Regulating Financial Innovations Without Apology

This paper views the housing and credit bubble 2001-2008 in a stylized manner, namely as a sequence starting with a financial innovation in 2001 followed by the superimposition of other financial innovations leading to the prevalence of uncertainty in Knight’s sense and ending in the last quarter of 2008 with both market failure and regulation failure. This ‘debt bubble sequence’ is just a slice of a dynamic process of stupefying complexity involving ignorance in a fundamental way. Few analysts would deny that a financial innovation, namely the sub-prime mortgage,combined with market participants’ ignorance about the size and location of the risk underlying complex financial products was a critical factor conducive to the financial meltdown 2007-2008. To the extent that financial innovation does bear the blame, the most obvious question is whether anything can be done to help reduce the degree of public’s ignorance about financial innovations and to prevent destabilizing innovations from entering the market.The main claim of this paper is that society should be involved in exercising directive intelligence through an appropriate institutional arrangement over the intricacies and technicalities inherent to financial innovations. Specifically, the paper proposes a new institutional arrangement conceived with the aim of strengthening financial system reliability and breaking the ‘government regulation-financial innovation’ vicious circle.Toxic financial innovations, Knightian uncertainty, debt bubble 2001-2008, relevant regulation

An Appreciative Model of Schumpeterian Evolution

Schumpeter persistently sought to reconcile innovation with general equilibrium to explain economic evolution. In essence, he was interested in innovatory discontinuities that upset equilibrium and generate a transitional dynamics converging to a different state of technology. There are two central approaches to the analysis of economic evolution which revolve around the Schumpeterian vision: the evolutionary approach as originated in the landmark book by Nelson and Winter An Evolutionary Theory of Economic Change and the neoclassical approach emerging from Romer’s seminal paper “Endogenous Technological Change” Neither of these approaches is able to explain economic evolution in an economy where both general equilibrium and innovatory discontinuities can happen. In this paper I formalize the notion of innovatory discontinuity using the concept of ‘ideas production function’ and present an appreciative model of economic evolution involving equilibrium, innovation and innovatory discontinuities. This (hybrid) model sheds some light on the answer to the question: is economic evolution continuous or discontinuous?General equilibrium, economic evolution, neoclassical approach, evolutionary economics, mega-invention, innovatory discontinuities, Schumpeterian view

Innovation Heterogeneity, Schumpeterian Growth and Evolutionary Theorizing

Schumpeterian growth models revolve around two tacit assumptions that are at odds with the empirical evidence, namely: all innovations are equally important for economic growth (equipollent innovation) and all innovations occur in one sector only (confined innovation). The present paper shows that it is possible to dispose of both implicit assumptions by disaggregating the "ideas production function" without altering the gist of the theoretical framework. The paper refers briefly to the concepts of macro and microinventions, and introduces the concept of "innovatory discontinuity". The extended theoretical framework developed here throws light on the ongoing controversy between neoclassical and evolutionary theorizing.Innovation heterogeneity, ideas production function, scale effects problem, innovatory discontinuity, neoclassical and evolutionary theorizing

The Double Paradox of Elementary Economics Education

Elementary economics textbooks have become less attractive to students requiring only an introduction to economics, given that their content is pervaded by mathematical diagrams and simple equations. Also they are of relatively little value to those interested in, for example, attempting to gain an understanding of the New Economy, for they rarely emphasise business innovation and its crucial dynamic role. These factors engender something of a double paradox. First (paradox of the tools and the audience), newcomers are frequently 'turned off' by existing economics textbooks due to the pervasive use of mathematics. Second (paradox of the content and relevance), those newcomers who are not initially turned off tend to be disenchanted with economics because they perceive that economics is of little use in understanding the New Economy in which they work, or will come to work. We suggest an integrated solution to both paradoxes. The implementation entails a minor reorientation of the traditional pedagogical strategy for teaching introductory economics.Double paradox, elementary economics education

