Showing papers on "Economic problem published in 1999"

The Political Economy of the Resource Curse

Abstract: How does a state's natural resource wealth influence its economic development? For the past fifty years, versions of this question have been explored by both economists and political scientists. New research suggests that resource wealth tends to harm economic growth, yet there is little agreement on why this occurs. This article reviews a wide range of recent attempts in both economics and political science to explain the “resource curse.” It suggests that much has been learned about the economic problems of resource exporters but less is known about their political problems. The disparity between strong findings on economic matters and weak findings on political ones partly reflects the failure of political scientists to carefully test their own theories.

A Team Production Theory of Corporate Law

Abstract: A Team Production Theory of Corporate Law^ INTRODUCTION Who owns a corporation? Most economists and legal scholars today seem inclined to answer: Its shareholders do. Contemporary discussions of corporate governance have come to be dominated by the view that public corporations are little more than bundles of assets collectively owned by shareholders (principals) who hire directors and officers (agents) to manage those assets on their behalf.1 This principal-agent model, in turn, has given rise to two recurring themes in the literature: First, that the central economic problem addressed by corporation law is reducing "agency costs" by keeping directors and managers faithful to shareholders' interests; and second, that the primary goal of the public corporation is-or ought to be-maximizing shareholders' wealth. In this Article we take issue with both the prevailing principal-agent model of the public corporation and the shareholder wealth maximization goal that underlies it. Because corporations are fictional entities that can only act through human agents, problems of agent fealty are frequently encountered by those who study and practice corporate law. Yet the public corporation is hardly unique in its use of agents. Other organizational forms, including partnerships, proprietorships, privately-held corporations, and limited liability companies, also routinely do business through hired managers and employees. Thus, while the principal-agent problem may be important in understanding the business firm, we question whether it necessarily provides special insight into the theory of the public corporation. We explore an alternative approach that we believe may go much further in explaining both the distinctive legal doctrines that apply to public corporations and the unique role these business entities have come to play in American economic life: the team production approach. In the economic literature, team production problems are said to arise in situations where a productive activity requires the combined investment and coordinated effort of two or more individuals or groups.2 If the team members' investments are firm-specific (that is, difficult to recover once committed to the project), and if output from the enterprise is nonseparable (meaning that it is difficult to attribute any particular portion of the joint output to any particular member's contribution), serious problems can arise in determining how any economic surpluses generated by team production-any "rents"should be divided. Ex ante sharing rules invite shirking,3 while ex post attempts to divvy up rewards create incentives for opportunistic rent-seeking4 that can erode and even destroy the economic gains that flow from team production. Yet trying to prevent shirking and rent-seeking by defining individual team members' duties and rewards through explicit contracts can be impossibly difficult, especially when the team production process is complex, continuous, or uncertain. While team production problems are less well studied than principal-agent problems, we believe the former may represent a more appropriate basis for understanding the unique economic and legal functions served by the public corporation. Our analysis rests on the observation-generally accepted even by corporate scholars who adhere to the principal-agent model-that shareholders are not the only group that may provide specialized inputs into corporate production.5 Executives, rank-and-file employees, and even creditors or the local community may also make essential contributions and have an interest in an enterprise's success. And in circumstances where it is impossible to draft explicit contracts that deter shirking and rent-seeking among these various corporate "team members" by preallocating rewards and responsibilities, we suggest that the problem may be better left to an institutional substitute for explicit contracts: the law of public corporations. …

Economic Freedom and the Environment for Economic Growth

Abstract: Modern growth theory, built on the foundation of Solow [1956], emphasizes growth in inputs and technological advances as the underlying causes of economic growth. More recent work has emphasized the importance of market institutions and economic freedom as prerequisites for growth. This paper empirically examines the importance of economic freedom by using an index that measures economic freedom in four basic areas - money and inflation, economic structure, takings and discriminatory taxation, and international trade. The empirical results show that economic freedom is a significant determinant of economic growth, even when human and physical capital, and demographics are taken into account. (JEL: O 40)

