Natural Incentive Research Articles

Ventral tegmental area opioid mechanisms and modulation of ingestive behavior

In this paper we report on the effects of intra-VTA infusion of opioid agonists on rat ingestive behavior in a variety of experimental contexts. When the animals were tested outside of their home cages surrounded only by food-pellets (Experiment 1), the injection of the mu-opioid agonist DAMGO, but not the kappa-opioid agonist U-50,488H, into the ventral tegmental area facilitated food-related behaviors, decreasing the latency to feed and increasing the number of interactions with food. When, as in Experiment 2, gnawable objects and a drinking tube were also available, intra-VTA DAMGO gnawing and drinking behaviors, whereas the effects on feeding were negligible. These effects intra-VTA DAMGO increased were greatly enhanced in rats that underwent repeated treatments with amphetamine. On the other hand, when food-related behaviors were studied in a home-cage, where access to the food supply was achieved by entry into a tunnel, latency to feed and total food-intake were not enhanced in tests made during either the dark or the light phase (Experiment 3 and 4). This was true whether powdered standard lab chow or a highly palatable food was available. It appears that when a number of alternative incentive stimuli are available, increases in dopamine transmission such as that induced by intra-VTA DAMGO may ultimately have the effect of interfering with behavior normally directed primarily to one of these stimuli, by enhancing the salience of others. These effects bears some resemblance to the effects of tail-pinch and electrical brain stimulation of the medial forebrain bundle-lateral hypothalamic area on the responses to natural incentive stimuli.

Elections and aggregation: Interpreting econometric analyses of local governments

This paper analyzes the provision of local government service under the assumption that fiscal policy is set by local officials in order to maximize the expected number of votes in the next election. The model includes both the widely-used median voter model and the “average voter” model as special cases. Further, it is a convenient framework for empirical analyses. Numerical simulations indicate that the vote-maximization model is capable of producing levels of government spending either greater or less than those predicted by the median voter model, while exhibiting similar responses to changes in incomes, grants, prices, etc.. Thus, the model captures the advantages of the median voter model without its objectionable features. Many avenues for further work remain, I will mention briefly only a few of the most obvious. The first is to make housing prices endogenously determined within the model. In this way, one could examine the role of both fiscal incentives (capitalization) and political incentives (votes) in the determination of optimal policies. A second extension is to introduce explicitly the possibility of a mobile population and examine, in the spirit of Tiebout (1956), the effects of “voting with your feet” within the vote-maximization framework. The possibilities include both setting policies that de facto concede exit of some fraction of the current residents and/or setting policies to attract new residents with particular characteristics. Another extension is to look at decisions over time. Despite widespread agreement upon the usefulness of the life-cycle model of private consumption, the median voter is essentially static. It seems a minimal extension to include both government and private consumption in an intertemporal framework. Unfortunately, the median voter may change over time, making implementation of the median voter model problematic at best. In practice, intertemporal issues are important, emphasizing the absence of an acceptable framework. It is often suggested that elected officials will choose inappropriate intertemporal fiscal policies in response to the short-run focus of the electoral process. For example, it appears plausible that officials will borrow in order to finance higher levels of spending (and/or lower taxes) in the present. Because future residents are not present to vote against these policies, the electoral process produces incorrect incentives. In the same way, this line of reasoning suggests that officials will undertake too little infrastructure investments because the benefits accrue to future residents. One countervailing force is the effects of property capitalization. To the extent that the local housing market correctly capitalizes future taxes and services into housing values, current residents will be affected by inefficient policies and may use the electoral process to provide correct signals to officials. There is another possibility as well. To the extent that current officials recognize that inefficient current policies reduce the probability of future re-election, they have an incentive — even in the absence of perfect capitalization — to adopt intertemporally appropriate tax and spending policies. Intuitively, the official must care about re-election. What if the particular individual chooses not to run for office again? Then, to the extent that political parties or machines cause the individual to value the election of his successor; i.e., to the extent that political “legacies” are important, the adopted policies may satisfy the conditions for intertemporal efficiency. The vote-maximization approach provides a framework in which to analyze these issues. Lastly, one could extend the model to situations in which officials care not only about election, but also about the policies themselves. This provides not only a different tradeoff between the tastes of the public and private sector, but also a natural incentive for officials to seek re-election.

Experiences on Demand-Side-Management Options of Small- and Medium-Scale Industries in Finland

Due to the diversified rate structure, many of the small- and medium- scale industrial consumers have a natural incentive for different Demand-Side-Management (DSM) measures in Finland. The field research work, which lasted for over two years and was aimed to study these options in practice, revealed that each customer forms a unique case for which individual solutions must be found in order to level the electric load and to reduce energy costs. Peak clipping by solely controlling customers’ own loads seldom yields substantial benefits. In some cases the modification of customers’ own power-generating engines for peak clipping, which initially have been purchased for other purposes, such as emergency or stand-by aggregates, can come into question. However, many practical details restrict the applicability of these solutions. Investments for sophisticated, computer-based load control devices are justified in cases where other monitoring- and management functions besides DSM can be implemented in the system. In the future a closer co-operation between the customer and the distributing utility can enhance the benefits of the current DSM options.

THE INVESTMENT DECISION OF THE FIRM UNDER UNCERTAINTY AND THE ALLOCATIVE EFFICIENCY OF CAPITAL MARKETS*

FISHER (9) DEMONSTRATED that in a perfect capital market under certainty the optimal investment decision is to maximize the market value net of input. Value maximizing decisions are unanamimously preferred by the owners of the firm and imply a Pareto optimal allocation of resources. Debreu (3) and Arrow (1) generalized Fisher's results to complete and perfect markets under uncertainty. Sharpe (24), Lintner (16), Mossin (19) and Fama (7) developed the capital asset pricing model, and investment criteria for value maximizing firms in capital markets satisfying the assumptions of the capital asset pricing model were derived by Lintner (16), Tuttle and Litzenberger (26), Mossin (20) and Hamada (10). Recently, however, the optimality of value maximizing decisions outside perfect and complete markets, that is, outside the worlds of Fisher, Debreu and Arrow, has been questioned in a number of papers, including Stiglitz (25), Jensen and Long (12), Fama (8), Wilson (29), Ekern (5), Ekern and Wilson (6), Leland (14), and King (13). They argue that value maximizing decisions are not Pareto optimal. Furthermore it is argued that value maximizing decisions are not preferred by the owners of the firm. Instead there exist decisions different from value maximization that are unanimously preferred by all owners of the firm. In addition there are natural incentives for management to make the decisions unanimously preferred. This paper is addressed the question of whether value maximizing decisions are optimal decisions or whether there exist decisions different from value maximization that are unanimously preferred. Though many different explanations are provided for the purported non-optimality of value maximizing decisions' it is our