A New Taxonomy of Economic sectors With a View to Policy Implications

This paper is an attempt to tease out a taxonomy of economic sectors based on a systems approach to innovation and economic growth that may be useful for policy analysis. The taxonomy explored here revolves around novel products rather than ethereal knowledge-producing entities. This insight goes back to Allyn Young (1928) and Joseph Schumpeter (1934) who argued that the introduction of new goods was the engine of economic growth. More precisely, our taxonomy of sectors focuses on novel products which are efficiency-enhancing within and between sectors through the market mechanism. The scheme revolves around the relationship between 'Enabling' and 'Recipient' sectors (which gives the taxonomy its name: ER), and offers a lens for viewing and interpreting a substantive part of the mechanics of modern economic growth. The last part of the paper briefly discusses a few immediate policy implications, although it has the potential for greater use and value in this regard.innovation, economic growth, enabling linkages approach, knowledge-based economies, novel products, efficiency-enhancing innovations

Causality in Economics: A Menu of Approaches

Causality is a notion that occurs often in economics. In using the words ‘cause' and ‘effect,' economists seek to distinguish causation from association, recognizing that causes are responsible for producing effects, whereas non-causal associations are not. The identification of causes is accorded a high priority because it is viewed as the basis for understanding economic phenomena and developing policy implications. In this survey we look at different approaches to causality in economics and set out the general principles of each approach, so as to assist in the communication and teaching role. Specifically, we confine attention to five approaches to causality in economics (narrative, comparative statics, theoretical, structural, and experimentalist) and elucidate their distinctive characteristics without entering into philosophical discussions. In particular, we pay close attention to the debate between the structuralist and experimentalist schools because this controversy has been extremely useful to clarify a number of fundamental points concerning causality in economic

REGULATING FINANCIAL INNOVATIONS WITHOUT APOLOGY

Abstract This paper views the housing and credit bubble [2001][2002][2003][2004][2005][2006][2007][2008] in a stylized manner, namely as a sequence starting with a financial innovation in 2001 followed by the superimposition of other financial innovations leading to the prevalence of uncertainty in Knight's sense and ending in the last quarter of 2008 with both market failure and regulation failure. This 'debt bubble sequence' is just a slice of a dynamic process of stupefying complexity involving ignorance in a fundamental way. Few analysts would deny that a financial innovation, namely the sub-prime mortgage, combined with market participants' ignorance about the size and location of the risk underlying complex financial products was a critical factor conducive to the financial meltdown [2007][2008]. To the extent that financial innovation does bear the blame, the most obvious question is whether anything can be done to help reduce the degree of public's ignorance about financial innovations and to prevent destabilizing innovations from entering the market. The main claim of this paper is that society should be involved in exercising directive intelligence through an appropriate institutional arrangement over the intricacies and technicalities inherent to financial innovations. Specifically, the paper proposes a new institutional arrangement conceived with the aim of strengthening financial system reliability and breaking the 'government regulation-financial innovation' vicious circle

Venting out : exports during a domestic slump

En este artículo utilizamos variación geográfica plausiblemente exógena en la reducción de la demanda interna causada por la Gran Recesión en España para documentar la existencia de una robusta relación causal negativa a nivel de empresa entre cambios provocados por la demanda en las ventas internas y en los flujos de exportaciones. Las empresas manufactureras españolas cuyas ventas internas se redujeron en mayor medida durante la crisis experimentaron un mayor incremento en sus flujos de exportación, incluso una vez que se controla por sus determinantes de oferta, tales como sus costes laborales. Esta relación negativa entre cambios en las ventas internas y cambios en los flujos de exportación provocados por cambios de la demanda ilustra la capacidad de los mercados de exportación para compensar el impacto negativo de shocks de demanda locales. Los resultados presentados en el artículo se racionalizan a través de un modelo estándar de exportaciones con heterogeneidad de empresas que permite la existencia de costes marginales de producción no constantes. Utilizando una versión de este modelo estimada de manera estructural, concluimos que las respuestas a nivel de empresa a la caída de la demanda interna en España podrían explicar alrededor de la mitad del espectacular incremento de las exportaciones de bienes en España (el denominado «milagro exportador español») en el período 2009-2013We exploit plausibly exogenous geographical variation in the reduction in domestic demand caused by the Great Recession in Spain to document the existence of a robust, within-firm negative causal relationship between demand-driven changes in domestic sales and export flows. Spanish manufacturing firms whose domestic sales were reduced by more during the crisis observed a larger increase in their export flows, even after controlling for firms’ supply determinants (such as labor costs). This negative relationship between demand-driven changes in domestic sales and changes in export flows illustrates the capacity of export markets to counteract the negative impact of local demand shocks. We rationalize our findings through a standard heterogeneous-firm model of exporting expanded to allow for non-constant marginal costs of production. Using a structurally estimated version of this model, we conclude that the firm-level responses to the slump in domestic demand in Spain could well have accounted for around one-half of the spectacular increase in Spanish goods exports (the so-called “Spanish export miracle”) over the period 2009-1