Community Conservation and the Future of Africa's Wildlife

Abstract: The term community-based conservation (CBC) refers to wildlife conservation efforts that involve rural people as an integral part of a wildlife conservation policy. The key elements of such programs are that local communities participate in resource planning and management and that they gain economically from wildlife utilization. In part, CBC is seen as an alternative to the more exclusionary protectionist policies of the past, which often alienated rural people from conservation efforts. The new approach acts to make rural people a constituency for wildlife and therefore active backers of wildlife protection. Africans, however, are struggling with severe social and economic problems such as poverty, long-standing economic stagnation, rapid population growth, and environmental deterioration. Because of the pressures that Africans face in making a living, the application of CBC may not occur as readily or as successfully as its advocates would hope. It may also be that the approach is being oversold. I use brief case studies from Madagascar, Ethiopia, Zimbabwe, and Swaziland to highlight the possible conflicts between rural people's economic needs and the implementation of community conservation. In addition, the CBC literature treats the role of protection vaguely, as it does the question of what might happen if CBC fails to achieve wildlife conservation goals. Community-based conservation is an obvious advance over past practices because of its inclusive philosophy, but if rural people accept CBC because of its economic benefits, they may reject it at some point in the future if a better economic alternative is presented. Thus, CBC programs can work to produce a better relationship between wildlife and people, but only a vast improvement in the lives of rural Africans will ultimately produce a more secure future for the continent's wildlife.

Societal Vulnerability to Climate Change and Variability

Abstract: Institutions in many wealthy industrialised countries are robust and their societies appear to be relatively well insulated against the impacts of climate variability, economic problems elsewhere and so on. However, many countries are not in this position, and there is a growing group of humanity which is not benefiting from the apparent global adaptive trends. Worst case scenarios reinforce the impact of this uneven distribution of adaptive capacity, both between and within countries. Nevertheless, at the broad global scale human societies are strongly adaptive and not threatened by climate change for many decades. At the local level the picture is quite different and the survival of some populations at their present locations is in doubt. In the absence of abatement, the longer term outlook is highly uncertain. Adaptation research needs to begin with an understanding of social and economic vulnerability. It requires a different approach to the traditional IPCC impacts assessment, as human behaviour, institutional capacity and culture are more important than biophysical impacts. This is consistent with the intellectual history of the IPCC which has gradually embraced an increasing range of disciplines.

Understanding Local Economic Development

Abstract: This book offers insights into the process and the practice of local economic development. Bridging the gap between theory and practice it demonstrates the relevance of theory to inform local strategic planning in the context of widespread disparities in regional economic performance. The book summarizes the core theories of economic development, applies each of these to professional practice, and provides detailed commentary on them. This updated second edition includes more recent contributions - regional innovation, agglomeration and dynamic theories – and presents the major ideas that inform economic development strategic planning, particularly in the United States and Canada. The text offers theoretical insights that help explain why some regions thrive while others languish and why metropolitan economies often rise and fall over time. Without theory, economic developers can only do what is politically feasible. This text, however, provides them with a logical tool for thinking about development and establishing an independent basis from which to build the local consensus needed for evidence-based action undertaken in the public interest. Offering valuable perspectives on both the process and the practice of local and regional economic development, this book will be useful for both current and future economic developers to think more profoundly and confidently about their local economy.

Principles of Environmental Economics: Ecology, Economics and Public Policy

Abstract: 1. The Natural Environment and the Human Economy: The Neoclassical Economic Perspective 2. The Natural Environment and the Human Economy: An Ecological Perspective 3. Fundamentals of the Economics of Environmental Resources: The "Optimal" Trade-Off between Environmental Quality and Economic Goods 4. The Economic Theory of Pollution Control: The "Optimal" Level of Pollution 5. The Economics of Environmental Regulations: Regulating the Environment through Judicial Procedures 6. The Economics of Environmental Regulations: Pollution Tax and Transferable Emission Permits 7. Economic Valuation of Environmental Benefits 8. A Framework for assessing the worthiness of an Environmental Project: Cost Benefit Analysis 9. Biophysical Limits to Economic Growth: The Malthusian Perspective 10. Biophysical Limits to Economic Growth: The Neoclassical Economic Perspective 11. Biophysical Limits to Economic Growth: The Ecological Economic Perspective 12. The Economics of Sustainable Development 13. Population, Development, and Environmental Degradation in the Developing World Appendix: Basic Elements of the Market Economy: How the Invisible Hand Works

