Showing papers on "Inefficiency published in 1987"

Reducing bias and inefficiency in the selection algorithm

Abstract: Most implementations of genetic algorithms experience sampling bias and are unnecessarily inefficient. This paper reviews various sampling algorithms proposed in the literature and offers two new algorithms of reduced bias and increased efficiency. An empirical analysis of bias is then presented.

Testing between Competing Models of Sharecropping

Abstract: The "Marshallian" approach assumes a prohibitively high cost of monitoring the sharecropper's activities while the "monitoring" approach argues that landlords stipulate and effectively monitor sharecroppers' activities. I present new evidence using detailed data collected from eight Indian villages. Most tenants own some land of their own; this provides a controlled environment in studying the impact of contractual arrangements. The differences in input and output intensities on owned minus sharecropped land of the same household are found to be sizable and significant, suggesting a rejection of the monitoring approach and supporting the notion of the "Marshallian productive inefficiency" of sharecropping.

Optimal Contracts with a Utility-Maximizing Auditor

Abstract: This paper presents a principal-agent model in which the agent becomes strictly better informed than the principal after the contract agreement. To mitigate the inefficiency caused by this information asymmetry, the principal and agent agree that the agent will communicate the private information to the principal.' They can further reduce this inefficiency by hiring a utility-maximizing auditor, whose effort is not observable, to attest to the validity of the agent's message. To improve efficiency with this attestation, the principal must -motivate the auditor to audit effectively and to report honestly. Thus, hiring a utility-maximizing auditor to mitigate the inefficiency in the principal-agent contractual relationship may introduce a moral hazard problem and a new source of inefficiency. Our objectives are (a) to characterize an optimal pair of contracts (principal-agent and principal-auditor) so as (b) to analyze both how

Technical efficiency and size: The case of Illinois grain farms

Abstract: In this paper, the relative productive performance of a sample of Illinois grain farms is gauged using Farrell-type measures of technical efficiency. Mathematical pr ogramming methods are used to envelop the data to form a multiple-out put, multiple-input technology relative to which the performance of i ndividual farms is assessed. Using a decomposition of those measures developed by R. Fare, S. Grosskopf, and C. A. K. Lovell (1985), it wa s found that the major source of inefficiency was deviation from most productive size of the large farms in the sample. Coauthors are R. F are, S. Grosskopf, and S. Kraft. Copyright 1987 by Oxford University Press.

The technical efficiency of illinois grain farms: an application of a ray-homothetic production function

Abstract: The purpose of this paper is to measure the extent of technical inefficiency among a sample of Illinois grain farms using the corrected ordinary least squares method. Instead of assuming a Cobb-Douglas production function, a linear form of the ray-homothetic is used. The results show a significant amount of technical inefficiency among all the farms in the sample, but with large farms being less technically inefficient than small farms.

Microeconomics and the Public Economy : A Defence of Leviathan

Abstract: Market Failure - a Rationale for Government Intervention? Governmental Failure: a Rationale for Market Provision? Measuring Leviathan: the "size" of the Public Sector The Growth of the Public Sector Constitutional Bias and Fiscal Illusions Bureaucratic Inefficiency Private Responses to Public Expenditure Decisions Privatisation The Economic Consequences of Financing the Public Sector Freedom and the Public Sector.

Capital Accumulation and Annuities in an Adverse Selection Economy

Abstract: This paper suggests that adverse selection problems in competitive annuity markets can generate quantity-constrained equilibria in which some agents, whose length of lifetime is uncertain, find it advantageous to accumulate capital privately. This occurs despite the higher rates of return on annuities. The welfare properties of these allocations are analyzed. It is shown that the level of capital accumulation is excessive in a Paretian sense. Policies that eliminate this inefficiency are discussed. Copyright 1987 by University of Chicago Press.

Economic Paradigms and Slow American Productivity Growth

Abstract: Conventional explanations of America's slow productivity growth end up by giving up. Much of the slow down remains unexplained by changes in the quality or quantity of conventional inputs. If one looks at changes in occupational employment, it is clear that the productivity problem is an office and not a factory problem. White collar employment has simply grown much faster than it should have grown. To explain this growth, it is necessary to probe into theories of management and why they have led American firms into inefficiency. The answer is found in a misguided belief in "management by the numbers."

Participatory Decision Making in Review

Abstract: Should managers share their decision‐making power? Do managers who alow their subordinates to participate in organisational decision making increase the satisfaction, self‐esteem, loyalty and productivity of their employees and create positive manager‐subordinate relations, or do they merely contribute to high‐cost inefficiency and incompetence? The literature on what has come to be known as PDM — participatory decision making — is examined in an attempt to answer these questions.

