Showing papers in "Social Science Research Network in 1971"

The Welfare Function of Income in Belgium:An Empirical Investigation

Abstract: This paper is an empirical investigation into the validity of some theses posed in [5]. There it is stated (1) that the individual is able to evaluate his income level on a zero-one scale in a cardinal way, and (2) that the resulting evaluation U(y) of a steady income system at a level y under specific assumptions is approximately equal to A (y: uo2) where A is a lognormal distribution function with parameters u, o2. In this paper these statements are empirically investigated on the basis of a consumer survey conducted by the Belgian Consumer Union. Moreover, approximate relationships between the values of u, o2 and several variables, such as income, family size, age, job, stability of income, etc., have been derived. It turns out that o2 is an individual constant, but that u can be explained for a considerable part by the variables family size and income level. Most notable is the dependence of the individual's welfare evaluation or income, a phenomenon that is called "preference drift." It might lead to major changes in parts of the existing economic theory on consumer behavior and social welfare.

Hunting the Heffalump

Abstract: Reviews the major theoretical constructs devised for explaining the source of dynamic entrepreneurial performance in developing countries. Discusses the roles in terms of theories of entrepreneurial supply, which are constructed from either psychological or sociological elements. Provides a comparative evaluation of theoretical formulations in terms of the variables employed and the methodological approaches used. Evaluated are four psychological theories (of Joseph Schumpeter, David McClelland, Everett Hagen, and John Kunkel) and three sociological theories (of Max Weber, Thomas Cochran, and Frank Young). Sets out what each author regards as the defining qualities of the entrepreneur and the non-economic variables that control his appearance (supply), as well as the role played by social groups and the means by which individuals are directed into business pursuits. Theories may explain entrepreneurial supply in terms of need for achievement, of deviant or supernormal individuals, as representing society's modal personality, of society's incorporation of reactive subgroups, or as result of surrounding social structures. Critically evaluates the theories and discusses the entrepreneurial bottlenecks in developing countries. The mechanism by which persons with high need for achievement are directed into entrepreneurial careers is explained. Concludes that none of the psychological or sociological entrepreneurship theories achieves an acceptable level of empirical verification or can be rejected as demonstrably false. Almost all face a problem in explaining change in entrepreneurial performance: is it due to change in supply of entrepreneurial effort or improvement in economic environment (demand)? Concludes with a new model of entrepreneurial performance drawing on evidence contained in existing empirical studies of business performance in developing countries. In this model one exogenous fact is assumed: the psychological drive to maximize income. This reduces the entrepreneurial role to decision-making under uncertainty. Rejecting a binary conception that there is a presence or absence of the entrepreneur, proposes considering the 13 tasks and activities (rather than personal attributes), grouped as exchange relationships, political administration, management control, and technology. The social structure that supports and is enmeshed with traditional technology is explored. Evidence shows managerial and technological shortcomings are continuing impediments to entrepreneurial development rooted in the sociological variables on the supply side. Factors can be related to the status system, social structure, problems of role discontinuity and role incongruency. Concludes that various activities required of the industrial entrepreneur are hindered or reinforced by prior technological traditions and social structure factors. In modernizing economies, the crucial inputs are achieving and maintaining efficient production. (TNM)

Costs and Benefits of Medical Research: A Case Study of Poliomyelitis

Abstract: The paper provides estimates of (1) research expenditures on poliomyelitis, (2) several forms of productivity benefits from applying the knowledge generated by the research, and (3) the costs of applying that knowledge. Internal rates of return are computed under a variety of assumptions, with results generally between 4 and 14 percent. The inter-relatedness of research with procedures for applying the research findings is investigated; in the case of polio, the rate of return on research is found to be heavily influenced by the costs of application. Finally, a discussion is included of the likely allocative efficiency of private-market behavior when a collective-consumption good, such as research knowledge, requires the use of an individual-consumption good, such as a vaccination, for its application.

Tenure: A Summary, Explanation, and 'Defense'

Abstract: Responding to growing student unrest and steep competition for funding among national priorities, this essay seeks addresses demands for greater accountability by eliminating scholastic tenure. This discussion maintains that the best defense of tenure is a clear statement of what tenure specifically is - and is not.

