Showing papers by "London School of Economics and Political Science published in 1981"

Rational Expectations and Econometric Practice

Abstract: Feel lonely? What about reading books? Book is one of the greatest friends to accompany while in your lonely time. When you have no friends and activities somewhere and sometimes, reading book can be a great choice. This is not only for spending the time, it will increase the knowledge. Of course the b=benefits to take will relate to what kind of book that you are reading. And now, we will concern you to try reading rational expectations and econometric practice as one of the reading material to finish quickly.

The Self-Regulating Profession

Abstract: Slayton and Treblicock (1978)), the formal analysis of the economics of the self-regulating profession has received little attention from theorists. If a profession is "self-regulating", in the sense that its current members, being the sole suppliers of a certain type of service, are free to determine, in one way or another, whether or not to admit a potential recruit, then it might seem prima facie that such a profession could simply be regarded as a monopolistic seller of the service in question, so that the effects of self-regulation would appear to involve an unambiguous welfare loss. The whole rationale for self-regulation, however, rests on the notion that it provides a vehicle through which the quality of the service may be maintained in markets where the consumer cannot readily measure this quality himself. It is the analysis of the interplay of these two elements, the enhanced price of such services associated with the monopolistic power of the profession, and the improved quality of the service which may accompany a reduction in supply, which forms the focus of the present paper. It is tempting to begin the analysis of such a profession by first positing some particular

War and ethnicity: The role of warfare in the formation, self‐images and cohesion of ethnic communities

Abstract: (1981). War and ethnicity: The role of warfare in the formation, self‐images and cohesion of ethnic communities. Ethnic and Racial Studies: Vol. 4, No. 4, pp. 375-397.

Growth Cycles with Induced Technical Change

Abstract: This paper concerns itself with two related topics: the relative shares of workers and capitalists in the national income and the labour augmenting bias of technical change. Both have been dealt with, in contrasting fashion, in two seminal papers on distribution theory. Kennedy (I964) attempts to explain the then observed constancy of relative shares with the help of the now famous invention possibility frontier. However, the wage and profit rates are exogeneous to his model. Goodwin (I967), on the other hand, presents a model of cycles in growth rates in which the share of labour, the wage rate and the profit rate are endogenously determined. However, unlike the Kennedy analysis, technical change is assumed to be constant and exogeneously given. Given that these pioneering works have addressed themselves to important questions, it seems a worthwhile task to build a model in which the shares of labour and capital, the wage rate, the profit rate, and technical change are all endogenously determined. The perspective we have chosen here introduces the key element of Kennedy's perception, induced technical change, into the Goodwin scheme and the consequences of so doing are traced out in the following terse account. There are two classes in the economy, workers and capitalists. Only one good q(t) is produced and it can be either consumed or invested. Capital stock k(t) is homogeneous and, for simplicity, also assumed to be non-depreciating. The capital-output ratio at time t is denoted by o(t). Labour, I(t) is also homogeneous and its productivity at time t, a(t) = q(t)/l(t), improves at the rate ac(t). Labour's share in the national income denoted by u(t) is

Context-specificity and generalization in the acquisition of pronominal distinctions.

Abstract: The pronoun system provides a fruitful area for investigating the conditions under which children make linguistic generalizations. Pronouns are defined by a complex of semantic, syntactic, and morphological distinctions whose interaction is only partially consistent. In the course of acquiring them, children often make systematic errors which reflect novel generalizations from the adult input. A distributional analysis was applied to the errors made by 48 children in marking distinctions of person, possession, and case in their spontaneous use of pronouns. The analysis indicated that children do not make maximal generalizations which extend a particular feature to all related contexts. Rather, they acquire specific complexes of features, and are quite conservative in extrapolating from one feature complex to another.