Inefficiency and Speculation in the Indian Capital Market

Abstract: Is the Indian capital market inefficient? Does it reward low risk takers with high returns? Barua and Raghunathan argued (“Inefficiency of the Indian Capital Market,” ‘Vikalpa,July-September 1986) that the Indian capital market was inefficient, based on an illustration. Ramesh Gupta contended, in a response article entitled “Is the Indian Capital Market Inefficient or Excessively Speculative?” (Vikalpa, April-June 1987), that their conclusion was erroneous as it was based on many assumptions and a hypothetical example. Barua and Raghunathan re-examine their risk-return evaluation in the light of the actual developments over the last year in the case illustration used earlier. They argue that their conclusion on market inefficiency remains valid, notwithstanding the many changes in the assumptions.

Productivity Analysis: A Micro-to-Macro Perspective

Abstract: This paper raises several issues concerning productivity analysis. An attempt is made to demonstrate the usefulness of a micro-based approach to productivity analysis which challenges some basic assumptions of conventional analyses based on aggregate production functions. With the help of a micro- (firm-)based macro simulation model it is shown if there are important differences among firms in economic competence, here represented by efficiency and investment behavior, the relationships between investment, productivity, and economic growth are much more complex and unpredictable than commonly assumed . The rate of technological progress as measured by the rate of change in best-practice technology seems to be less important than the elimination of inefficiency by closure of firms and/or by firms moving closer to their respective production frontiers. It is also shown that the conditions which determine firm borrowing for investment (involving their interpretation of past profitability and expectations based on current capacity utilization) are more important for productivity and economic growth than the total amount invested. In other words, it matters less how much is invested than who does the investing, and under what incentives. The implication for productivity analysis is that unless diversity among economic units is taken into account, the results are likely to continue to be inconclusive. What is needed is much more of an integration of micro and macro theory than has been accomplished thus far. In particular, economic competence must be included. The paper also tries to put productivity in the proper perspective, not as an object in and of itself but rather as a partial measure, at best, of economic performance at any level within the economy.

Labor Contracts under Asymmetric Information When Workers are Free to Quit

Abstract: This paper examines the impact of workers' ability to quit on the performance of labor contracts between workers and privately informed firms While the need to induce workers to remain with the firm necessarily lowers total welfare, the effect on employment levels is to reduce the magnitude of the inefficiency due to asymmetric information, whether this inefficiency is under- or overemployment The model predicts that employment distortions increase with the strength of lock-in effects on workers, a prediction which contrasts with the results of efficiency wage models and which may help in empirical testing of labor contract theory

Surface mining of coal: efficiency of US interior mines

Abstract: In this paper the relative efficiency in surface mining of US interior coal is investigated. A nonparmetric, non-stochasitic method is applied to 186 observations and esch firm's efficiency is calculated relative to the piecewise llinesr frontier technology. In adition, three sources of inefficiency are identified, namely: Scale, congestion and purely technical inefficiency. The outcome of the study shows among other things that on the average, captive mines are more efficient than non-captive mines, and that unionized mines are more efficient than non-unionized mines.

A Technique for Estimating a Cost System that Allows for Inefficiency

Abstract: The presentation of a new econometric technique for estimating a system of cost and input share equations that allow for inefficiency

Matching Resources to Needs in Community Care: An Evaluated Demonstration of a Long-Term Care Model

Abstract: First published in 1986, Matching Resources to Needs describes the PSSRU’s community care approach and analyses the first of the community care projects, a seminal set of experiments in the care of the elderly at high risk of institutional long-term care The experiments create field structures which provide incentives to improve efficiency, decentralised power over resources being balanced by enhanced accountability The first part explains the approach, analyses the causes of inefficiency in ~British social care, and reviews British and American evidence about the relationships between resources, recipient characteristics and outcomes The approach is compared with some two dozen American experiments hitherto unknown in the UK It describes the design of the project and its evaluation The authors then examine the experimental results They show that cost and welfare effects are better and the costs of outcomes are lower for recipients of community car The third part of the book uses observational and other data to explore the relationships between structures, assumptive worlds, causal processes and outcomes and their costs It also analyses the performance of the core tasks of entrepreneurial case management for types of case The book concludes with a discussion of the broader implications of this approach to community care

Testing for weak form efficiency in new agricultural futures markets: some uk evidence

Abstract: This paper examines the hypothesis that new agricultural futures markets are weak form inefficient in their early stages of development and that they exhibit a process of adjustment towards efficiency over time. The concept of pricing efficiency in futures markets is outlined and the hypothesis is tested with respect to the UK soyabean meal, potato and pigmeat futures markets, using serial correlation, runs and spectral analysis. The results indicate that over the time period of the contract samples these markets exhibit some weak form inefficiency; however there is no clear evidence of an adjustment process.

