Financial crisis, effective policy rules and bounded rationality in a New Keynesian framework

This paper extends a standard open-economy New Keynesian model to include a third-generation “balance sheet effect” which is made operational through an endogenous risk premium impacting on investment. Using rational expectations and adaptive learning solutions, the efficiency of alternative monetary policy rules is examined during a period of financial crisis. We find that the Taylor rule is the welfare superior policy, questioning the idea of an “information encompassing” inflation-forecast based rule. Under adaptive learning we find additional policy traction and less instrument variability in rules augmented with the exchange rate. All rules, however, advocate a sharp initial interest rate response to the crisis.     

Revisiting broken windows theory: A test of the mediation impact of social mechanisms on the disorder–fear relationship

PurposeBroken windows theory predicts that disorder signals a lack of neighborhood control, sparks fear of crime, and sets off a chain reaction ultimately resulting in crime. Support has been found for the disorder–fear link, but the present study argues that this link is actually intended to be indirect—perceived loss of control is what should cause fear.MethodsHierarchical linear models and structural equation models test four hypotheses regarding whether social cohesion and expectations for social control mediate the disorder–fear relationship.ResultsResults support partial mediation.ConclusionResults suggest confirmation of a portion of broken windows theory, in that disorder may inspire fear partially as a result of its detrimental impact on neighborhood cohesion and shared expectations for social control.     

A three-year comparative longitudinal study of a school-based social work family service to reduce truancy,delinquency and school exclusions

New Labour is keen to use legislation to encourage what are seen as desirable family practices, and to discourage other, less-favoured, forms. What this means in policy terms has now been codified in its 1998 Green Paper, Supporting Families . In this paper, we examine the validity of this enterprise in terms of its underlying assumptions about social behaviour and economic decision making. We argue that the government implicitly assumes a universal model of 'rational economic man' and his close relative the 'rational legal subject', whereby people take individualistic, cost-benefit type decisions about how to maximize their own personal gain. Change the financial structure of costs and benefits, and the legal structure of rights and duties, in the appropriate way and people will modify their social behaviour in the desired direction. However, recent research suggests that people do not act like rational economic man in making decisions about their moral economy. Legislation based on this assumption might then be ineffectual and the proposals in Supporting Families seem to be one example. This is what we have labelled the 'rationality mistake'. In Part I of this work, we focus on the financial proposals in the Green Paper and on the New Deal for Lone Parents in particular. We then go on to counterpose this with the results of recent empirical work on how and why people actually do make family decisions. In Part II, to be published in the next issue, we focus on chapter four of Supporting Families , on strengthening marriage, and again compare New Labour's proposals with recent empirical work.     

Market failure and stagflation: Some aspects of privatisation in Poland

The paper investigates causes of the stagflation phenomena which appeared in Poland in the period after the ‘shortageflation’, i.e. after February 1990. It is conjectured that one of the primary reasons for the appearance of the stagflation was substantial market uncertainty, which led to a market failure. The theoretical analysis is based on the Newbery-Stiglitz model of futures trading. This reveals that, in the presence of huge price variations a market is likely to fail if a substantial backwardation accompanies negative correlation between prices and quantities. The empirical evidence consists of testing market efficiency (weak and semi-strong forms) and the rational expectations hypothesis for the Polish consumption market and inflation in the period of shortageflation. It is found that the market survives the tests for weak efficiency but fails the test for semi-strong efficiency and rational expectations.     

Flexibility and uncertainty in the housing market

This paper provides one reason why the level of trading in the housing market is volatile. We show that when uncertainty is high and can be expected to be resolved in the near future, both buyers and sellers have an incentive to postpone trading until uncertainty has been resolved. In the model, agents trade in the housing market either now, when there is uncertainty concerning the future tax rule for house owners, or later, when this uncertainty has been resolved. Under the assumption of risk neutrality (and high transaction costs), we show that any rational expectations equilibrium involves all trading being postponed. When agents are risk averse, this result holds less generally; we show that it does hold when changes in the tax rule are expected not to affect the future price of houses too strongly.     

