Showing papers on "Managerial economics published in 1997"

A Resource-Based Perspective On Corporate Environmental Performance And Profitability

Abstract: Drawing on the resource-based view of the firm, we posited that environmental performance and economic performance are positively linked and that industry growth moderates the relationship, with the returns to environmental performance higher in high-growth industries. We tested these hypotheses with an analysis of 243 Finns over two years, using independently developed environmental ratings. Results indicate that “it pays to be green” and that this relationship strengthens with industry growth. We conclude by highlighting the study's academic and managerial implications, making special reference to the social issues in management literature.

An Introduction to the Economics of Information: Incentives and Contracts

Abstract: A textbook on optimal contract theory, An Introduction to the Economics of Information covers the consequences for the character and efficiency of the interaction between individuals or organizations when one party has more or better information on some aspect of the relationship.

A dictionary of economics

Abstract: PREFACE DICTIONARY APPENDICES Institutional Acronyms Nobel Prize Winners The Greek Alphabet

Strategy at the edge of chaos

Abstract: "Fishbowl" economics once provided the basis of corporate strategy. No more New theories show markets are "complex adaptive systems" Making your company an evolver Are we more than blind players in an evolutionary business game? The Economist Paul Krugman says that there are three types of economics. There are up-and-down economics ("stocks were up and unemployment was down today"), airport-bookstore economics (Ten Easy Steps to Avoid Global Depression), and Greek-letter economics. Greek-letter economics is the mathematical variety practised in universities and published in academic journals. And it is in serious trouble. Historically, Greek-letter economics has rewarded mathematical pyrotechnics over fidelity to the real world. The core theories it has produced over the last few decades, such as rational expectations and general equilibrium, are mathematically elegant, but lacking in empirical validity. Joseph Stiglitz, chairman of the US President's Council of Economic Advisors, recently observed, "Anybody looking at these models would say they can't provide a good description of the modern world." The dismal state of the dismal science matters to managers, CEOs, consultants, and business professors because much of modern thinking in management is built on a foundation of Greek-letter economics. The bad news is that this foundation is now in serious doubt; the good news is that a radically new one is starting to be put in place. Though the term paradigm shift is overused, the changes currently taking shape in economics justify the use of the phrase Thomas Kuhn coined to describe how scientific fields enter a state of crisis and then move to a completely new way of thinking, as with the shift from Newtonian to Einsteinian physics. The new approach to economics has important implications for management, and in particular for strategy and organization. Although it is still in its infancy, we can begin to see how it might help us gain fresh insights into a host of difficult questions. Why do industries that look stable suddenly get turned upside down? How can companies develop strategies in the face of uncertainty? Why are big companies that seem to have it all so often vulnerable to attack by small upstarts? Let's begin by considering where traditional thinking on management comes from, and how it is based on a central metaphor that originated in physics and was adopted by economics. The roots of management thinking Many of the most successful and widely used strategy tools today - the five forces framework, cost curves, the structure-conduct-performance (SCP) model, and the concept of sustainable competitive advantage, to name a few - owe their origins to ideas developed in the 1950s in a field known as the theory of industrial organization. IO theory, which is concerned with industry structure and firm performance, is in turn based on microeconomic theory. Modern neoclassical microeconomics was founded in the 1870s by Leon Walras, William Stanley Jevons, and Carl Menger, and synthesized into a coherent theory by Alfred Marshall at the turn of the century. Seeking to make economics more scientific, Walras, Jevons, and Menger had borrowed ideas and mathematical apparatus from the leading science of their day, energy physics. Twenty years earlier, Julius Mayer, James Prescott Joule, Hermann von Helmholtz, and Ludwig August had achieved breakthroughs in energy physics that paved the way for thermodynamics. The early neoclassicists copied the mathematics of mid-nineteenth-century energy physics equation by equation, translating it metaphorically (and, according to many physicists, incorrectly) into economic concepts. Another neoclassicist, Irving Fisher, showed in his 1892 doctoral thesis how the physicists' "particle" became the economists' "individual," "force" became "marginal utility," "kinetic energy" became "total expenditure," and so on. …

Dynamic Economics: Optimization by the Lagrange Method

Abstract: This work provides a unified and simple treatment of dynamic economics using dynamic optimization as the main theme, and the method of Lagrange multipliers to solve dynamic economic problems. The author presents the optimization framework for dynamic economics in order that readers can understand the approach and use it as they see fit. Instead of using dynamic programming, the author chooses instead to use the method of Lagrange multipliers in the analysis of dynamic optimization because it is easier and more efficient than dynamic programming, and allows readers to understand the substance of dynamic economics better. The author treats a number of topics in economics, including economic growth, macroeconomics, microeconomics, finance and dynamic games. The book also teaches by examples, using concepts to solve simple problems; it then moves to general propositions.