Competition versus Monopoly in the Supply of Public Goods

Abstract: In an earlier paper (Guth and Hellwig (1986)), we studied the supply of a public good by a profit-maximizing monopolistic producer. A major finding of our analysis was that the private monopoly supply of a public good is inefficient because, as in the case of a private good, the monopolist makes his supply artificially scarce. In this paper we study the question whether the inefficiency would disappear if there was a sufficient amount of competition among actual or potential providers of the public good.

Agricultural Policy Debate: A Survey*

Abstract: A survey is provided of writings between 1978 and 1985 on or directly relevant to Australian agricultural policy. The areas covered are: background and overview; industry policy, including tariff compensation, home consumption price schemes. quotas, input subsidies and futures trading by marketing boards; stabilization; adjustment and the capital market; and macroeconomics and agriculture. An increasingly critical approach has been taken in identifying sources of inefficiency in agriculture and in considering ways of reducing them. Private interest explanations of policy descisions have received serious study and macroeconomic issues have received increasing attention.

Decentralized tax competition for business capital and national economic efficiency

Abstract: For a nation composed of independent regions, the effects of local tax competition for business investments are examined. It is first shown that atomistic regional authorities tax only local resources to finance the provision of public services to business. Thus, an efficient interregional equilibrium is induced. Various political/institutional constraints are shown to cause misallocation of the capital stock and an inefficient provision of public services. The characterization of the inefficiency is shown to vary widely, depending upon the constraint under consideration.

Productivity Incentives and Rate-of-Return Regulation

Abstract: Rate-of-return (RoR) regulation has been the subject of much criticism on the grounds of economic inefficiency. According to Averch and Johnson (1962), it can result in input distortions in the form of a capital bias. Another criticism has been that regulation induces rent seeking which results in a further dissipation of resources (Crew and Rowley, 1986). Williamson (1976, 1984), however, argues that these kinds of criticisms of regulation are incomplete to the extent that they ignore transactional due process and equity issues. He argues that before economists condemn regulation out of hand they should perform a comparative institutional assessment to determine how regulation shapes up against other governance structures. In Crew and Kleindorfer (1986) we performed such a comparative institutional assessment. The result of this assessment was relatively favourable for traditional RoR regulation but did indicate the need for additional incentives for economic efficiency.

Do Specialists' Short Sales Predict Returns?

Abstract: This paper provides evidence of a market inefficiency. Between 1942 and 1984, the specialists' short sales ratio has foretold periods of higher and lower returns on the New York Stock Exchange. Average stock returns have been significantly higher after low values of the ratio (marking low short sales by specialists) and significantly lower after high values of the ratio. Not only has the market been strong-form inefficient but these data have been publicly available with a slight lag, indicating semi-strong form inefficiency.

Issues in the application of cost-benefit analysis to energy projects in developing countries*

Abstract: THE THEORY behind cost-benefit analysis is relatively well developed [see Little and Mirrlees (1968), (1974); Dasgupta, Marglin and Sen (1972); Mason and Merton (1984)], but its application to real world problems is not always easy. This paper considers the application of cost-benefit analysis to energy problems in oil-importing developing countries (OIDCs). The results are divided into four parts: Section 2 presents a methodology for handling uncertainty; Section 3 studies the implications of exhaustibility; Section 4 examines the externalities associated with exploration; Section 5 applies these tools in an analysis of the costs associated with importing oil. In Section 2 we begin with a discussion of the theoretical issues involved in cost-benefit analysis in the presence of uncertainty. Problems arise when there are conflicting estimates of a project's chance of success. The analysis must consider how the range of possible outcomes affects both the total risk borne in the economy and the income distribution. Uncertain future returns have to be appropriately discounted to the present. Projects which deplete exhaustible resources are irreversible and therefore the cost-benefit analysis must take into account the value of current reserves. In Section 3 Hotelling's rule is presented as the starting point for forming expectations about the price path of oil and other exhaustible energy resources. All project appraisals for programs ranging from new energy development to conservation or stockpiling are strongly influenced by the expected future price of energy, and oil in particular. Energy prices today and in the future depend on estimates of total world hydrocarbon reserves, their extraction costs, and the predicted availability of backstop technologies. Uncertainty about future reserves leads to variability in supplies and price, and causes an inefficiency in the intertemporal allocation of oil; depletion takes place more slowly in order to maintain flexibility in the event of worse-case scenarios. The gains from developing new energy supplies (and conservation) include lower prices, reduced vulnerability, and