Simultaneous Optimization of Preventive Maintenance and Replacement Policy for Machines: A Modern Control Theory Approach

Abstract: In this paper, the problem of machine replacement in a changing technological environment is formulated as a problem in modern control theory. The objective is to maximize the present value of all future net profits over a class of infinite chains of machines where each link in the chain represents a uniform length replacement cycle with identical preventive maintenance. The control is effected by varying (i) the length of the replacement cycle, and (ii) the schedule of preventive maintenance. The optimal control is determined by applying the maximum principle of Pontryagin and resulting influence functions are provided economic interpretations.PDF version: Sethi, S.P. “Simultaneous Optimization of Preventive Maintenance and Replacement Policy for Machines: A Modern Control Theory Approach,” Management Sciences Research Report #223, GSIA, Carnegie-Mellon University, 1971.

Characteristics of Successful Entrepreneurs

Abstract: This study attempts to identify an objective test to understand the psychological nature of the successful entrepreneur. Successful entrepreneurs are defined as those who started a business, where none before existed, established for at least five years with at least eight employees. Previous research into the personal characteristics that predict entrepreneurial success is claimed to be unsatisfactory because the projective tests have laborious procedures, require technical training to interpret, and focus on the individual's need for achievement. The present study is based on the assumptions that (1) an objective system of evaluation structured so non-psychologists could administer it was needed, and (2) many other factors than need for achievement could be measured. Five tests were identified that appeared to fit the need for an objective, valid test in a simple format with ease of administration and interpretation. The assessment program utilized these established tests and structured interviews. These were administered to sixty individuals, equally divided by race into blacks and whites, of which all but four were men. Five hypotheses are investigated. Found that racial differences for entrepreneurs were not evident, and that (compared to men in general) entrepreneurs score higher on need for achievement, independence, and effectiveness of leadership, and are low on scales reflecting need for support. Concludes that the Kuder Occupational Interest Survey, the Gordon Survey of Interpersonal Values and the Edwards Personal Preference Schedule successfully differentiated entrepreneurs from others, could therefore serve as objective indicators of entrepreneurship, and should be tested in further research studies. (TNM)

On the Maximum Principle for a Class of Discrete Dynamical Systems with Lags

Abstract: A maximum principle for a class of discrete systems with lags is established constructively within the framework of discrete optimal control theory. An application of the maximum principle to a problem in advertising concludes the paper.PDF Version: Sethi, S.P. and Burdet, C.-A., "On the Maximum Principle for Discrete Dynamical Systems with Lags," Management Sciences Research Report No. 262, GSIA, Carnegie-Mellon University, November 1971.

The Need for Futures Markets in Currencies

Abstract: Under the system of rigidly fixed rates that do not change — the ideal envisioned by some supporters of Bretton Woods — there is only limited room or need for a broad, resilient public futures market in currencies. The central banks plus the large commercial banks can readily provide the need. Under a system of rigidly fixed rates subject to large jumps from time to time — the Bretton Woods system in practice — there is great need for a futures market in currencies to permit foreign traders and investors to hedge against the occasional large changes that will occur. But it is almost impossible for such a market to exist because most of the time there is little for it to do, and when there is a role for it, the speculation is one-sided.

Optimal Skill Mix: An Application of the Maximum Principle for Systems with Retarded Controls

Abstract: In this paper, we analyze the optimal skill mix in a model with two kinds of imperfectly substitutable labor, skilled and unskilled. The population is characterized by a distribution of innate abilities, and individuals are trained according to optimal rules or market rules (with imperfect expectations); the length of each individual's training period depends upon his innate ability. The market and optimal rules are characterized and compared, and corrective policies are investigated. This model represents a major advance over earlier models, which are based on the following assumptions: (a) either unskilled and skilled labor are perfectly substitutable or training is a necessary condition for employment; (b) individuals are innately identical; (c) in most cases, training occurs either instantaneously or with fixed lag.PDF Version: Sethi, S. P. and T. W. McGuire, "Optimal Skill-Mix: An Application of the Maximum Principle for Systems with Continuous Lags," W. P. # 46-71-2, GSIA, Carnegie-Mellon University, November 1971.

A Useful Transformation of Hamiltonians Occurring in Optimal Control Problems in Economic Analyses

Abstract: : The introduction of a discounting term into the objective functional can be troublesome in terms of analysis by the standard maximum principle formulation. This is because it renders the Hamiltonian and the adjoint equations depend explicitly on time. In finite horizon problems it makes the switching point analysis difficult. In case of infinite horizon, which is usual in economic problems, it does not admit long-run stationary equilibriums. A technique discussed by Arrow to alleviate these difficulties is applied to various standard control problems occuring in economics and management science. This transforms the Hamiltonian and the corresponding adjoint system into an explicitly time-independepent form and hence autonomous in all but one case. A natural consequence of the transformation is current-value interpretations of the Hamiltonian and the adjoint variables.