Exploring the Impact of Agricultural Price and Trade Policy Reform under Transition in Albania

Agricultural policy decision making in economies undergoing transition to market is in need of empirical tools for assessing the impact of alternative policy options. The econometric means available for such exercise, however, are limited for lack of data and structural breaks in economic behaviour. Synthetic, partial equilibrium, multi-market models offer a potential alternative. Such models have been used extensively, even in advanced economies, to offer valuable insights on the impact of alternative policy options. This paper shows the use of such a partial equilibrium, multi-market, synthetic-type model as a tool for agricultural policy analysis in a country in transition. The model is applied for Albania, a predominantly agricultural country that, after a period of centralism and autarky, aims to re-join the international economic system. The model, albeit its many limitations, offers some useful insights on the impact of alternative options available for agricultural price and trade policy.     

Neighborhood Social Ties and Shared Expectations for Informal Social Control: Do They Influence Informal Social Control Actions?

Objectives

Social disorganization states that neighborhood social ties and shared expectations for informal social control are necessary for the exercise of informal social control actions. Yet this association is largely assumed rather than empirically examined in the literature. This paper examines the relationship between neighborhood social ties, shared expectations for informal social control and actual parochial and public informal social control actions taken by residents in response to big neighborhood problems.

Methods

Using multi-level logistic regression models, we integrate Australian Bureau of Statistics census data with the Australian Community Capacity Study survey data of 1310 residents reporting 2614 significant neighborhood problems across 148 neighborhoods to examine specific informal social control actions taken by residents when faced with neighborhood problems.

Results

We do not find a relationship between shared expectations for informal social control and residents’ informal social control actions. Individual social ties, however, do lead to an increase in informal social control actions in response to ‘big’ neighborhood problems. Residents with strong ties are more likely to engage in public and parochial informal social control actions than those individuals who lack social ties. Yet individuals living in neighborhoods with high levels of social ties are only moderately more likely to engage in parochial informal social control action than those living in areas where these ties are not present. Shared expectations for informal social control are not associated with the likelihood that residents engage in informal social control actions when faced with a significant neighborhood problem.

Conclusion

Neighborhood social ties and shared expectations for informal social control are not unilaterally necessary for the exercise of informal social control actions. Our results challenge contemporary articulations of social disorganization theory that assume that the availability of neighborhood social ties or expectations for action are associated with residents actually doing something to exercise of informal social control.

     

Mental health policy for the 1990s: tinkering in the interstices

That public policy has abysmally failed the chronically mentally ill seems beyond genuine dispute. Successive reforms have foundered on the familiar shoals of overblown expectations and insufficient resources. In this paper, we review current policies affecting the chronic and disabled mentally ill, and we consider some approaches to reform. We begin by trying to identify and characterize the chronically mentally ill and their disabilities. Next, we consider the chaotic patchwork of federal and state programs that has come to replace the asylum. We then criticize several competing models of reform that we believe fail to make an empathic connection with the mentally ill. Finally, we urge a strategy of limited reform consistent with available empirical data about program effectiveness and sensitive to the likely economic, political, and legal constraints of the 1990s.     

A Selection of Empirical Socio-Economic Research with Respect to the Functioning of Legal Rules and Institutions in Belgium and the Netherlands

In this paper some studies with respect to empirical socio-economic research which has been undertaken in Belgium and the Netherlands concerning the functioning of legal rules and institutions are discussed. The paper focuses on the domains of criminal law, civil procedure, liability and insurance. The paper argues that contrary to the overwhelming economic literature on liability and insurance, the empirical results in that domain are poor. More research is undertaken in the area of criminal law and apparently it is overwhelming in the area of civil procedure. The latter studies are, however, mainly undertaken by socio-legal scholars and less by economists. The general conclusion of the empirical studies discussed seems to be that while the empirical literature on the effect of changes in the decision making environment on rational actions in the legal system is rich and provocative, there is much less empirical testing of the effects of legal rules as such on allocational outcomes. The paper argues that much more effort should be devoted to the latter issue.     

The price-wage inflationary spiral in Poland

In this paper the problem of price-wage relationship modelling in the case of a mixed economy is addressed. The empirical investigation was based on Polish annual data for the period of a centrally planned system (1964–1989) and on quarterly data for the period of transition towards a market economy (1990.1–1990.3). The traditional approach proved to be inappropriate because of the variables' nonstationarity. Identification of long-run behaviour was attempted by applying the two-step Engle-Granger's, or alternatively, Johansen's maximum likelihood (ML) procedures. The ML estimator provided better estimates of cointegration vectors and, even more important, allowed as many as three to be found. The main conclusion which can be drawn from the empirical findings is that three variables: price index, average wages and labour productivity, form a multi-dimensional equilibrium space. This property of the described phenomena needs to be taken into serious account when building macroeconometric models explaining the behaviour of the Polish economy. The existence of these three cointegration vectors is troublesome because of unusual problems of interpretation. However, if it is not as a result of misspecification and/or small sample bias, it proves that much remains to be learned about the price-wage mechanisms functioning in economies having a mixed character.     