Prosperity, poverty and pollution : managing the approaching crisis

Abstract: * Contents * 1. What this book is all about. * Part 1: The Structure of the Global System * 2. The economic problem in a nutshell. * 3. Economic discrepancies. * 4. Ecological deterioration. * 5. Causes of economic imbalances. * Part 2: The Transformation of Collective Consciousness * 6. The social reality of convictions. * 7. Activating the resources of faith. * 8. Traditionalism and modernity. * 9. Overcoming the dependency syndrome. * 10. Interests and ideology. * Part 3: Towards a New Economic Paradigm * 11. The pending paradigm shift in economics. * 12. A more fundamental appraoch: market and marginalisation. * 13. A wider frame of reference: entropy and evolution. * Part 4: The Transformation of Social Structures * 14. Drawing up the agenda. * 15. Policies for peripheries. * 16. Policies for centres. * 17. Policies for centre-periphery interaction

Governance and economic performance: A survey

Abstract: This paper presents a framework for analyzing the determinants and effects of public governance and a survey of recent theoretical and empirical studies pertaining to developing and transition countries. It explains how informational, transactional and political constraints on government activity lead to trade-offs between efficiency and the extraction of rents by private firms, politicians and government agents, thus producing welfare-increasing or welfare-decreasing outcomes. It also discusses how political rules and law both constrain and facilitate economic activity. The common feature of the studies reviewed here is their analytical approach based on incentive theory and institutional economics. Governments are not benevolent dictators maximizing social welfare, but complex governance structures characterized by agency relationships. When agency problems and political and legal institutions are taken into account, it becomes easier to understand how markets and government, acting interdependently, produce social and economic outcomes that are, in many cases, inefficient and/or inequitable. The efficiency of the use of public resources as well as their targeting is seen to depend crucially on institutional features of the state and on incentive schemes in public organizations. Reforms should concentrate not only on defining objectives, instruments and parameters of public policy (regulation, taxation and redistribution), but also on designing processes and incentive schemes in such a way that credible commitment is possible and that agents actually implement policies that maximize social welfare. It is also crucial that reforms effectively prevent rent-seeking and the capture of the state by powerful elites, whose interests are at odds with those of the general public. Section 1 introduces the issues. Section 2 presents the analytical framework and discusses successively basic theoretical concepts (2.1); the interactions between economic, political and legal systems (2.2); the relationships between public institutions and concepts of authority (2.3); the interdependence of government and markets (2.4) and the provision of public goods (2.5). Section 3 discusses four political economy themes: first, the relationship between governance and income distribution (3.1); second, models of rent-seeking (3.2); third, how outcomes are enforced in a democracy (3.3) and, finally, sociopolitical instability (3.4). Section 4 turns to legal systems, first discussing the notion of "economic constitution" (4.1) and then issues of the "cost of rights" and the conflict between fiscal sustainability and the respect for basic rights, taking as an example constitutionally guaranteed entitlements (4.2). Three sub-sections then expand on the theme of efficient legal institutions and their role in development. The issues that are discussed are: whether formal or informal legal systems are more efficient (4.3), the meaning of the rule of law, and private enforcement of laws when there is no rule of law (4.4) and whether legal systems belonging to different 'families' are more efficient (4.5). Section 5 reviews empirical issues in assessing the links between governance and development. First, methodological problems are addressed: data issues, choice of model, and estimation problems (5.1); then cross-country studies on governance are surveyed (5.2) and, finally, empirical research within the context of individual countries is discussed, taking as an example a study on market-preserving federalism in Russia (5.3). Section 6 provides some conclusions, including remarks on a possible research agenda (6.1) and implications for international development policy (6.2).