Industry Inefficiency, Monopoly and Import Liberalization in New Zealand — An Assessment of the Static Welfare Effects*

Abstract: A monopoly industry trade model embodying various assumptions is used to estimate the static, partial, welfare effects of the New Zealand import liberalization policy introduced in 1984. Import licences for products competitive with domestic manufactures are being expanded, causing tendered premiums to fall until tariffs assume the protective role. The resulting price falls are estimated to produce an aggregate welfare gain of 0.28 per cent of GDP, and to generate large distributional effects.

The Informal Venture Capital Market: Aspects of Scale and Market Efficiency

Abstract: Examines the scale and market efficiency of the informal venture capital market. The performance of the informal venture capital market is of concern to entrepreneurs, venture capitalists, and public officials. This almost invisible informal market provides equity-type financing to entrepreneurs, which fills gaps in the institutional equity market. Private venture investors are likely to have created their own wealth, have business and financial experience, and have net worth of $1 million or more. There are about 100,000 active in any year. Private investors manage about $50 billion, about twice that managed by professional venture investors, and finance 20,000 or more firms, compared to the two to three thousand of professionals. The typical venture raised about $250,000 from three or more investors. The ventures funded by the informal market tend to be (1) technology inventors and start-ups requiring less than $1 million of seed capital, and (2) firms growing faster than cash flows can support. There is a perception that a gap exists in the funding of entrepreneurs. However, this anecdotal folklore overlooks the investment record and that angel investors do invest in the areas perceived as gaps. There is some evidence that there is little or no market imperfection. The effect of gaps (or inefficiency) is created when the flow of informal market capital is constrained by the high cost of the limited information about investors and investment opportunities; the market is also limited by unfamiliarity of investors and entrepreneurs about the usual techniques of successful venture financing. The usual channels for investment are informal networks of friends and businesspersons. The gaps between private and social returns from innovation, and the perceived inefficiency of the informal market suggest public and private initiatives to foster the market would be appropriate. Concludes with a report about an experimental project, the Venture Capital Network established at the University of New Hampshire to enhance the efficiency of the informal venture capital market. Lessons learned from the project are discussed: The informal investor population is diffuse and hard to reach. New concepts do not sell themselves. It takes time to build a track record. An investor's interest depends in part on familiarity with techniques of venture investing. The project's endurance would suggest market efficiency can be improved. (TNM)

The Politics of Secret Intelligence — British and American Attitudes

Abstract: There have been many arguments that secret intelligence is dangerous, hazardous to the health of a democratic society, but far fewer arguments that intelligence is an activity which requires secrecy. The arguments against secret intelligence fall into two main categories; that secrecy is harmful since it leads to, or protects, abuse of power, and secondly that it is immoral, contrary to democratic values. There is a possible third argument that secrecy is undesirable because it produces inefficiency or protects ineffectiveness. However, given that this argument is based on the premise that effective intelligence is necessary and desirable it is not likely to be expressed by critics of intelligence activities and so has been rarely found in the literature and will therefore not be considered here. However, this is not to say that such an argument cannot be made. Its absence here merely reflects its absence in the literature.

The Thematic Procedures of the UN Commission on Human Rights

Abstract: It is not at all difficult to criticize the United Nations human rights programme on the grounds of inefficiency, hypocrisy, double standards and lack of imagination. But critics often tend to take a myopic view and overlook what has been achieved over a slightly longer period of time. One such development which has so far received little attention outside the small world of human rights activists and specialised diplomats is the emergence of the ‘thematic’ or issue-oriented response to human rights violations by the UN Commission on Human Rights.

Is the Indian Capital Market Inefficient or Excessively Speculative

Abstract: Based on the way the markets actually function, Ramesh Gupta questions in this article the validity of the assumptions used in arguing that the Indian capital market is inefficient. Far more than inefficiency; the problem with the Indian market is its excessively speculative character, by permitting trading on low margins in carry forward transactions. He also makes suggestions on how to restrict speculation and protect the interest of investors.