HPC-enabling technologies for high-fidelity combustion simulations

With the increase in computational power in the last decade and the forthcoming Exascale supercomputers, a new horizon in computational modelling and simulation is envisioned in combustion science. Considering the multiscale and multiphysics characteristics of turbulent reacting flows, combustion simulations are considered as one of the most computationally demanding applications running on cutting-edge supercomputers. Exascale computing opens new frontiers for the simulation of combustion systems as more realistic conditions can be achieved with high-fidelity methods. However, an efficient use of these computing architectures requires methodologies that can exploit all levels of parallelism. The efficient utilization of the next generation of supercomputers needs to be considered from a global perspective, that is, involving physical modelling and numerical methods with methodologies based on High-Performance Computing (HPC) and hardware architectures. This review introduces recent developments in numerical methods for large-eddy simulations (LES) and direct-numerical simulations (DNS) to simulate combustion systems, with focus on the computational performance and algorithmic capabilities. Due to the broad scope, a first section is devoted to describe the fundamentals of turbulent combustion, which is followed by a general description of state-of-the-art computational strategies for solving these problems. These applications require advanced HPC approaches to exploit modern supercomputers, which is addressed in the third section. The increasing complexity of new computing architectures, with tightly coupled CPUs and GPUs, as well as high levels of parallelism, requires new parallel models and algorithms exposing the required level of concurrency. Advances in terms of dynamic load balancing, vectorization, GPU acceleration and mesh adaptation have permitted to achieve highly-efficient combustion simulations with data-driven methods in HPC environments. Therefore, dedicated sections covering the use of high-order methods for reacting flows, integration of detailed chemistry and two-phase flows are addressed. Final remarks and directions of future work are given at the end. }The research leading to these results has received funding from the European Union’s Horizon 2020 Programme under the CoEC project, grant agreement No. 952181 and the CoE RAISE project grant agreement no. 951733.Peer ReviewedPostprint (published version

IDENTIFICAÇÃO DOS RISCOS AMBIENTAIS EM COMÉRCIO VAREJISTA DE COMBUSTÍVEIS DE NOVO HAMBURGO/RS.

A atividade de revenda de combustíveis pode causar impactos ambientais significativos decorrentes da manipulação de produtos químicos que são consideradas potenciais poluidora dos recursos naturais e da saúde humana. O objetivo da pesquisa foi avaliar a gestão dos riscos ambientais de um Posto de Combustível de Novo Hamburgo por meio de uma Análise Preliminar de Riscos. As evidências empíricas foram obtidas por meio de entrevista semiestruturada com o gestor operacional, observação não participante e levantamento documental, que facultaram a realização da análise preliminar de riscos. Constatou-se a existência de um conjunto de atividades operacionais voltadas para o gerenciamento ambiental. Entre os riscos ambientais melhor gerenciados, destaca-se o risco de incêndio, uma vez que coloca em risco a vida não apenas dos funcionários e dos clientes, mas também da comunidade do entorno