Agricultural land reform in postwar Japan : experiences and issues

Abstract: Immediately after World War II, drastic agricultural land reform was implemented in Japan. This reform has been considered one of the most successful agrarian reform projects in the world. It is often said that the reform gave former tenant farmers new incentives, which contributed to the rapid growth of Japanese agriculture, but little empirical evidence has been presented to support that assertion. Most past studies discussed the impact of reform without distinguishing between political and economic issues. How was the agrarian structure changed by reform? What kind of economic and political issues were raised, solved, or remained intact? The author explores the political and economic motives for reform and the conditions that allowed such drastic reform to succeed. He also identifies economic issues that were inoculated by the reform, and chronologically traces reform's progress. His conclusion: Japanese land reform succeeded politically but, as an industrial policy, brought serious economic problems. Japan's reform experience offers precious lessons to developing countries now intent on implementing agrarian reform. Land reform in Japan demolished a class structure based on landholding. Landlords were no longer supreme and rural society was restructured, so the rural population became supportive of the ruling conservative party. But land reform had little effect on agricultural production. Land ownership was transferred from landlords to tillers of the soil, and small tenant farmers became small owner-cultivators, with no apparent change in farm size. The traditional agricultural production structure from prewar Japan remained. Agriculture grew after the war, but not because of land reform--possibly because of greater technical knowledge and the recovery of critical inputs, such as knowledge and the recovery of critical inputs, such as fertilizer, that were in short supply during the war. The income and standard of living of rural people may have improved, but it is not clear to what extent land reform contributed to capital formation in agriculture. More empirical work is needed.

Agricultural land reform in postwar Japan: experiences and issues

Abstract: Immediately after World War II, drastic agricultural land reform was implemented in Japan. This reform has been considered one of the most successful agrarian reform projects in the world. It is often said that the reform gave former tenant farmers new incentives, which contributed to the rapid growth of Japanese agriculture, but little empirical evidence has been presented to support that assertion. Most past studies discussed the impact of reform without distinguishing between political and economic issues. How was the agrarian structure changed by reform? What kind of economic and political issues were raised, solved, or remained intact? The author explores the political and economic motives for reform and the conditions that allowed such drastic reform to succeed. He also identifies economic issues that were inoculated by the reform, and chronologically traces reform's progress. His conclusion: Japanese land reform succeeded politically but, as an industrial policy, brought serious economic problems. Japan's reform experience offers precious lessons to developing countries now intent on implementing agrarian reform. Land reform in Japan demolished a class structure based on landholding. Landlords were no longer supreme and rural society was restructured, so the rural population became supportive of the ruling conservative party. But land reform had little effect on agricultural production. Land ownership was transferred from landlords to tillers of the soil, and small tenant farmers became small owner-cultivators, with no apparent change in farm size. The traditional agricultural production structure from prewar Japan remained. Agriculture grew after the war, but not because of land reform--possibly because of greater technical knowledge and the recovery of critical inputs, such as knowledge and the recovery of critical inputs, such as fertilizer, thatwere in short supply during the war. The income and standard of living of rural people may have improved, but it is not clear to what extent land reform contributed to capital formation in agriculture. More empirical work is needed.

Policy and economy in Macedonia

Abstract: The present-day Republic of Macedonia, with its two million inhabitants, is a small country still striving for international recognition. The 1.3 million Macedonians who live in this country, together with about 430,000 Albanians, nearly 100,000 Turks and other minorities, are anxious not only about their difficult economic problems. There is also a traditional fear of the ‘four wolves’ surrounding this country — Greece, Albania, Bulgaria and Serbia.1

Special Topic I: Structural Adjustment Policies and the Environment

Abstract: Background to structural adjustment The oil price increases of the 1970s, the worldwide recession, and developing country debt crisis of the 1980s, led to the adoption of so-called structural adjustment policies (SAPs). These economic reform packages which included stringent monetary and fiscal measures, sought to restore conditions for growth and development by a combination of short-term ‘stabilization’ and more medium-term ‘adjustment’ policies for the macro-economy. SAPs have not always achieved their economic goals, for a variety of reasons. Of greater relevance is the fact that even where economic gains have been realized through structural adjustment, both environmental and social problems have persisted in several countries. The growing sustainable development literature is seeking to identify and remedy development strategies that lead to the unsustainable use of natural resources and the environment. One key question is whether the very economic policies being prescribed to alleviate economic problems are perhaps undermining the environmental resources and social fabric on which the long-term development of nations will ultimately depend.

