/pdf/the-theory-of-industrial-organization-19bejph0ej.pdf

The Theory of Industrial Organization

Differential-Difference Equations. By Richard Bellman and Kenneth L. Cooke. Pp. xvi, 465. 1963. (Academic Press)

The theory of precautionary saving is shown in this paper to be isomorphic to the Arrow-Pratt theory of risk aversion, making possible the application of a large body of knowledge about risk aversion to precautionary saving, and more generally, to the theory of optimal choice under risk In particular, a measure of the strength of precautionary saving motive analogous to the Arrow-Pratt measure of risk aversion is used to establish a number of new propositions about precautionary saving, and to give a new interpretation of the Oreze-Modigliani substitution effect

Precautionary Saving in the Small and in the Large

Dynamic optimization: The calculus of variations and optimal control in economics and management: Morton I. KAMIEN and Nancy L. SCHWARTZ Volume 4 in: Dynamic Economics: Theory and Applications, North-Holland, New York, 1981, xi + 331 pages, Dfl.90.00

The paper investigates the impact of the Common Agricultural Policy (CAP) subsidies on farm total factor productivity (TFP) in the European Union (EU). We employ a structural semi-parametric estimation algorithm directly incorporating the effect of subsidies into a model of unobserved productivity. We empirically study the effects using the Farm Accountancy Data Network (FADN) samples for the EU-15 countries. Our main findings are clear: subsidies impact negatively on farm productivity in the period before the decoupling reform was implemented; after decoupling the effect of subsidies on productivity is more nuanced and in several countries it turned positive.

/pdf/cap-subsidies-and-productivity-of-the-eu-farms-3yekgbd5aa.pdf

CAP Subsidies and Productivity of the EU Farms

Qualitative change is widely recognised as a defining feature of evolution. Schumpeter and Georgescu-Roegen put it at the centre of their methodological reasoning. I revisit important contributions of these two authors, paying attention to the immediate relationship of the major traits and treated issues between their works. With reference to qualitative change, their joint approach provides answers as to (i) why an evolutionary analysis has to necessarily apply a varied less formal set of methods as compared with modern static and dynamic analysis, (ii) why an evolutionary analysis is a necessary component of economic analysis and (iii) how it can be seen as complementary to modern statics and dynamics. They argued for methodological pluralism, where the choice of methods shall derive from close observation of the subject matter under scrutiny. Georgescu-Roegen’s reasoning shows the necessity of interdisciplinary contributions and the interrelation of economic activity and environmental impact and constraints, putting environmental issues immediately on the evolutionary economics agenda. The paper provides a new ground for evaluating Georgescu-Roegen’s own and their joint contribution to modern research.

/pdf/schumpeter-and-georgescu-roegen-on-the-foundations-of-an-3tjfkyq1pl.pdf

Schumpeter and Georgescu-Roegen on the foundations of an evolutionary analysis

Despite the frequent references to Schumpeter's work, his own encompassing methodological approach as worked out by Shionoya (1997) has hardly been considered. In this paper, it is revisited together with Georgescu-Roegen's contributions to economic methodology in view of (i) their contribution to the foundations of an evolutionary analysis in economics and (ii) their mutual complementarity and differences. Both are centred around the issue of qualitative change and its substantial analysis. Schumpeter's analytical distinction between the levels of subject matter and method and his further distinction between stationary and evolutionary economy on the level of subject matter are shown to be decisive for the structure of his analytical system and the determination of an evolutionary analysis on its basis. It is further shown that Georgescu-Roegen's contributions – his evaluation of the entropy law and his consideration of the implications of qualitative change for economic analysis – follow exactly the general structure of Schumpeter's analytical system which they refine or correct. It is argued that they provided together an encompassing general framework for the analysis of economic evolution necessarily different from, but complementary to modern static and dynamic analysis. However, they did neither state nor solve the general theoretical problem of an evolutionary analysis in their sense.

https://www.econstor.eu/bitstream/10419/22737/1/DDPE200610.pdf

Schumpeter and Georgescu-Roegen on the foundations of an evolutionary analysis: The problem of qualitative change, its methodical implications and analytical treatment

We study the welfare-theoretic consequences of diverging social and private time-preference rates and time-to-build for the transition to a low-carbon energy industry. We show that time-to-build, a prevalent characteristic of capital accumulation in the energy sector, amplifies the distortion induced by the split discount rates. Thus, these two characteristics create in a mutually reinforcing way less favorable circumstances for the introduction of new clean energy technologies as compared to the social optimum, even if welfare losses from emissions are internalized. We discuss resulting policy implications with particular emphasis on the energy sector.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1711146_code363521.pdf?abstractid=1711146&mirid=1&type=2

Distorted Time Preferences and Time-to-Build in the Transition to a Low-Carbon Energy Industry

In a dynamic general equilibrium model we study the interplay between gradual and structural change in the transition to a low-carbon energy industry. We focus on the welfare-theoretic consequences of diverging social and private rates of time preference and a time-to-build feature in capital accumulation. Both features are particularly important in the transformation of energy systems. We show that only a combination of environmental and technology policies can achieve a socially optimal transition. We thus provide a new reason for environmental regulation to be complemented by technology policy such as a non-distortionary investment subsidy.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1000903_code400523.pdf?abstractid=1000903&mirid=1

The role of environmental and technology policies in the transition to a low-carbon energy industry

For the 2014-2020 phase of the Common Agricultural Policy, the European Commission has the opportunity to reduce the leakage of public support to landowners and to better target it towards active farmers. Our purpose is to assess whether shifting the basis of direct payments from land towards active farmers will significantly alter agricultural production decisions. In a dynamic and stochastic microeconomic framework, we identify the impact of this shift on the farm household’s production and consumption decisions. In the dynamic setting the production impacts of direct payments are much higher than previously quantified, because the “long run” absolute risk aversion (associated with the value function) is lower than the “short run” one (associated with direct utility). In our dynamic setting, the impact profiles are opposed for initially poor and initially wealthy farmers, due to their different precautionary motives. Leakage to land owners is lower with an active-farmer than with a land subsidy, so that the production impact is higher.

Christoph Heinzel

Papers

Schumpeter and Georgescu-Roegen on the foundations of an evolutionary analysis

Schumpeter and Georgescu-Roegen on the foundations of an evolutionary analysis: The problem of qualitative change, its methodical implications and analytical treatment

Distorted Time Preferences and Time-to-Build in the Transition to a Low-Carbon Energy Industry

The role of environmental and technology policies in the transition to a low-carbon energy industry

Production Effects of Direct Payments to Active Farmers: a Microeconomic Dynamic and Stochastic Analysis