The primacy of economics: an explanation of the comparative success of economics in the social sciences: western economic association international 1996 presidential address

Abstract: I The strong export surplus economics maintains in its trade in ideas and methods with the other social sciences is an important indicator of the success of economics. Not much has been said about the source of this success, but it has been attributed largely to advantages offered to other social sciences by the economics tool kit. Thus, Gary Becker, who has earned Commander-in-Chief ranking in the EEF (Economics Expeditionary Forces), attributes the interdisciplinary influence of economics to our relentless and unflinching application of "The combined assumptions of maximizing behavior, market equilibrium, and stable preferences..." (Becker [1976]). This view, but with a different emphasis, is shared in by Hirshleifer [1985], my distinguished colleague, who leads an active EEF group now reconnoitering sociobiology: What gives economics its imperialist invasive power is that our analytical categories - scarcity, cost, preferences, opportunities, etc. - are truly universal in applicability. Even more important is our structured organization of these concepts into the distinct yet intertwined processes of optimization on the individual decision level and equilibrium on the social level of analysis. (p. 53) The emphasis here is on the broad scope of phenomena that can be explained with our tool kit. Such breadth suggests the possibility of unifying the social sciences in an economics-led hegemony. Brief statements such as these cannot be taken as adequate representations of full views, but there is a disposition among most economists to accept the interdisciplinary influence of economics as a measure of its success and to identify its tool kit as the source in this success. The most important exception is R. H. Coase [1977], who doubts that the interdisciplinary influence of economics will continue. He believes the economics tool kit is easily mastered by practitioners of other social sciences when they find it useful. As Coase judges the situation, a sustained influence from economics requires that economics and the other social sciences share interests in the same problems. The nub of the disagreement between Coase and those, like Becker and Hirshleifer, who remain optimistic about a continuing strong influence from economics, turns on two issues that are not discussed explicitly. One relates to the definition of a "problem." Those who are optimistic seem to be distinguishing between problems according to whether their solutions do or do not depend importantly on scarcity and maximizing behavior. Interpreted this way, many problems across the social sciences are of the same type. Coase, on the other hand, distinguishes between problems according to differences in the factual knowledge needed to understand them. For Coase, understanding the firm is a different problem from understanding the marriage relationship because factual knowledge about one does not transfer to the other. For Becker, the essential similarity between these problems rests in utility maximization subject to constraints. This difference in interpretation raises a second issue, one that is more substantive. Coase's view is that the tools of one social science discipline, in this case economics, are easily learned by practitioners of another, but that factual knowledge is not. Those optimistic about the interdisciplinary influence of economics implicitly have the view that mastering the tools of economics is more difficult than Coase presumes; repeated practice in their use is needed to become their master. It is difficult to judge which side has the best case. I am even puzzled as to how to define a researcher's discipline if he or she is trained in the tools of one social science and applies them to problems in another. One possibility is to determine whether the researcher's work appears in economics journals or in the journals of other social science disciplines. I am most familiar with interactive work between law and economics. …

Economics for business and management

Abstract: This is an introductory economics textbook which has been crafted to meet the needs of business studies and management students. Developed using "Introduction to Positive Economics" as a starting point, the authors have carefully selected essential material, added new coverage, and taken the opportunity to make the text clearer. With the intended readership in mind, the greater part of the text focuses upon microeconomics, including the theory of the firm, consumers and markets, market structures, and the economics of business organizations. Business and management students should also find the texts coverage of the economics of employment and investment particularly helpful. The macroeconomics included has also been chosen to be of maximum benefit to management students, focusing on business cycles and the macroeconomic factors which affect firms (such as inflation and employment), and the balance of payments and exchange rates. The book includes case studies and case examples which are essential for understanding the business context of economics. Other learning aids include chapter introductions, chapter summaries, topics for review, and end of chapter questions.

The Problem of Knowledge in Economics

Abstract: While a graduate student at Rice University, my study carrell was located adjacent to the economics section in the library. Occasionally, I would wander through the aisles looking for reading material, and one day I came upon copies of the Southern Economic Journal. Little did I know that a few years later, at the University of North Carolina, would begin my affiliation with the Journal which would last thirty years, twenty-eight of which I have served as Managing Editor. During that period roughly 14,000 manuscript submissions have passed over my desk, approximately 2,600 articles and communications have been published, together with about 3,000 book reviews, in 113 issues. Many changes have occurred during those 30 years, both external and internal to our discipline. The rapidity of change in our cultural, social, political, and economic institutions during that period is, perhaps, unprecedented in our history. Thirty years ago, we were in the grips of both a cold war and a Vietnam war, the civil rights movement was in full swing, and the babyboom generation was beginning to make its presence felt at colleges and universities. All of these would have profound effects on our institutions which continue through the present.' Thirty years ago the profession was less specialized, less fragmented, than today, and communication among economists in different fields was more common. The newly emerging specialized fields were Soviet Economics and Economic Development, reflecting the concerns of the times. Econometrics was beginning to become a standard part of graduate training, and mathematical economics maintained its distinction, until later, when practically all specialized fields became mathematized. Computational costs and data limitations constrained empirical research, but the IBM 360 mainframe was available to those of us who had a working knowledge of Fortran which facilitated the construction of our own data sets, file maintenance and statistical programs whenever useful "canned" programs were absent. We were all programmers then, in varying degrees. Later, expansion of national government policy from general and indirect macro stabilization policies towards more direct intervention at the micro level spawned a host of new fields of specialization, which became known as "applied" fields, such as regional and urban economics, health economics, environmental economics, population economics, energy economics, as well