Category Theory and the Foundations of Mathematics

Abstract: With the creation and refinement of set theory in the hands of Cantor, Zermelo, von Neumann and others, the problem of providing an infrastructure for the elaborate developments in areas of mathematics such as abstract algebra, analysis and topology appeared to be solved. The domain of sets (structured by membership) came to be regarded by most mathematicians (those of a constructive tendency such as the intuitionists being the most notable exceptions) as the source of 'raw material' for building the structures required in all branches of mathematics. Thus, although the notions of structure and operation on structures had come to play a fundamental role in most mathematical disciplines, these notions were not taken as primitive, but were themselves explicated by reduction to the more fundamental notions of set and membership. On the other hand, the perspicuity and apparent reliability of the set-theoretical framework enabled mathematicians not primarily interested in set theory (i.e., the vast majority) simply to take this reduction for granted and instead concentrate on isolating and axiomatizing the basic mathematical features of these structures. With the rise of abstract algebra in the 1930s it came to be recognised that these features and the laws governing them (I am thinking particularly of the notions of isomorphism, homomorphism, substructure, etc.) had a kind of universality and even inevitability that was apparently independent of their set-theoretical origin. Moreover, it was observed that many of the basic notions of abstract algebra could be derived from the

Social desirability in the Eysenck Personality Inventory

Abstract: To investigate the extent to which the social desirability of test items can bias Eysenck Personality Inventory (EPI) score profiles, a group of subjects was asked to rate the items of the EPI in terms of their social desirability. Three further groups were asked to complete the inventory honestly, or in such a way as to give a good or bad impression of themselves. Test items measuring extraversion were rated as socially undesirable, whereas those measuring neuroticism were rated as undesirable. Compared with subjects asked to respond honestly, subjects attempting to give a good impression tended to endorse items rated as socially desirable and hence to respond in the direction of stable extraversion. Similarly, subjects asked to give a bad impression tended to give socially undesirable responses and hence tended to appear as neurotic introverts. The lie scale did not effectively discriminate faking subjects from honest subjects. It is concluded that a social desirability response set can consistently bias subjects’ scores on the EPI and this is not detected by the lie scale.

Method in Intellectual History: Quentin Skinner's Foundations

Abstract: Quentin Skinner's The Foundations of Modern Political Thought is primarily of interest to philosophers not for its excellent account of European thought about the state but for the self–conscious philosophy which has gone into it. It is a rare historian who pauses to get his philosophy in order before he embarks on a major enterprise, though such a policy is possibly less unusual in intellectual history than in other fields. In Skinner's case, however, this order of doing things has been pushed so far that he counts as a philosopher in his own right, rather than as merely someone who is unusually careful to think about what he is doing. The publication of this major work thus provides a convenient opportunity to make a few remarks about the relation between historical theory and practice.

The secular increase in fecundity in German village populations: An analysis of reproductive histories of couples married 1750–1899

Abstract: An examination of evidence from reproductive histories of couples married between 1750 and 1 899 in a sample of 14 German villages strongly suggests that fecundity, as defined by the underlying level of natural fertility, significantly increased between the end of the eighteenth and the onset of the twentieth century. An examination of the separate components which led to the increased fecundity are clearest with respect to an increase in fecundability. The evidence, although not entirely consistent, was also suggestive of a reduction in the non-susceptible period following birth. Little change appears to have occurred in terms of primary sterility. One factor which may have been related to the observed changes in fecundity is a marked decrease in the degree of seasonality of births during the same period. Evidence from other family reconstitution studies for German villages generally confirms the rise in underlying natural fertility observed for our sample. The extent to which these findings are...

Return times and conjugates of an antiperiodic transformation

Abstract: Denote by G the group of all μ-preserving bijections of a Lebesgue probability space (X, Σ, μ) and by C the conjugacy class of an antiperiodic transformation σ in G. We present several new results concerning the denseness of C in G with respect to various topologies. One of these asserts that given any weakly mixing transformation τ in G and any F with μ(F) < 1, there is a transformation in C which agrees with τ a.e. on F.