A Theoretical Analysis of Alcohol Regulation and Drinking-Related Economic Crime

Alcohol consumption is widely believed to influence criminal activity, and numerous sociological, criminological, and psychological studies demonstrate an apparent positive correlation between drinking and crime. Using a multiattribute model of offender and victim behavior, this study examines the theoretical effects of changes in the price of alcohol on the incidence of crimes committed for economic gain. It is shown that in the general case price effects do not result in an unambiguous decrease in the rates of crime or victimization even when the models are constructed to impose a bias towards the finding of a causal negative price effect. Using a modified model of the drinking offender that imposes even further structure on the model, it is shown that the realization and magnitude of a negative equilibrium alcohol price effect will likely depend upon the implementation of complementary alcohol control policies. The implications of the theoretical analysis to policy implementation and empirical research are also considered.     

Knowledge management technology in law firms: stages of growth

A law firm can be understood as a social community specializing in the speed and efficiency of creating and transferring legal knowledge. Knowledge management was first introduced to law firms in order to help them create, share and apply knowledge more effectively: information technology (IT) might well play an important role in the success of such knowledge management initiatives. In this paper, IT support for knowledge management is linked to stages of growth, with a stages‐of‐growth model proposed that consists of four stages. The first stage addresses the end‐user tools made available to knowledge workers (people to technology), while the second involves information about who knows what (people to people). The third stage concerns the information held by knowledge workers (people to documents), with information systems actually solving knowledge problems constituting the fourth and final stage (people to systems). Stages‐of‐growth models have been widely used in both organizational research and IT management research: such models have also been criticized for their lack of empirical validity. This paper develops such a survey instrument in order to test a knowledge management technology stage model empirically.     

Clinical assessment of adult sexual offenders with learning disabilities

Abstract

Assessment and treatment of adults with learning disabilities who commit sexual offences presents a number of challenges. Much of the professional forensic and psychiatric literature on work with this group concentrates on the development of interventions based on theoretical models of sexual offending originating from the mainstream criminal justice system and have often been adapted and applied to people with learning disabilities. Currently, there is very little evidence to demonstrate the effectiveness or validity of the adaptation and application of mainstream models to this population. The efficacy of such adapted models used to describe sexual offending in people with learning disabilities clearly has an impact of any intervention informed by them. In particular, some researchers suggest that key factors such as cognitive distortions are evident in sexual offenders with learning disabilities; there is, however, no research relating to the prevalence of these or other key factors within the general population of people with learning disabilities. The present literature review highlights some of the clinical issues with a particular focus on the assessment of deviant sexual interest. Specifically, the literature is confused with inconsistencies relating to the definition of the group, the extent and nature of offending and a lack of standardized methodology for assessment and comparison. Consideration is given to the particular needs of this group and the implications for research and treatment.     

Oil prices and economic activity in Greece

The paper studies the relationship between oil prices and economic activity in Greece during the period 1982:1–2008:8. Different empirical methods are used to estimate whether oil price changes affect asymmetrically the economic activity. A regime-switching model (RS-R) and a threshold regression modeling (TA-R) are applied which have the advantage to capture the dependence structure of the series both in terms of constant and variance. The empirical evidence suggests that the degree of negative correlation between oil prices and economic activity strengths during periods of rapid oil price changes and high oil price change volatility.     

The political economy of international environmental agreements: a survey

This paper surveys the recent literature on the political economy of the formation of international environmental agreements. The survey covers theoretical modelling approaches and empirical studies including experimental work. Central to our survey is the question how the political process impacts different stages of agreement formation and stability. We distinguish the rules defined during pre-negotiations that govern negotiations, ratification and implementation. Strategic delegation and lobbying are directly relevant during the negotiation and ratification phases. Implementation, the choice of policy instruments at the national level, will also be impacted by lobbying and indirectly influence negotiations. We find that the basic theoretical framework for the analysis of international environmental agreements is largely unrelated to empirical approaches. Furthermore, we observe that models of the political process of agreement formation, like for example sequential game models, are yet to be developed.     