A New Fidelity to the Regulatory Ideal

Abstract: As originally conceived, the independent agencies were designed to protect the consumer. This article examines their failure to respond adequately to consumer interests and concludes the original theory has not been allowed to work. It suggests remedies that, rather than dismantling the administrative agencies, would bring them closer to the original regulatory ideal. They include: greater citizen participation, stronger policy planning, additional agency independence, insulation from industry orientation, and sterner judicial and legislative review.

The Preamble: A Question of Jurisprudence

Abstract: Comparative historical experience shows that actual recourse to preamble is a function of local tradition: not a sine qua non, of course, but not substitutable by other means either. This is why once accustomed, it can turn to be a usual component. It defines normatively the final motive of legiferation in terms of historical devotion, transcendental and moral stand, national vocation and ethos, or long-term policy to be implemented. As to constitutions, in France, e.g., even decades ago whether or not the right to strike was legally acknowledged was debated since it had been, as part of the historical Declaration, enacted in the preamble. To face post World-War-Two conflicts, the federal competence of national defense had to be deduced from the preamble of the American Constitution, while the enigma in Soviet eyes of the Federal Republic of Germany lied all along in the philosophy of history formulated by the preamble of the Bonn Grundgesetz, as it had expressed expectations in terms of ethos applicable to any chances, including the collapse of the German Democratic Republic and subsequent unification as well. Or, defeated Japan launched unilateral demilitarisation with explanation in constitutional preamble. Once it proved to be a dead end, Japan founded reconsideration on previous presumption refuted by world politics. India’s constitutional preamble heralded long-term governmental goal-orientation. As an ideal, it could become strong enough to channel subsequent programs but not to substantiate any criticism of particular legislation. For whatever its contents, the need of time may fertilise preamble contents in their being interpreted as normative foundation of rights/duties or competence. On last analysis, bishop Hoadly’s sermon is to prevail: those competent to serve with last interpretation will turn into the genuine law-giver. Or, preamble itself is not to cause anything. But once there is a preamble available with ambiguous message, it can as well be referred to as legal entitlement to borrow/deduce validity of a given legal conclusion. For independently of the fact that fertilisation can only fill uncertain situations in respect of the conclusiveness in logical reconstruction, authoritative practice usually concludes in favour of one single solution, undebated and unchallenged for a reasonable time. All in all, whether or not the law-giver will recourse to preamble and with what contents is a political issue. The constitutions’ preamble may express elements of historical identity, guiding values, vocation, institutional path, and symbolic ketch-words as well, i.e., substantive messages in foundation that cannot be validated through other carriers of normative declaration. But the future is changing unforeseeably. Even solemnic dictions can be subjected to judicial scrutiny without empathy towards original intents but sympathetic towards undefined ends. This is why the way how a preamble is formulated is to matter. Quasi regulation in form of preambles may be necessitated when legiferation is open ended. Then, in want of regulatibility, channeling future action may be achieved by the inclusion into preamble of philosophy of history considerations and moral aspirations, with their national credo serving as a legitimising force.

Policy Implications of an Inter-temporal Analysis of Advertising Budgeting Models

Abstract: A procedure for optimizing dynamic advertising expenditures is presented in this paper, Because of the lagged effect of advertising on sales, the inter-temporal framework of optimal control theory is employed. Optimal time-paths of sales and advertising expenditures are prescribed for two well-known advertising models. Several theorems provide insights into the implications of parameter values for the time-paths. Also shown is the existence and uniqueness and the local stability of the optimal long-run stationary equilibrium for the second model with infinite horizon. PDF version: Sethi, S.P., Turner, R. E., and Neuman, C. P., "Optimal Control of Inter-Temporal Advertising Expenditures," W.P. #43-71-2, GSIA, Carnegie-Mellon University, November 1971.