Team Production in Business Organizations: An Introduction

Abstract: For the past two decades, legal and economic scholarship has tended to assume that the central economic problem addressed by corporation law is getting managers and directors to act as faithful agents for shareholders. There are other important economic problems faced by business firms, however. This article introduces a Symposium that explores one of those alternate economic problems: the problem of "team production". Team production problems can arise whenever three conditions are met: (1) economic production requires the combined inputs of two or more individuals; (2) at least some of these inputs are "team-specific," meaning they have a significantly higher value when used in the team than in their next best use; and (3) the gains resulting from team production are nonseparable, making it difficult to attribute any particular portion to any single team member's contribution. In such situations, it can be difficult or impossible for team members to draft explicit contracts that protect their team-specific investments from other team members' opportunism. Thus the nine articles in the Symposium explore the implications of team production analysis for a wide variety of business organizations, including public corporations, private companies, multinational firms, and venture capital firms.

Evaluating Governance: State, Market and Participation Compared

Abstract: The scientific literature on fisheries considers fisheries management to be an outstanding examplar of the problems of a sustainable use of renewable natural resources. The three basic and interrelated problems in fisheries are the biological problem, the economic problem, and the environmental problem. This chapter focuses on three perspectives of governance that dominate the theory and practice of fisheries management. These include hierarchical governance, market governance, and participatory governance. A related difference between market governance and participation is that advocates of the market solution usually evaluate the government only for its efficiency and effectiveness. From a market perspective, co-operation depends on and results from the refinement of property rights. The market perspective tries to construct a world in which there will no longer be any discrepancies between the private and the public interest by changing financial incentives. Such a society has no need for individual responsibility.

Irish Growth in Historical and Theoretical Perspective

Abstract: The nature of the Irish economy, and the definition of Ireland’s economic problem, were shaped by a combination of events that occurred in the nineteenth century. One of these was the large-scale emigration that the Great Famine induced. This left as its legacy a willingness and an ability on the part of the population to migrate when economic prospects elsewhere seemed brighter. Ireland henceforth functioned more as a regional economy, whose population expands or contracts as economic conditions dictate, than as a national economy whose population size is determined largely by demographic factors. As Krugman (1997) points out, national productivity determines the well-being of a national economy, regardless of the sectors in which the economy specializes. The size of a regional economy on the other hand is crucially determined by its export base (or more generally by its international competitiveness); if exports collapse, for example, regional income falls, expenditure on non-tradeables declines, and workers emigrate.

Grain marketing and National Competition Policy: Reform or Reaction?

Abstract: Grain marketing arrangements in Australia have been controversial for many years. Following an account of the historical background to grain marketing, this article concentrates on more recent debates. The most interesting technical economic argument concerns the validity of claims that statutory marketing authorities with export monopoly powers can obtain higher prices. The article also discusses how marketing in Australia has been affected by Commonwealth and State Government policies with respect to microeconomic reform and privatization. Although major changes appear to have been made in grain marketing and its institutions, there are inherent economic problems with the current approach to deregulation.

Indonesia: Long Road to Recovery 1

Abstract: This paper examines the collapse of the Indonesian economy in late 1997 and 1998, and analyses the most pressing economic problems inhibiting its recovery. It explores several weaknesses that emerged in the economy in the early 1990s, including a high dependence on short-term foreign borrowing, a weak banking system, a modestly overvalued exchange rate, and the seemingly unbridled growth of the business interests of the family and associates of President Suharto. These problems were serious, and they made the economy vulnerable to a significant slowdown. However, on their own, they cannot explain the magnitude and speed of the Indonesian collapse. Mismanagement of the crisis by the Indonesian government, especially President Suharto, and by the International Monetary Fund made the contraction much deeper than was necessary or inevitable. Looking ahead, the major ingredient necessary for economic recovery is a political stability, which depends on smooth parliamentary and presidential elections in 1999. On the economic front, the main challenges that lie ahead are the reorganization and recapitalization of the banking system, restructuring of corporate debt, stimulating exports, and containing the budget deficit.

