nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2013‒03‒23
nine papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. Constant Returns to Scale: Can the Neoclassical Economy Exist? By Alam, M. Shahid
  2. Disentangling the relationship between nonprofit and social capital: the role of social cooperatives and social welfare associations in the development of networks of strong and weak ties By Giacomo, Degli Antoni; Fabio, Sabatini
  3. Agent-based and macroscopic modeling of the complex socio-economic systems By Aleksejus Kononovicius; Valentas Daniunas
  4. Mode of socio-economic development and occupational structure: the case of contemporary Russia By Anikin, Vasiliy
  5. Customer Poaching with Retention Strategies By Rosa Branca Esteves
  6. Smokescreen: How Managers Behave When They Have Something To Hide By Tanja Artiga González; Markus Schmid; David Yermack
  7. A Regional Input-Output Model For Izmir By Osman Aydogus; Cagacan Deger; Elif Tunali Caliskan; Gülcin Gürel
  8. Incentives when altruism is impure: The case of blood and living organ donations By María Errea; Juan M. Cabasés
  9. Towards a pure state theory of money By Ballinger, Clint

  1. By: Alam, M. Shahid
    Abstract: Constant returns to scale (CRS) is one of the corner-stones of the competitive general equilibrium paradigm of neoclassical economics. This note argues that the equilibrium solutions of this paradigm are not compatible with CRS. CRS implies that all producers (whatever their scale of production) can produce goods at the same unit costs: and this makes self-production a feasible alternative to market production. In the event, an infinite number of equilibria become possible with a mix of markets and self-production. If labor is the only factor of production, self-production becomes the only option: and the market economy ceases to exist.
    Keywords: Constant returns to scale, competitive paradigm, neoclassical economics, second-best, Lipsey, Lancaster,Samuelson, Arrow, Debreu, Kaldor, Allyn Young, general equilibrium, increasing returns to scale, existence, uniqueness, equilibrium, classical economics, Adam Smith, Ricardo, Pareto-optimality, John Bates Clark, Wicksteed, Mirowski, Austrian
    JEL: B0 B00 B1 B3 B4 B41 D5
    Date: 2013–03–16
  2. By: Giacomo, Degli Antoni; Fabio, Sabatini
    Abstract: We use a unique dataset to study how participation in two specific types of nonprofit organizations, i.e. social welfare associations and social cooperatives, affects individual social capital. A descriptive analysis shows that both the types of organization have a positive impact. The econometric analysis reveals that social welfare associations play a significantly greater role in the development of volunteers’ networks of cooperative relationships, favouring the creation of weak ties which are used to exchange information and advice, and offering the opportunity to establish stronger ties entailing concrete mutual support. Within social cooperatives, workers develop their individual social capital to a greater extent than volunteers.
    Keywords: volunteering, nonprofit organizations, cooperative enterprises, social cooperatives, social capital, social networks
    JEL: L31 L33 P13 Z1
    Date: 2013–03–08
  3. By: Aleksejus Kononovicius; Valentas Daniunas
    Abstract: The current economic crisis has provoked an active response from the interdisciplinary scientific community. As a result many papers suggesting what can be improved in understanding of the complex socio-economics systems were published. Some of the most prominent papers on the topic include (Bouchaud, 2009; Farmer and Foley, 2009; Farmer et al, 2012; Helbing, 2010; Pietronero, 2008). These papers share the idea that agent-based modeling is essential for the better understanding of the complex socio-economic systems and consequently better policy making. Yet in order for an agent-based model to be useful it should also be analytically tractable, possess a macroscopic treatment (Cristelli et al, 2012). In this work we shed a new light on our research group's contributions towards understanding of the correspondence between the inter-individual interactions and collective behavior. We also provide some new insights into the implications of the global and local interactions, the leadership and the predator-prey interactions in the complex socio-economic systems.
    Date: 2013–03
  4. By: Anikin, Vasiliy
    Abstract: The given paper assumes the existence of a correlation between the occupational structure and the mode of social and economic development of a country. It is shown that the modern stage of development in advanced economies could be described by the post-industrial phase with (a) the specific proportions in the occupational structure (predominance of professional managers and technical experts); (b) particular nature of work and the corresponding extent of labor division according to specialization and qualification (highly skilled labor with broad specialization and a new criterion of creativity included within qualifications). Within the certain historical framework these indicators, combined onto the entire scheme, produce the criteria to distinct different types of socio-economic development and arrange them in consistent order. The analysis of occupational structure of Russian population shows that the reforms of 1990s have facilitated the process of deindustrialization alongside with the growth of semi- and low-skilled jobs. According to the scheme, Russia seems to have reached the stage of the development that is similar to one of the 1950–1960s in the USA and the Europe.