Involuntary Acts and Criminal Liability

Abstract: Criminal law does not hold individuals responsible for involuntary actions, where there is not the necessary actus reus. The uniting principle behind this limitation, however, is not in itself very philosophically illuminating. This article addresses exactly in what this lack of control consists and how it differs from the lack of control over consequences which one failed, nonnegligently, to foresee, which may count as a part of a voluntary act. It concludes that when an act is involuntary, when it is explained by causal reference to factors which eliminate normal capacities, the agent drops out. For example, if a defendant was having a seizure, our temptation will be to cite his seizure and not him as the cause, but yet we cannot hold seizures criminally liable. Our ordinary notions of responsibility thus rest upon agent causation. When the causation is not agent causation, the ordinary notions have no application.

Optimal and Market Control in a Dynamic Economic System with Endogenous Heterogeneous Labor

Abstract: In most control theoretic analyses of optimum economic growth the fraction of output allocated to investment is the control. The few models treating labor training assume innately identical individuals and a fixed amount of training for employability. We extend these models by assuming a CES production function of both skilled and unskilled labor (abstracting from capital) and a continuous distribution of innate ability. This results in a continuous lag optimal control problem for which the theory is still incomplete with regard to existence. [Analysis assuming existence is carried out in a separate paper.] In this paper we develop a discrete model with a finite number of training classes as state variables. The control solution is obtained by the Discrete Maximum Principle and is generally different from the market solution, assuming static expectations about future relative wages, except when the production function is linear. There exists, in general, a unique stationary optimal control not greater than the Golden Rule but equivalent to the market stationary control under certain circumstances. There also exists a stably controllable tax-subsidy system that induces dynamically optimal market behavior. PDF version: McGuire, T. W. and S. P. Sethi, "Optimal Economic Dynamics with Heterogeneous Labor by the Discrete Maximum Principle," Management Sciences Research Report #260, Carnegie-Mellon University, November 1971.

Vices and Self-Knowledge

Abstract: Towards an account of character traits in self-Knowledge, With an assessment of the sartrean thesis ("spectatorism") that character trait concepts are fitted for other-Ascription rather than self-Ascription. The logic of ascriptions of evil character and specific vices is dealt with. The relationship of self-Ascription to self-Falsification and "seeing oneself as an object" is examined. Self-Ascription has peculiarities, But at most a very mild form of spectatorism is born out.

International Implications of Race Relations in New Zealand

Abstract: This pamphlet is concerned with the attempts being made in New Zealand and internationally to eliminate racial discrimination. The introduction rapidly traces the development, especially since the horrors of Hitler’s ‘final solution’ and the decolonisation of many of the world’s peoples, of international concern with human rights and particularly with racial discrimination. The author discusses the International Convention on the Elimination of All Forms of Racial Discrimination and the enforcement methods it establishes. The third section concerns the Race Relations Act 1971 – legislation enacted to give effect to that Convention, by which New Zealand is bound. Finally, the paper looks at certain special legislation and the measures relating to Maori and other Polynesian groups in the light of the obligations arising from the Convention.

Defence of Necessity and Its Limitations

Abstract: This decision of the Supreme Court in M. & I. Shavit v. State of Israel illustrates the fallacy of a contrario argumentation in the interpretation of statutes, especially of criminal statutes.

A Mixed Optimization Technique for the Generalized Machine Replacement Problem

Abstract: A mixed optimization technique for optimal machine replacement is presented which allows much more flexibility than previous models. Optimal purchase, maintenance and sale of a given machine between any two given points in time is treated as a subproblem, which one may choose to solve via control theory, dynamic programming, or practical engineering considerations. A control theory formulation is used in the paper as an illustration. These subproblem solutions are then incorporated into a Wagner-Whitin formulation for solution of the full problem. The technique is particularly useful for problems with such asymmetries as an existing initial machine or uneven technological change. A simple numerical example is solved in the Appendix.PDF Version: Sethi, S. P. and Morton, T.E., "A Mixed Optimization Technique for the Generalized Machine Replacement Problem," Management Sciences Research Report #241, GSIA, Carnegie-Mellon University, November 1971.

Abolishing the Personal Injury Tort System: The New Zealand Experience

Abstract: The position advanced by Mr Laycraft in his earlier article in this volume is one side of what is becoming an ever deepening controversy. In this article Professor Palmer attacks Mr Laycraft's thesis and puts forward some justifications for root and branch change in the field of compensation for personal injuries. A plethora of plans has been suggested in recent years aimed at fundamentally altering compensation for personal injury. It has become evident that there are basic political difficulties involved in implementing these plans. The author, who was retained by the New Zealand Government to draft a White Paper on Personal Injury in New Zealand in 1969, discusses the political struggle which is now reaching a conclusion in New Zealand concerning a very radical proposal made by a New Zealand Royal Commission in 1967.