Gender implications of the "new" economic policy: a conceptual overview.

Abstract: A major effect of globalization has been the opening up of the Indian economy for international trade. Economic reforms under the “New Structural Adjustment Programme” (1991) include the deregularisation of the economy to allow free market forces to operate unfettered. With increasing global economic competition, employment conditions have declined and government spending on social and welfare services has decreased. This article demonstrates the impact upon women, and how policy makers take for granted that the burden of social services can be “costlessly” transferred from the “productive” economy to the “non-productive” economy, that is, to women within the household. Women's multiple role in production and reproduction is negated by the absence of gender analysis in economic policy making. It is, therefore, necessary for feminists to identify the forces that continue to deconstruct and reconstruct patriarchy, and to investigate the interrelationships between public and private spheres, and social and economic capital.

The Third Way and the Jammed Economy

Abstract: LIKE PLANNING IN THE 1930s or New Liberalism in the 1910s, ‘The Third Way’ is now being offered as a new political problematic with the potential to reconstruct problems and define new solutions which previously eluded Labour and old social democracy. In response, this polemic questions the Third Way's analysis and policy prescriptions in the area of the economy. The first section presents an analysis of how the economy is represented and conceptualised in Blair's Fabian Society pamphlet and Giddens’ recent book, both titled ‘The Third Way’. Although there are clear differences between Blair's and Gidden's vision of the Third Way and how to get there, for the purposes of our interest in economic management the overlap is sufficient to consider them together. The first section of the paper concludes with a consideration of the practice of Blair's New Labour Government in the crucial area of economic management before, in the second section, presenting an alternative conception of our economic problems.

The ‘Unbearable Lightness’ of the Economic Approach to Economic Behavior in the Social Setting: Rational Action and the Sociology of the Economy

Abstract: This article entails endeavours to properly conceive the theoretical-methodoAlogical relations between sociology of the economy or economic sociology and the economic approach to human behaviour or rational action theory. These endeavors are induced by recent proposals for an economic approach to economic sociology and other conflations between the two disciplines. Such proposals exemplify the tendency of rational action theorists to dissolve economic (and all) sociology into their universalist ‘theory of everything’. Many economic sociologists display a bona fide attitude toward such extensions of the economic approach albeit these can be essentially incongruous with a sociological perspective on the economy as advanced by their discipline. The article allows for the possibility that the economic approach to economic sociology is unsustainable in epistemological terms. This would imply epistemologically non-rational grounds for the attraction of economic sociologists to the economic approach to human behaviour.

The project of a personalistic economics

Abstract: One cannot really speak of a school of personalistic economists. Moreover, there is a wide gulf between the economic philosophy of the personalists and the mathematical context of economic science. Since the thirties, philosophers such as Alexandre Marc, Jacques Maritain, Emmanuel Mounier and many others have been searching, on the basis of a personalistic view of man, for a `third way' between individualistic capitalism and statist socialism, but there was seldom interest from the side of the scientific economists. Fortunately, there are some notable exceptions. Francois Perroux, Kenneth Boulding, Ernst Schumacher, Serge Christophe Kolm, and Amartya Sen are economists who, in various ways, have attempted to bridge the gulf between the personalistic view of man and economic rationality. By carrying out an immanent critique of some of the standard economic assumptions, they opened a path for a normative economics that was clearly distinct from a purely positive economics as well as from Pareto's welfare economics. One can affix various labels to these attempts: humanistic economics (Mark A. Lutz), socio-economics (Amitai Etzioni), moral economics (Sen and others). In what follows, I shall interpret these attempts as initiatives in the direction of a personalistic economics. I would also situate the current research in `economics and ethics', which is becoming part of the mainstream of economic thought, and which has received official recognition with the recent Nobel prize award to Sen, within this tendency towards a more personalistic economics. Attention to moral feelings, human rights, altruistic motives, justice and solidarity, non-profit organizations, etc., contribute to situating the economic problem in a field where economics, politics and ethics no longer function as three distinct domains but where their interaction is central.