The sociology of the sociology of law: A view from economics

The sociology of law appears to be a weak field in the United States, in comparison to other indisciplinary fields of legal study, notably economic analysis of law. Although American legal sociologists have done important empirical work, particularly on the litigation process and on the legal profession, the focus of American sociology of law has been narrow, theoretically limited, and, empirically, limited in both scope and method. These deficiencies may reflect the methodological limitations of Max Weber, the most influential figure in the history of sociology in general and sociology of law in particular. The failure of legal sociologists to borrow theoretical and empirical tools from sociologically minded economists such as Gary Becker is especially regrettable, and may be due to inaccurate perceptions of the political valence of economic analysis of law, sociology's traditional skepticism about the knowledge claims of other disciplines, professional envy, and misunderstanding of the economists' conception of rational choice.     

Capital Punishment and Deterrence: Understanding Disparate Results

Objectives

Investigate how different model assumptions have driven the conflicting findings in the literature on the deterrence effect of capital punishment.

Methods

The deterrence effect of capital punishment is estimated across different models that reflect the following sources of model uncertainty: (1) the uncertainty about the probability model generating the aggregate murder rate equation, (2) the uncertainty about the determinants of an individual’s choice of committing a murder or not, (3) the uncertainty about state level heterogeneity, and (4) the uncertainty about the exchangeability between observations with zero murder case and those with positive murder cases.

Results

First, the estimated deterrence effects exhibit great dispersion across models. Second, a particular subset of models—linear models with constant coefficients—always predict a positive deterrence effect. All other models predict negative deterrence effects. Third, the magnitudes of the point estimates of deterrence effects differ mainly because of the choice of linear versus logistic specifications.

Conclusions

The question about the deterrence effect of capital punishment cannot be answered independently from substantive assumptions on what determines individual behavior. The need for judgment cannot be escaped in empirical work.     

Judges,Litigants, and the Design of Courts

Two important perspectives on courts highlight fundamentally different elements of adjudication and yield distinct predictions about judicial outcomes. The Attitudinal Model of judicial voting posits judge ideology as a strong predictor of court outcomes. Alternatively, the Law and Economics perspective focuses on the settlement behavior of litigants and reasons that while judges may vote ideologically, litigants adapt to these ideological proclivities, nullifying the effect of judge ideology. This analysis focuses on reconciling expectations about the effects of judge ideology and litigant strategies by examining their contingent nature and the conditioning effects of institutional design. The analysis examines state supreme courts from 1995–1998 to identify empirical evidence supporting both perspectives. While some state supreme courts have discretionary dockets allowing judges greater opportunities to exercise their ideology, others lack discretionary docket control, making dockets and outcomes largely litigant driven. Support for each perspective largely hinges on this fundamental feature of institutional design.     

基于价格影响的期货市场操纵规制理论:反思与重构

在基于价格影响的期货市场操纵规制理论中,操纵被定义为故意制造人为价格的行为。人为价格的判断依赖于替代的价格标准,即执法实践中经常采用的参照系比较方法。这种判断方法不仅证明困难,且在行政处罚听证会或法庭辩论中容易受到质疑,导致期货市场操纵问题上的监管无力。要改变此种状况,首先,在判断操纵行为是否造成人为价格时,所关注的重点应当是影响市场价格的力量和因素,而非操纵行为造成的价格是否偏离了正常供求力量下应有的价格水平。其次,应当将意图作为操纵的核心要件,运用价格影响测试的分析框架,以行为人的不正当行为和其他直接或间接证据为支撑,并辅以经济或经验分析等方法进行综合判断。最后,当行为人的操纵行为未造成或未能证明造成人为价格时,引入试图操纵进行规制。     

The world at their fingertips? The mental wellbeing of online distance-based law students

In recent years there has been an increased interest in student mental wellbeing within higher education. In terms of legal education, much of this has been focused upon the United States (US) and Australia, with a lack of United Kingdom (UK)-based empirical data available. Although there is now extensive provision of online distance learning options available to UK (and other) law students, there is a notable lack of research into the possible challenges which are specific to this form of tertiary offering. This paper seeks to contribute to the development of research in this area by reporting upon, and analysing, preliminary data gathered from an empirical study of the mental wellbeing of online distance learning law students.