Project Appraisal and Foreign Exchange Constraints

Abstract: It is a commonplace that the shadow (or accounting) prices appropriate for use in project selection in an economy depend on the 'market' imperfections that are judged to be present. What has received far less attention in the theoretical literature on social cost-benefit analysis is the fact that they depend as well on the response of the government to the perturbation which the undertaking of projects entails. It is convenient to suppose that the government simultaneously optimises with respect to all variables within its control, and it is the implication of this supposition that has been explored in much ofthe recent literature on project evaluation. But as a model of government behaviour it is not persuasive. Moreover, the analysis of government behaviour becomes critical in situations where prices and wages are not perfectly flexible. This paper is concerned with economies in which markets are characterised by price rigidities and where governments behave systematically, but not necessarily optimally. In such a world we wish to obtain rules for project selection. The analysis is conducted in the context of the foreign exchange market. We shall focus on this, not only because of its importance in developing countries but also because there is considerable evidence that for one reason or another there often appears to be an excess demand for foreign exchange in such economies. Specifically, what we wish to do is to evaluate the meaning of the idea ofa foreign exchange constraint (as contrasted with 'resource constraints' in general), together with the notion ofthe shadow price of foreign exchange, and their connection with the structure of accounting prices of goods and services involved in investment projects.^ We shall present the analysis in the context ofthe simplest of economies, in order that some ofthe discussion can be presented in diagrammatic form. Most ofthe time, for instance, we shall consider what is essentially a single-consumer economy. Nevertheless, we shall have a multi-consumer economy as a motivation for the assumptions that are made.^ Moreover, excepting Section I, we will not consider factor markets or their shadow prices; rather, we will think of projects as alternative uses of identical factor inputs. We employ this device in order to develop a methodology for the derivation ofthe accounting prices of produced commodities. In Section I, we draw on recent work in the theory of public finance to discuss

Natural Phonology or Natural Memory? the Interaction Between Phonological Processes and Recall Mechanisms

Abstract: An analysis of the attempts by 90 children between the ages of four and nine to learn a number of new words revealed that their recall errors were remarkably similar to the phonological deformations found in the speech of young children in the early stages of language development. Two complementary explanations are put forward to account for the observed similarities: phonological processes noted in the speech of young children may reflect recall problems, and recall in all children may be related to perceptual salience, since perceptually salient features are likely to be those most strongly encoded in auditory memory. We point out that the role of memory, which has been virtually ignored by linguists, clearly needs to be taken into consideration.

Student expectations and labour market performance: The case of the Philippines

Abstract: This article uses individual data on 10,000 higher education students and 5,000 graduates in the Philippines in 1977 to assess theex ante student perceptions of the labour market against actual labour market outcomes. A comparison of mean expected and actual earnings by various sample characteristics reveals a high degree of realism from the students' viewpoint. Individual self-assessed foregone earnings are used to estimate theex ante returns to higher education and to investment in particular fields of specialization. The expected returns are close to the actual returns. Expected and actual waiting time to first job are of a short duration and a sharply declining function of age. Family background and college performance strongly influence the expected and actual labour market outcomes. The policy implications of the results are briefly discussed.

Market Structure and Resource Extraction Under Uncertainty

Abstract: This paper compares the rate of extraction of a natural resource under alternative market structures when there is uncertainty about the date of discovery of a substitute (or about the date of discovery of a new deposit). The analysis shows that imperfectly competitive market structures are excessively conservationist: for any value of the initial stock of the natural resource, the price is higher than in competitive equilibrium (and therefore higher than the socially optimal level). But markets with limited competition may have a higher price than markets with pure monopoly (the same monopolist controlling the natural resource and its substitute). In particular, we find that the highest prices are associated with (Nash quantity setting) duopolists; the next highest prices occur in markets in which the monopolist controls the resource but the substitute is competitively produced; the pure monopolist sets his price lower than this, while the market in which a monopolist controls the substitute but the resource is competitvely owned is still lower.

Another look at social psychological aspects of juror bias

Abstract: Two trials were constructed by tape recording verbatim reports taken in court. One was a case of theft, the other of rape, involving two defendants and varying the amount of incriminating evidence. Subjects were recruited to listen to the trials and reach a verdict after deliberation. The recruitment of subjects was done by door-to-door survey methods aiming at producing a series of juries whose composition was representative of the adult population of Greater London. Thirty-four juries considered the theft case, and 26 the rape case, respectively 319 and 257 subjects. The results indicate that few variables correlate with the verdict, either before or after the verdict. In general, there was a slight tendency for younger (up to 25) and older (above 40) jurors to prefer to acquit. In terms of attitudes and personality, the only general finding was that people with most favorable views towards the jury system tended to wish to convict.

