based. The court did not appear to ground its decision on a finding of the existence of any fiduciary relationship nor, as a corollary, a finding of the existence of a duty to make affirmative disclosures. It is not the purpose of this comment to explore all the possible ramifications of either the reasoning of the court or the correctness of the ultimate finding of defendant\u27s liability to respond in damages. Moreover, it will be assumed that the evidence supported the inference that at the time the offer was made there did exist an intent to liquidate. Instead, this comment will concern itself with but two questions: namely, whether the price quoted in the offer to purchase was an actionable misrepresentation, and whether, as a possible alternative ground for recovery, the relation of the parties was such as would convert non-disclosure of the intent to liquidate into actionable fraudulent concealment

Nonpoint Pollution Control: Inducing First-best Outcomes through the Use of Threats

In this paper we develop a simple economic model to analyze the use of a policy that combines a voluntary approach to controlling nonpoint-source pollution with a background threat of an ambient tax if the voluntary approach is unsuccessful in meeting a pre-specified environmental goal. We first consider the case where the policy is applied to a single farmer, and then extend the analysis to the case where the policy is applied to a group of farmers. We show that in either case such a policy can induce cost-minimizing abatement without the need for farm-specific information. In this sense, the combined policy approach is not only more effective in protecting environmental quality than a pure voluntary approach (which does not ensure that water quality goals are met) but also less costly than a pure ambient tax approach (since it entails lower information costs). However, when the policy is applied to a group of farmers, we show that there is a potential tradeoff in the design of the policy. In this context, lowering the cutoff level of pollution used for determining total tax payments increases the likely effectiveness of the combined approach but also increases the potential for free riding. By setting the cutoff level equal to the target level of pollution, the regulator can eliminate free riding and ensure that cost-minimizing abatement is the unique Nash equilibrium under which the target is met voluntarily. However, this cutoff level also ensures that zero voluntary abatement is a Nash equilibrium. In addition, with this cutoff level the equilibrium under which the target is met voluntarily will not strictly dominate the equilibrium under which it is not. We show that all results still hold if the background threat instead takes the form of reducing government subsidies if a pre-specified environmental goal is not met