Reason and reality in the methodologies of economics : an introduction

Abstract: Is there a crisis in economic theory? how do economists know what they know? what is methodology? economics as positivism and falsification economics as prediction economics as deduction economics as realism economics as conversation and rhetoric is economics a science?

Economic Theory and Public Decisions: Selected Essays of Robert Dorfman

Abstract: Contents: Acknowledgements Introduction Part I: Statistics Part II: Mathematical Methods Part III: Economic Theory Part IV: Natural Resource and Environmental Economics Part V: Social Decisions Part VI: History of Economics Index

From Apec to Xanadu: Creating a Viable Community in the Post-cold War Pacific

Abstract: The economic analysis of legal and regulatory issues need not be limited to the neoclassical economic approach. The expert contributors to this work employ a variety of heterodox legal-economic theories to address a broad range of legal issues. They demonstrate how these various approaches can lead to very different conclusions concerning the role of the law and legal intervention in a wide array of contexts. The schools of thought and methodologies represented here include institutional economics, new institutional economics, socio-economics, social economics, behavioral economics, game theory, feminist economics, Rawlsian economics, radical economics, Austrian economics, and personalist economics. The legal and regulatory issues examined include anti-trust and competition, corporate governance, the environment and natural resources, land use and property rights, unions and collective bargaining, welfare benefits, work-time regulation and standards, sexual harassment in the workplace, obligations of employers and employees to each other, crime, torts, and even the structure of government. Each contributor brings a different emphasis and provides thoughtful, sometimes provocative analysis and conclusions. Together, these heterodox insights will provide valuable supplementary reading for courses in law and economics as well as public policy and business courses at both the graduate and undergraduate levels.

Managerial decision making.

Abstract: The accounting assumption of a stable measuring unit gellerally has allowed accountants to ignore the changing value or purchasing power of the dollar in preparing external accounting reports. Nevertheless, the issue of whether or not financial statements should be adjusted to reflect changing prices of either the specific or general variety has been of concern for many decades. With tche higher inflation rates of the late seventies and early eighties, the validity of the stable-measuring-unit assumption has been a topic of frequent debate; and the entire issue of accounting for the effects of changing prices has gained in relevance. In 1979, the Financial Accounting Standards Board issued FASB Statement No. 33 (4) requiring that large public enterprises disclose the effects of changing prices as supplementary information to pu blished financial statements prepared on an unadjusted basis. The pronouncement originally required that supplementary income summaries be computed and disclosed on both a "constant dollar" and a "current cost" ba.sis. Constant dollar reporting states the financial statement elements in dollars of the same general purchasing power. Current cost reporting states financial statement elements at what their costs would be at the balance sheet date to the time of their use. In 1984, the FASB issued Statement N~o. 82 (5) eliminating the requirement for constant dollar reporting under certain conditions. SFAS No. 33 applies to all public companies which prepare their financial statements in U.S. dollars in accordance with U.S. generally -accepted accounting principles and which have either total assets of more than $1 billion or inventories and gross plant, property, and equipment of more than $125 million at the beginning of the current fiscal year. The amounts for these criteria are the amounts shown in the company's consolidated financial statements. While SFAS No. 33 placed certain requirements on particular companies with regard to their external reporting, internal reporting is not so constrained. Managements continue to be free to choose what they consider to

Nonprofit organizations, privatization and the mixed economy: A managerial economics perspective

Abstract: This paper is divided into two parts. The first illustrates the present characteristics and future prospects for the development of the third sector in Italy. It then examines the social context in which the third sector develops not only in Italy but also in the rest of Europe. The theoretical perspective that seems to be the most appropriate to the dimensions the third sector has taken on in most Western countries is that of dynamic complementarity between state agencies, for-profit organizations and nonprofit organizations. In order to foster economic and social innovation, there is a need for collaboration and complementarity of roles among organizations of different types. An economic policy implemented on a rational basis should select its own intervention instruments after building a set of strategic and organizational alternatives, avoiding the exclusive adoption of only one of these, as happened at the time of the almost unlimited provision of state aid to enterprises and with the unproductive rescues of ailing public enterprises.