The Politics of Trade in Safavid Iran

Abstract: Using a wide range of archival and written sources, Rudi Matthee considers the economic, social and political networks established between Iran, its neighbours and the world at large, through the prism of the late Safavid silk trade. In so doing, he demonstrates how silk, a resource crucial to state revenue and the only commodity to span Iran's entire economic activity, was integral to aspects of late Safavid society, including its approach to commerce, export routes and, importantly, to the political and economic problems which contributed to its collapse in the early 1700s. In a challenge to traditional scholarship, the author argues that despite the introduction of a maritime, western-dominated channel, Iran's traditional land-based silk export continued to expand right up to the end of the seventeenth century. The book makes a major theoretical contribution to the debates on the social and economic history of the pre-modern world.

Third way transitions : Building benevolent capitalism for the information society

Abstract: Sociologist Anthony Giddens (1998a; 1998b) points to a recent policy move in the UK away from market fundamentalism towards a mixed economy, where the aim is to strike a better balance between economic and non-economic areas of social life. A more participatory and compassionate democracy is favored to implement the third way, a modernizing philosophy which bids everyone in the UK to rise to the civic and economic challenges of contemporary society, perceived as increasingly information based. At the same time, cooperative informatic strategies are developing practical associations between community-based ICTs, community networks and community-building activities, to improve existing structures and find better solutions to social and economic problems in distinct neighborhoods. This article explores the principles and incentives central to the third way, and reflects on how more benevolent capitalism is to support philosophical, structural and cultural change and new interactive communities in tune with the Information Society.

Public Economic Theory

Abstract: Understanding the role of the government in the economy is a question of fundamental importance. For decades, modern public economists have been working to provide answers as they relate to how society taxes, spends, distributes, regulates and stabilizes its economic systems. To a great extent, this research has been driven by contemporary policy issues. The resulting stream of practical, real-world research has yielded great dividends both to the polity and the academy. Unfortunately, the very success of applied and especially empirical public economics has tended to push more theoretical work to the periphery of the field. As a consequence, the theoretical and applied agendas in public economics have become increasingly distinct. At the same time, important advances in areas such as evolution, game theory, and experimental economics have been slow to work their way into the mainstream of public economic theory. Thus, we see growing gaps between theoretical public economics both with applied public economics and pure economic theory. The main objective of the Journal of Public Economic Theory is to help bridge these two gaps. Strengthening the connection between public economics and modern theoretical research is probably the easier of the two. To this end, the Journal will actively promote the development and dissemination of new theoretical tools and techniques in the field. We will make every effort to develop a reputation as an outlet for theorists seeking to demonstrate and explore the direct economic applications of their work. We believe it is equally important to demonstrate that theory can make significant contributions to the current policy debate. Consider, for example, the interplay between theoretical and empirical work in the controversies surrounding rational expectations or the impact of game theory on the structuring of the recent spectrum auctions. When theory is cut off from the applied side of a field, it runs the risk of beginning to feed upon itself and of becoming less and less relevant to applied researchers and the outside world. By the same token, when empiricists pay attention only to the data and previous empirical work, they risk missing new JPET 98038

Accounting for State Economic Performance: A Time-Series Cross-Sectional Analysis of the Limits of State Economic Policy

