The author systematically examines one of the important issues of information — establishing the market price. He introduces the concept of «search» — where a buyer wanting to get a better price, is forced to question sellers. The article deals with various aspects of finding the necessary information.

Economics of Information

Trust: The Social Virtues and the Creation of Prosperity

NUDGE: IMPROVING DECISIONS ABOUT HEALTH, WEALTH, AND HAPPINESS by Richard H. Thaler and Cass R. Sunstein Penguin Books, 2009, 312 pp, ISBN 978-0-14-311526-7This book is best described formally as a general explanation of and advocacy for libertarian paternalism, a term coined by the authors in earlier publications. Informally, it is about how leaders, systems, organizations, and governments can nudge people to do the things the nudgers want and need done for the betterment of the nudgees, or of society. It is paternalism in the sense that "it is legitimate for choice architects to try to influence people's behavior in order to make their lives longer, healthier, and better", (p. 5) It is libertarian in that "people should be free to do what they like - and to opt out of undesirable arrangements if they want to do so", (p. 5) The built-in possibility of opting out or making a different choice preserves freedom of choice even though people's behavior has been influenced by the nature of the presentation of the information or by the structure of the decisionmaking system. I had never heard of libertarian paternalism before reading this book, and I now find it fascinating.Written for a general audience, this book contains mostly social and behavioral science theory and models, but there is considerable discussion of structure and process that has roots in mathematical and quantitative modeling. One of the main applications of this social system is economic choice in investing, selecting and purchasing products and services, systems of taxes, banking (mortgages, borrowing, savings), and retirement systems. Other quantitative social choice systems discussed include environmental effects, health care plans, gambling, and organ donations. Softer issues that are also subject to a nudge-based approach are marriage, education, eating, drinking, smoking, influence, spread of information, and politics. There is something in this book for everyone.The basis for this libertarian paternalism concept is in the social theory called "science of choice", the study of the design and implementation of influence systems on various kinds of people. The terms Econs and Humans, are used to refer to people with either considerable or little rational decision-making talent, respectively. The various libertarian paternalism concepts and systems presented are tested and compared in light of these two types of people. Two foundational issues that this book has in common with another book, Network of Echoes: Imitation, Innovation and Invisible Leaders, that was also reviewed for this issue of the Journal are that 1 ) there are two modes of thinking (or components of the brain) - an automatic (intuitive) process and a reflective (rational) process and 2) the need for conformity and the desire for imitation are powerful forces in human behavior. …

Nudge: Improving Decisions about Health, Wealth, and Happiness

All these premises having, as I think, been clearly made out, it is impossible that the rulers now on earth should make any benefit, or derive any the least shadow of authority from that, which is held to be the fountain of all power, Adam's private dominion and paternal jurisdiction; so that he that will not give just occasion to think that all government in the world is the product only of force and violence, and that men live together by no other rules but that of beasts, where the strongest carries it, and so lay a foundation for perpetual disorder and mischief, tumult, sedition and rebellion, (things that the followers of that hypothesis so loudly cry out against) must of necessity find out another rise of government, another original of political power, and another way of designing and knowing the persons that have it, than what Sir Robert Filmer hath taught us.

Two Treatises of Government.

Criticism and the Growth of Knowledge. Edited by I. Lakatos and A. Musgrave. Pp. viii, 282. £3·50, paperback £1. 1970. (Cambridge University Press.)

This book presents modern developments in time series econometrics that are applied to macroeconomic and financial time series. It attempts to bridge the gap between methods and realistic applications. This book contains the most important approaches to analyse time series which may be stationary or nonstationary. Modelling and forecasting univariate time series is the starting point. For multiple stationary time series Granger causality tests and vector autoregressive models are presented. For real applied work the modelling of nonstationary uni- or multivariate time series is most important. Therefore, unit root and cointegration analysis as well as vector error correction models play a central part. Modelling volatilities of financial time series with autoregressive conditional heteroskedastic models is also treated.

Introduction to Modern Time Series Analysis

In the past there was hardly any use of economic instruments in environmental policy, mainly command and control measures were used. More recently, ecological taxes as well as tradable permits became more popular and voluntary agreements have been implemented. Using the Public Choice approach we ask for the reasons of this wider acceptance of economic instruments. We conclude that the use of market based instruments in environmental policy has not increased very much and their impact on the actual situation is still rather low, but there is hope of at least some increase in the future.

On the Political Economy of Environmental Policy

Homo oeconomicus : das ökonomische Modell individuellen Verhaltens und seine Anwendung in den Wirtschafts- und Sozialwissenschaften

According to the Leviathan-Model, fiscal federalism is seen as a binding constraint on a revenue-maximizing government. The competitive pressure of fiscal federalism is supposed to reduce public sector size as compared to unitary states. However, empirical results concerning the Leviathan hypothesis are mixed. This study uses a state and local-level panel data set of Swiss cantons from 1980 to 1998 to empirically analyze the effect of different federalist institutions on the size and structure of government revenue. Because of the considerable tax autonomy of sub-national Swiss governments, it is possible to investigate different mechanisms by which fiscal federalism may influence government size. The results indicate that tax exporting has a revenue expanding effect whereas tax competition favors a smaller size of government. Fragmentation has essentially no effect on the size of government revenue for Swiss cantons. The overall effect of revenue decentralization leads to lower tax revenue but higher user charges. Thus, revenue decentralization favors a smaller size of government revenue and shifts government revenue from taxes to user charges.

Gebhard Kirchgässner

Papers

Introduction to Modern Time Series Analysis

On the Political Economy of Environmental Policy

Homo oeconomicus : das ökonomische Modell individuellen Verhaltens und seine Anwendung in den Wirtschafts- und Sozialwissenschaften

Decentralized Taxation and the Size of Government: Evidence from Swiss State and Local Governments

Towards a theory of low-cost decisions