Water, the environment and economics: what does experience teach us so far?

Abstract: With the increasing treatment of water as an economic good, it is appropriate to ask whether this has led to better decisions being made. Conversely, it can be asked what the application of economic analysis to decisions about water has taught us about economics. In discussing economics, however, it is necessary to make a distinction between economics as an approach, the application of reason to choice, and specific implementations of that approach. Of these implementations, the dominant form is neo-classical economics. It will be argued that this parochial (better termed ’Anglo-Saxon’) economics suffers from a number of limitations. Nevertheless, even with these limitations, it is argued that economics can contribute to improving decisions involving water.

"Unorthodox, troublesome, dangerous and disobedient": a feminist perspective on health economics, CHERE Discussion Paper No 33

Abstract: Feminist theory has developed to explore the links between the social construction of scientific disciplines and the social construction of gender (Ferber and Nelson, 1993). The critique of economic theory is a more recent application of feminist theory. Many feminist economists have examined issues of gender bias within neoclassical economics. It is the aim of this discussion paper to outline this feminist critique of economics, particularly neoclassical economics, and to discuss its relevance to health economics. The feminist critique is relevant to health economics for a number of reasons. Health economics draws upon theories developed in other areas of economics such as finance and insurance, industrial organisation, labour and public finance. Therefore, many of the gender related criticisms applied to the discipline of economics can be extended to health economics. It is also relevant simply because women represent the main labour force within health , are the majority of unpaid producers of health care and health, and are the principal consumers of market provided health care. The paper examines how three key assumptions in neoclassical economics have been applied in health economics: the idea of the separative self, the single maximand and the benchmark of perfect competition. It is argued that while the idea of market failure is more central to health economics than to other areas of economics, these key assumptions are evident in the work of health economists, and have implications for androcentric bias in the sub-discipline. The implications of these assumptions are investigated for one of the major areas of work in health economics - that of economic evaluation of health care interventions.

Integrating Computer Spreadsheet Modeling into a Microeconomics Curriculum: Principles to Managerial.

Abstract: At a principles level, the use of spreadsheets fosters learning by doing in the exploration of basic economic concepts. Through the introduction of increasingly complex topics, the student becomes comfortable using spreadsheets to explore economic theory. Consistent use of spreadsheets at the principles level will allow the managerial economics student to expand into the development of decisionmaking problems such as alternative advertising pricing methods and optimal advertising campaigns with alternative time-paths of sales. This article explores and gives examples of the use of spreadsheets in the microeconomics curriculum.

Complexity and Economics of Institutions

Abstract: In this article, we focus on computational aspects of game strategies and mechanism design Some games or mechanisms arise the problems with computational difficulties We argue some complexity measure of game strategy to model agents whose rationality are bounded We think that the model of bounded rational agent is more suitable for analyzing many economic situations than that of rational agents assumed in ordinary economics In fact, we can show that bounded rational agents can achieve Nash equilibrium in optimal auction mechanism But human behaviors in real life have some mysterious aspects Experiments with human-subjects showed that players could have some different expectations or actions in the game that could not be obserbed in Nash equilbrium analysis Constructing more reasonable behavioral model of bounded rationality remains in future researches

Lecture Note 2 Relational Contracts 1

Abstract: Game theory is rampant in economics. Having long ago invaded industrial organization (the sub-field of economics that studies firms and their product markets), game-theoretic modeling is now commonplace in international, labor, macro, and financial economics, and is gathering steam even in development economics and economic history. Nor is economics alone: accounting, law, marketing, political science, and even sociology are beginning similar experiences. Why is this? Broadly speaking, two views are possible: fads and fundamentals. While I believe that fads are partly to blame for the current enthusiasm for game theory, I also believe that fundamentals are an important part of the story. Simply put, many economists use game theory because it allows them to study the implications of rationality, self-interest, and equilibrium when the theory of perfect competition does not apply—such as where markets are imperfectly competitive, or where markets are only peripherally relevant (such as in the relationship between a regulator and a firm or a boss and a worker). By my armchair citation count, repeated games have been applied more broadly than any other game-theoretic model—not only in economics but also in other social sciences and management fields. I believe this is because repeated games capture the following fact of life: when people interact over time, threats and promises concerning future behavior may influence current behavior. I do not mean to imply that this logic is surprising or rare. To the contrary, I think it is simple and ubiquitous. In this note I present the simplest possible formalization of this logic. I first describe a one-shot interaction between two parties (which works out badly) and then analyze an ongoing relationship in which such interactions occur repeatedly (and work out well because of the parties’ concerns for their reputations). The ongoingrelationship model shows how repeated games allow economists to analyze some aspects