Abstract: State capital, labor, and technological market conditions are important determinants of state economic performance, but these conditions should be considered exogenous variables because state government has only a marginal influence on the capital, labor, and technological resources within their political boundaries. Development and growth involve different tradeoffs, and therefore mixtures, of capital, labor, and technology across the American states. The production model specified in this paper accounts for both the direction and relative impacts of capital, labor, and technology on state economic development and state economic growth rates. Our time series regression estimations reval that increasing capital has a greater positive short-term impact on state development levels and growth rates, than increases in labor supply. Increases in labor and technology do not produce contemporaneous increases in state economic performance because these variables involve longer-term adjustments. The findings also suggest state economies were responsive to international energy price changes and national policy reforms in the 1970's and 1980's. Introduction There is a growing consensus state economic performance is beyond either the political control or public policy influence of state government. The results in the state politics and policy literature also suggest national trends exert a strong influence on state labor and capital markets, and the value of goods and services produced within a state's boundaries. While the results of these influences have important implications for state and local politics, these influences are deemed largely independent of state policies and policymaking processes (Brace, 1993). These findings reveal an ironic truth about American state politics in the 1990's: states are more important institutions today, but they are important because of the growth in their economies, which is largely independent of state government. This paper examines the two-edged sword presented by the increasing significance and autonomy of state level economic performance. The first part of the argument is simply that a federal policy of decentralization and a context of increasing international competition magnify the importance of comparative resource advantages at the state level. This expanded role increases the responsibility for state level economic performance for both state and federal officials (Fosler, 1988), while producing greater variation and isolation of state economies from national labor, capital, and technological market conditions and policies. The second part of the argument concerns the increasing autonomy of state economic performance from federal policy. This greater autonomy is partially the result of budget deficits and their related impact on federal politics and policies (Walker, 1995: pp. 3-13; Bowman and Kearney, 1996: pp. 52-60). The other side of this coin is a twenty-five-year effort to decentralize policymaking to the state level. Under budget deficits, the federal government has engaged in either an active or a benign policy of decentralization (Gray and Eisinger, 1997: pp. 38-44). While different factors motivate the politics of decentralization (Eisinger, 1988: pp. 55-76), federal resource constraints play an important role in shaping attitudes toward state government (Elling and Thompson, 1997). The perception may be that state officials have a better understanding of state market conditions, and, increasingly, more resources to solve economic problems. While there is evidence of increased state capacity and organizational resources to administer policies (Bowman and Kearney, 1988; Walker, 1995: pp. 249-267), this trend is in sharp contrast to the view of states which led to a greater centralization of policymaking (Press and Adrian, 1964). The irony of this long-wave cycle of administrative and policy centralization and decentralization should not be lost on those who study state politics or federal policy. …

Political economy, Oligopoly and experimental games

Abstract: These essays of Shubik's represent how his work connects ideas, precision and the methods of mathematics in the area of game theory and economic problems. They through light on price systems and money.

The role of small and medium size enterprise in cuba's future

Abstract: Policy reform and investments in a post-Castro Cuba will have to pay special attention to employment problems resulting from the need to conduct rigorous restructuring and privatization of the enterprise sector, including both the manufacturing and the services sectors. Currently, the Cuban Government estimates that close to one million workers, almost 25 percent of the labor force, would be displaced if significant restructuring were to occur. A Resolution on the Economy, announced and approved during the Fifth Congress of the Communist Party of Cuba, stressed the need to “perfect” the socialist system of production, and ignored the role that a small enterprise-based private sector could have in solving Cuba’s pressing economic problems. The government, however, has not actually developed or carried out any new significant reform policy directed to address any of the problems identified during the Party Congress discussions. No meaningful restructuring has occurred. In particular, the government’s position against private sector initiatives, or small privately owned firms, which could offer employment opportunities for displaced workers and managers, has hardened. The reasons for this irresolution are probably many. In my view, however, the main ones are closely related to the conflict between the need to provide employment, and the strong reluctance, on the part of the government, to allow the creation of a private sector owned by Cuban citizens, which could lead to financial and, ultimately, political autonomy. In fact, in the economic resolution approved by the Fifth Congress, the Party affirmed that the government would stimulate small and medium size enterprises (SMEs), but state-owned ones. We know that, for more than a year, reformist elements within the government technical cadres had identified the critical need to allow private SMEs to start. Their major justification was that only that way could the government conduct needed restructuring of state firms that would necessitate release of large number of supernumerary employees. They presented such proposals to the Party and its Central Committee, only to face determined rejection. Basically, as has been the case with the self-employed, the government remains afraid that a vigorous, albeit small private sector would diminish its political control over a large sector of the population. The selfemployed, who grew rapidly in numbers to more than 200 thousand in 1994, currently number well below 150 thousand, victims of their own economic success and consequent repressive measures the government has initiated to keep them under control. These measures include punitive taxes, high fines, as well as harassment by means of continuous inspections by several kinds of government overseers. In a post-Castro regime committed to economic and political democratization, providing the conditions to