The fundamental problem of command : plan and compliance in a partially centralised economy

When a principal gives an order to an agent and advances resources for its implementation, the temptations for the agent to shirk or steal from the principal rather than comply constitute the fundamental problem of command. Historically, partially centralised command economies enforced compliance in various ways, assisted by nesting the fundamental problem of exchange within that of command. The Soviet economy provides some relevant data. The Soviet command system combined several enforcement mechanisms in an equilibrium that shifted as agents learned and each mechanism's comparative costs and benefits changed. When the conditions for an equilibrium disappeared, the system collapsed.Comparative Economic Studies (2005) 47, 296–314. doi:10.1057/palgrave.ces.810011

Is diversity good?

Prominent ethical and policy issues such as affirmative action and female enrollment in science and engineering revolve around the idea that diversity is good. However, even though diversity is an ambiguous concept, a precise definition is seldom provided. We show that diversity may be construed as a factual description, a craving for symmetry, an intrinsic good, an instrumental good, a symptom, or a side effect. These acceptions differ vastly in their nature and properties. The first one cannot lead to any action and the second one is mistaken. Diversity as intrinsic good is a mere opinion, which cannot be concretely applied; moreover, the most commonly invoked forms of diversity (sexual and racial) are not intrinsically good. On the other hand, diversity as instrumental good can be evaluated empirically and can give rise to policies, but these may be very weak. Finally, symptoms and side effects are not actually about diversity. We consider the example of female enrollment in science and engineering, interpreting the various arguments found in the literature in light of this polysemy. Keywords: ethics, policy, higher education, female students, minority students, affirmative actionComment: 7 page

Frontal and Parietal Components of a Cerebral Network Mediating Voluntary Attention to Novel Events

Despite the important role that attending to novel events plays in human behavior, there is limited information about the neuroanatomical underpinnings of this vital activity. This study investigated the relative contributions of the frontal and posterior parietal lobes to the differential processing of novel and target stimuli under an experimental condition in which subjects actively directed attention to novel events. Event-related potentials were recorded from well-matched frontal patients, parietal patients, and non-brain-injured subjects who controlled their viewing duration (by button press) of line drawings that included a frequent, repetitive background stimulus, an infrequent target stimulus, and infrequent, novel visual stimuli. Subjects also responded to target stimuli by pressing a foot pedal. Damage to the frontal cortex resulted in a much greater disruption of response to novel stimuli than to designated targets. Frontal patients exhibited a widely distributed, profound reduction of the novelty P3 response and a marked diminution of the viewing duration of novel events. In contrast, damage to posterior parietal lobes was associated with a substantial reduction of both target P3 and novelty P3 amplitude; however, there was less disruption of the processing of novel than of target stimuli. We conclude that two nodes of the neuroanatomical network for responding to and processing novelty are the prefrontal and posterior parietal regions, which participate in the voluntary allocation of attention to novel events. Injury to this network is indexed by reduced novelty P3 amplitude, which is tightly associated with diminished attention to novel stimuli. The prefrontal cortex may serve as the central node in determining the allocation of attentional resources to novel events, whereas the posterior parietal lobe may provide the neural substrate for the dynamic process of updating one's internal model of the environment to take into account a novel event

Climate Policy Under Fat-Tailed Risk: An Application of Dice

Uncertainty plays a significant role in evaluating climate policy, and fat-tailed uncertainty may dominate policy advice. Should we make our utmost effort to prevent the arbitrarily large impacts of climate change under deep uncertainty? In order to answer to this question, we propose a new way of investigating the impact of (fat-tailed) uncertainty on optimal climate policy: the curvature of the optimal carbon tax against the uncertainty. We find that the optimal carbon tax increases as the uncertainty about climate sensitivity increases, but it does not accelerate as implied by Weitzman's Dismal Theorem. We find the same result in a wide variety of sensitivity analyses. These results emphasize the importance of balancing the costs of climate change against its benefits, also under deep uncertainty. © 2013 Springer Science+Business Media Dordrecht

Divergent mathematical treatments in utility theory

In this paper I study how divergent mathematical treatments affect mathematical modelling, with a special focus on utility theory. In particular I examine recent work on the ranking of information states and the discounting of future utilities, in order to show how, by replacing the standard analytical treatment of the models involved with one based on the framework of Nonstandard Analysis, diametrically opposite results are obtained. In both cases, the choice between the standard and nonstandard treatment amounts to a selection of set-theoretical parameters that cannot be made on purely empirical grounds. The analysis of this phenomenon gives rise to a simple logical account of the relativity of impossibility theorems in economic theory, which concludes the paper

Employee Stock Ownership and Financial Performance in European Countries: The Moderating Effects of Uncertainty Avoidance and Social Trust

This study investigates how the effect of employee stock ownership on financial performance may hinge on the diverse cultural and societal contexts of European countries. Based on agency and national culture theories, we hypothesize that the positive relationship between employee stock ownership and return on assets (ROA) is stronger in those nations with lower uncertainty avoidance and higher social trust. Using a multisource, time‐lagged, large‐scale dataset of 1,741 firms from 21 countries in Europe, our multilevel, random coefficient modeling analysis found evidence for these hypotheses, suggesting that uncertainty avoidance and social trust serve as important contextual cues in predicting the linkage between employee stock ownership and financial performance. Our supplemental analysis with distinction between the managerial and nonmanagerial employee stock ownership further indicates managerial employee stock ownership has a direct positive effect on ROA. Although nonmanagerial employee stock ownership had a nonsignificant association with ROA, the relationship was positive and significant when uncertainty avoidance was low and social trust was high. This research contributes to the existing literature by illuminating some of the contextual influences altering the effectiveness of employee stock ownership. Our findings also offer practical suggestions for effectively using employee stock ownership

Employee share ownership in a unionised duopoly

Profit sharing schemes have been analysed assuming Cournot competition and decentralised wage negotiations, and it has been found that firms share profits in equilibrium. This paper analyses a different remuneration system: employee share ownership. We find that whether firms choose to share ownership or not depends on both the type of competition in the product market and the way in which workers organise to negotiate wages. If wage setting is decentralised, under duopolistic Cournot competition both firms share ownership. If wage setting is centralised, only one firm shares ownership if the degree to which goods are substitutes takes an intermediate value; otherwise, the two firms share ownership. In this case, if the union sets the same wage for all workers neither firm shares ownership. Therefore, centralised wage setting discourages share ownership. Fi- nally, under Bertrand competition neither firm shares ownership regardless of how workers are organised to negotiate wages.info:eu-repo/semantics/publishedVersio

Diversity Structure of the Schumpeterian Evolution: An Axiomatic Approach

The purpose of the paper is to impose the diversity structure on the Schumpeterian evolution modelled axiomatically within a dynamical system approach to the Arrow-Debreu theory of general equilibrium. In this framework two basic forms of economic life studied by Schumpeter, i.e., the circular flow and economic development are investigated as specific properties of a dynamic system, where single production systems being the parts of the Debreu models change in the definite environment according to the rules of the Schumpeterian evolution. Moreover, the Sterling diversity-triplet concept based on subcategories of variety, balance and disparity, is slightly modified and applied to serve as a tool for rigorous analysis of innovative and cumulative changes in production system with respect to diversity structure. Finally, integrating diversity aspects into a dynamic system approach, the study identifies innovative processes as the source of growing diversity in the Schumpeterian vision of economic development