    Keywords: Occupational structure; Socio-economic development; Knowledge based economy; Industrialization;Labour potential; Modernization; Russia
    JEL: J21 O14 P20
    Date: 2013–02–24
  5. By: Rosa Branca Esteves (Universidade do Minho - NIPE)
    Abstract: This paper is a first step in investigating the competitive and welfare effects of behaviourbased price discrimination (BBPD) in markets where firms have information to employ retention strategies as an attempt to raise barriers to switching. We focus on retention activity in the form of a discount offered to a consumer expressing an intention to switch. When save activity is allowed forward looking firms anticipate the effect of first period market share on second period profits and so they price more aggressively in the first-period. Thus, first period equilibrium price with BBPD and save activity is below its non-discrimination counterpart. This contrasts with first period price above the non-discrimination level if BBPD is used and save activity is forbidden. Regarding second period prices, retention discounts increase the price offered to those consumers who do not signal am intention to switch. The reverse happens to those consumer who decide to switch after being exposed to retention offers. As in other models where consumers have stable exogenous brand preferences, the instrument of behaviour based price discrimination is bad for profits and welfare but good for consumers. However, BBPD with the additional tool of retention activity boosts consumer surplus and overall welfare but decreases industry profit.
    Date: 2013
  6. By: Tanja Artiga González; Markus Schmid; David Yermack
    Abstract: We study financial reporting and corporate governance in 216 U.S. companies accused of price fixing by antitrust authorities. We document a range of strategies used by these firms when reporting financial results, including frequent earnings smoothing, segment reclassification, and restatements. In corporate governance, cartel firms favor outside directors who are likely to be inattentive monitors due to their status as foreign or “busy.” When directors resign, they are often not replaced, and new auditors are rarely engaged. Cartel managers exercise their stock options faster than managers of other firms. While our results are based only upon firms engaged in price fixing, we expect that they should apply generally to all companies in which managers seek to conceal poor performance or personal wrongdoing.
    JEL: D43 G34 L40
    Date: 2013–03
  7. By: Osman Aydogus (Department of Economics, Ege University); Cagacan Deger (Department of Economics, Ege University); Elif Tunali Caliskan (Department of Economics, Ege University); Gülcin Gürel (Department of Economics, Ege University)
    Abstract: Input-output (I-O) tables provide a snapshot of an economy, with details on i) intersectoral exchange of intermediate inputs, ii) components of final demand for sectoral outputs, and iii) components of sectoral value added and production. The tables are generally prepared by national statistics institutes at a national level. Even though their policy and academic value are not refuted, regional tables and regional models are seldom produced. This paper presents a 36 sector regional I-O table, the 2008 IZKA (Izmir Kalkinma Ajansi, Izmir Development Agency) Izmir Table, and a model for the Izmir province of Turkey. Table construction process requires an update of the available Turkish national table. The update of the national table and the construction of the regional model are detailed. A structural analysis of the Izmir province is performed through the constructed table.
    Keywords: Input-output models, planning policy, regional economics
    JEL: C67 C81 O21 R11 R15 R58
    Date: 2013–02
  8. By: María Errea (Departamento de Economía-UPNA); Juan M. Cabasés (Departamento de Economía-UPNA)
    Abstract: The decision to donate blood and living organs is considered voluntary and altruistic. However, the shortage of donors has opened an interesting debate in recent years, considering offering economic incentives to donors. This paper analyzes theoretically and empirically, the effects of incentives over individuals when facing the decision of becoming donors. Results show that crowding-in of blood donors would be more likely by offering "Information concerning blood donations" or "Blood Tests". In both, blood and living organ donations, "Money" would be very likely to crowd-out individuals from donating. Concerning living organs, we do not find good evidence for crowding-in. We conclude donation policies, properly designed, could help to increase the number of donors, and more specifically suggest implementing non-monetary incentives.
    Keywords: social preferences, incentives, altruism, blood and living organ donations
    Date: 2013
  9. By: Ballinger, Clint
    Abstract: MODERN MONETARY THEORY (MMT) notes correctly that money is a creature of the state, and that important macroeconomic and policy conclusions follow from this understanding, e.g., sovereign states are not revenue constrained and spending is primarily limited by inflation. Taxes give value to state money and maintain its value (i.e., inflation can be controlled through taxes). One (among many) key policy insight is that a job guarantee is possible. A job guarantee not only achieves what many think should for myriad social reasons be a primary goal of macroeconomics but also further creates a buffer stock (the most useful one of any imaginable given the social reasons just mentioned) that achieves an additional primary macroeconomic policy goal – stability. However, there is no state that operates under a pure state system of money. Most of what serves as money in most banking systems in the world is privately created credit money. We can compare the current most common banking system with a pure state system of money:
    Keywords: The chicago plan, Full Reserve Banking, Modern Monetary Theory, 100% reserves, Alfred Mitchell-Innes, Austrian economics, Bagehot, bank reform, banking crisis, chartalism, chartalist, Circuit theory, credit money, endogenous money, financial crisis, Fractional Reserves, Georg Friedrich Knapp, Limited Purpose Banking, Lombard Street, MCT, Misesean banking, mmt, modern monetary theory, narrow banking, neo-chartalism, circuitisme
    JEL: A1 A10 E0 E00 G1 G2 G21
    Date: 2013–03

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