The politics of economic decline

Abstract: S O M E day soon, Britain will be able to mark, though hardly celebrate, the remarkable jubilee of a century of economic decline. Keith Middlemas describes how as early as the 1890s, ‘awareness of Britain’s relative decline in export markets and technological innovation led the majority of employers and managers to look enviously at the process of cartel formation and amalgamation in the United States and in Germany’.’ Such observations have been made through the decades. There is thus nothing new in James Ah’s conclusion that, in the 1960s, ‘not only d o the British people see themselves as falling behind other countries, but they apparently (and perhaps accurately) single out the economy as the area in which the decline is taking place’.’ However, the ‘perhaps’ in Alt’s suggestion in brackets is surely unduly cautious. Middlemas may be right that ‘Britain’s century-long relative decline has encouraged a belief in her concomitant political d e ~ a d e n c e , ’ ~ but in fact the important point to make in a comparative perspective is that such decadence has not happened, a t least not for a long time, so that economic decline remained an insulated process. At first sight, the most interesting political concomitant of a century of economic decline is the unending return of the same. Even in 1980, there are those who discover the unfortunate fact that there are politically ‘two Englands’, the desirability, or not, of a ‘concordat’ or ‘contract’, indeed the need for a ‘centre party’ as if all these ideas were new-yet every one of them and many others were discussed in the 1920s and 1930s as in the 1950s. Economic decline seems to have remained unaffected by such ideas. More than that, in the years since 191 1 (with which Middlemas is concerned), Britain has had Liberal, Conservative and Labour governments, coalition and adversary governments, consensual and radical governments, and yet the process of economic decline seems to have continued unabated. There is a story here not only about the cause of economic decline, but also about the relevance of governments.

Jobs as Dam Sites

Abstract: Much economic analysis is based on stylized relations between the nature of economic processes and the functions economists use as their tools of analysis. For example, if production processes are duplicable, constant returns to scale production functions are obtained. The student of elementary economics is told that if goods are difficult to substitute, their demand is inelastic; if easy to substitute their demand is elastic. In similar fashion it is the purpose of this paper to categorize the nature of jobs and to show that it has implications for the elasticity of demand for labour with respect to the wage. We see a job as like a dam site. A dam which underutilizes a dam site, even though productive in the sense that water is usefully stored or electricity is usefully produced, will nevertheless be costly in the sense that the valuable dam site is wasted. Even at zero cost (and hence a benefit/cost ratio of infinity) it may not pay to use a dam which underutilizes the site. We picture jobs and workers in the same way. Jobs are pictured as being like dam sites and workers of different skills as being like the potential dams on the dam site. Workers of sufficiently low skills will not be able to get jobs even at zero wages, not because their output on those jobs is negative, but because they underutilize the jobs themselves. Nor may it matter that the firm will have to pay significantly positive wages to hire skilled workers on its jobs. This image of the job gives reason for pessimism about the wage elasticity of demand for labour of a given skill, since it says that unskilled workers, no matter how low they bid their wages, may still be unable to bid jobs away from skilled workers. This has at least five consequences. First, it shows that in a demand downturn, in which prices of final goods and services are below the full employment level, wage flexibility alone will not be sufficient to restore full employment. Skilled workers will receive jobs and positive wages; unskilled workers will not be able to capture jobs even at zero wages. Second, the minimum wage is often considered a major cause of unemployment in general and among youth in particular (see Feldstein (1973) for one example). The effects of minimum wages on employment depends critically on the wage elasticity of demand, which is low for unskilled workers if, as in our argument, they cannot capture jobs even at zero wages. Third, Feldstein among others (1973, pp. 19-26) has argued that wage subsidies should be paid to encourage employees to hire youth in ladder jobs. Feldstein's recommendation rests implicitly on the belief that the elasticity of demand for such youths in such jobs is fairly high-at least in the sense that employers would more than willingly hire such workers with sufficient reduction of the minimum wage. Wage costs thus serve as an upper bound to his estimates of the costs of such programmes. If, on the other hand, jobs are as pictured in this paper, like dam sites, even at a zero wage firms may be quite unwilling to hire unskilled workers in ladder jobs because they may underutilize the ladder jobs themselves. The other side to the subsidy issue is manpower training programmes. Such programmes have been strongly criticized in the US for their high cost per worker. Implicit in much of this criticism has been the comparison with on-the-job training on the supposition

Finite sample prediction and overdifferencing

Abstract: . If the process generating a time series contains a deterministic component the differencing operations carried out to achieve stationarity may lead to an ARMA model which is strictly noninvertible. This is known as overdifferencing but it is shown here that overdifferencing need not have serious implications for prediction provided that a finite sample prediction procedure is used. The proposed method is based on the Kalman filter and it allows both the optimal predictors and their mean square errors to be computed.