Municipal Water: Pricing and Efficiency in Water Resource Management

Abstract: This chapter is an appraisal of the major issues in the pricing of municipal water The topic is ideally suited for a report devoted to a discussion of the potential for financing water resource projects through means of fees and charges, since the provision of municipal water fulfills the two necessary conditions that make the adoption of user fees possible First, through the installation of water meters, beneficiaries of those identified without undue costs Second, those customers who are unwilling to pay for the water service can be excluded

The Race Relations Bill

Abstract: It is generally accepted, in New Zealand and abroad, that laws preventing discrimination on the grounds of race are called for. Kenneth Keith focuses here on narrower questions about the procedures and methods of enforcement of these restraints and prohibitions. He explains the direct methods by which the law attempts to ensure compliance in four parts: the law may be able to refuse recognition of the unlawful act; the law may by some specific remedy require the wrongdoer to comply; failing this, the law may require the wrongdoer to compensate the victim; and the law may punish the wrongdoer by penal sanctions. The article concludes with a discussion on the definition of discrimination.

Twentieth Century Soapbox: The Right to Purchase Radio and Television Time

Abstract: In two 1970 cases the Federal Communications Commission rejected the request of a national political organization that wanted to purchase radio and television time for the discussion of timely public issues, including the course and conduct of the Vietnam War. This article argues that its rationale for doing so was fundamentally erroneous, and erects an unconstitutional barrier to the use of broadcasting to communicate protected political ideas.

Comment, The Evidentiary Uses of Neutron Activation Analysis

Abstract: Neutron activation analysis (NAA) is a method of detecting with great sensitivity the presence and concentrations of most chemical elements in materials, without, in most cases, destroying the sample analyzed. It permits identification and measurement of concentrations of elements which are present in only minute or trace quantities, such as specks of paint, which because of their size are not susceptible to other techniques. Also, under appropriate circumstances, NAA can identify both large and small pieces of material by accurately analyzing their trace element concentrations. Such identifications rely on the fact that, although concentrations of the major constituents of similar specimens such as two pieces of glass may be nearly the same, impurity trace elements sometimes show a wide variation from one source to another because manufacturers make no effort to control the quantities of these elements in their products. Besides its high sensitivity, NAA's potential for nondestructive measurement provides the further advantage that the samples which are measured can be preserved for production in court or for further tests.NAA, properly applied, can be a valuable forensic tool. However, the interpretation of the analysis presents difficult legal problems that depend almost entirely on the circumstances of the individual case. The analytical chemist is qualified to present the results of the analysis, but his subjective interpretation, as a chemist, is worthless; an expert in statistics is required to present a legal interpretation of the analysis. The expert must have a solid, objective basis for any statement beyond the composition of the measured samples, and the burden of laying an objective foundation for the testimony should rest on the party seeking to introduce the results of the tests. The expert must use well-defined terms which fit the legal issue presented by the facts of the case, and must present his testimony in such a way that the trier of fact clearly understands the limitations of the analysis.

Devaluation-Bias and the Bretton Woods System

Abstract: The exchange-rate system established at Bretton Woods was intended to combine a fixity of the par-value of each member’s currency in the short run with a flexibility of the parity in the longer-run. Because of this emphasis on the fixity of the spot rates and of the parity in the short run, the Fund’s par-value system can be regarded as a variant of fixed exchange rates. The presumption that there is a devaluation-bias in present international monetary arrangements rests primarily on the hypothesis that under any variant of a fixed exchange rate the deficit country is more likely to be forced unwillingly to devalue than the surplus country is to be forced unwillingly to appreciate. The present paper considers the validity of the presumption that a devaluation-bias does exist under the Fund’s system of the adjustable peg. The author reviews the actual experience among Fund members in making changes in the par-value and then considers the analytical and statistical evidence which might throw light on this experience.

The Mauritius Approach to Article 1384 (1) of the French Civil Code

Abstract: It is the purpose of this article to discuss briefly the history of article 1384 (1) in fine of the French Civil Code in France, and to then trace the development of that provision through the decisions of the courts of Mauritius. It will be noted that the approach of the two jurisdictions has diverged markedly in recent times: France favouring a presumption of liability and Mauritius favouring fault as the foundation of 1384 (1) responsibility.