Traditional Economic Theory Research Articles

Money as a Tool for Collective Action

Complementary currencies are usually seen as a by-product of collective movements for social change or as an institutional tool for local development: they are an outcome of collective action, not the origin of collective mobilisation. Empirical research on the Sardex complementary currency, though, suggests that money may support the emergence of collective action. Traditional economic theory considers any collective benefits provided by the economic system as the secondary effects of individual entrepreneurs seeking to maximise their profits. Entrepreneurs belonging to the Sardex network, though, do associate the use of the Sardex currency with direct collective benefits. This means they consider their business activities to be a form of collective action for promoting the common good of Sardinia's socio-economic development. Using the Sardex currency sets this collective action in motion: some Sardex members also work to expand the Sardex network without any expectation of economic gain.

Urban Externalities and Human Well-Being

Abstract: The existence of externalities in fact makes it impossible to measure social costs and social well-being by market means. The solution of many urban problems demands an integrated approach. Urban economy is crucial domain where externalities disrupt efficiency and make it difficult reach prompt decisions. It is essential to pay attention to the function of a city and its spatial organization. Traditional economic theory fails to consider the externalities arising from the interaction of three city spheres: economic, ecological and social. The choice between environmental and social well-being is a very acute issue. The access to high-paying jobs and the availability of social benefits is associated in Russia with living or moving to cities or regions with an unfavorable environment. Authors have tried to find an efficient city size (in terms of population) for 114 Russian towns considering all three spheres and demonstrated how to achieve an efficient city size by means of ecological regulation and changes in city area.

Behavioural Economics for Investor Protection- Practical Recommendations for Investors, Entities and Regulators

Since its beginning, traditional economic theory has addressed how people make their investment, saving and spending decisions. It is also based on the assumptions that people know what they want, use the available information to achieve their objectives and fully understand the risks and rewards of their financial decisions. In recent years, however, numerous discoveries from disciplines such as psychology, neurology or neurophysiology about how the human brain works have revealed that this is not the case. People often do not know what their preferences are, misuse available information and do not adequately understand the risks they take on. Behavioural economics addresses this issue – real human behaviour in the real world – to develop more precise and practical economic models than those provided by neoclassical economic theory. Behavioural economics takes into account those subtle and not-so-subtle factors that underlie financial decisions. This discipline is an attempt to analyse the patterns and biases of people’s behaviour and use these as a base to predict behavioural models. Research conducted in the area of behavioural economics shows that most of these patterns or biases are predictable. These findings open up new possibilities for a better understanding of investor behaviour and, therefore, supplement the existing regulation for their protection. This aim of this working document is to present a series of proposals addressed to investors, entities and regulators that facilitate the practical application of the central premises of this discipline to investor protection. The fundamentals of behavioural economics will be discussed, followed by an analysis of its role in investor protection, and lastly, the main fields of practical application of the discipline in this area.

Spatial evolution of industries modelled by cellular automata

Traditional economic theories often neglect evolutionary aspects and thus offer sterile answers to essential questions grounded in economic reality, such as the dependence of industrial structure on technological progress, evolution of the cooperation/competition within or among industries, or evolutionary stability of cooperation networks. We present a conceptual model of industrial evolution based on agent-based modelling and cellular automata. In evolutionary simulation, the least fitted firms are repeatedly forced to adapt to the changing environment by partial mutations of their profiles. Following self-organised criticality, even a small change in an industrial profile can cause massive waves of firm restructuring causing new spatial patterns. In the long term, new industrial profiles emerge, and firms become self-organised in spatial clusters evolving towards Zipf’s rank-size distribution. The proposed model is able to appropriately explain the long-term evolution of industrial economic structures in both time and space.

Rational Irrationality: A Two Stage Decision Making Model

This paper proposes a mathematical two-stage decision making model based on dual-decision models from behavioral economics that includes, in addition to cognitive and affective systems, an individualistic human factor and a stochastic shock. The model provides a new vision of the decision-making process and the impact of individualism. In the first stage, the agent´s initial willingness to choose is obtained following traditional economic theory but including an individual human factor, which is composed by the learning process, free will, and other human factors. This allows us to explain the reason why sometimes people are inclined to choose options that seem to be irrational decisions from the view of traditional economics logic. In the second stage, the model explains how the cognitive and affective systems and the influence of a stochastic shock affect the initial willingness to choose, obtained in the first stage. The shock might be produced by those negative and/or positive feelings and information not known or considered previously that allows the individual arrive to the final decision. Finally, our model demonstrates that the individual human factor and the stochastic shock are fundamental elements that define the rational irrationality when traditional economic theory fails to explain individuals´ choices.

자산가격 변화가 경제적 불평등과 대외경제 변수에 미치는 영향 분석 (Analysis of the Effects of Asset Price Changes on Economic Inequality and External Economic Variables)

자산가격 변화가 경제적 불평등과 대외경제 변수에 미치는 영향 분석 (Analysis of the Effects of Asset Price Changes on Economic Inequality and External Economic Variables)

Management of enterprise economic security: sinergistical approach

One of main problems of modern society there is complex safety of the difficult systems of different nature. Today the problems of creation of the difficult nonlinear dynamic reliable systems go out on the first plan. It stipulates exceptional theoretical and practical meaningfulness of the use of methods of synergetics in a management the systems. An improvement of the existent theoretical and methodological going is near organization of control system by economic security of enterprise from position of sinergistical approach. An increase of multi-variant approach of development of the economic systems is reason of change of methodology of economic researches and a nonlinear economic theory comes on changing to the traditional economic theory. Invariants, non-linearity, coherentness and factorable synthesis, are the base concepts of sinergistical theory of management. Any socio-economic system presents by a soba complex of functional subsystems, that is bound by inter se the processes of intensive dynamic cooperation, exchange information. Application of synergetics showed in researches of economy, that most cases have an evolution direction of that through nonlinear character of connections in the system is determined by the action of insignificant factors basic direction of motion of the socio-economic systems, as a rule, informative, that prove in bifurcational processes. The condition of development and viability of any enterprise are maintenances of dynamic equilibrium, that are the aim of the system of economic security of enterprise — it’s attractor. By principles of management of enterprise economic security from positions sinergistical approaches are: complication, non-linearity, dynamic. The system of economic security of enterprise is base on principle of feed-back. Leaning on sinergistical approach, set forth raising of sinergistical synthesis of nonlinear control system by economic security. Exactly sinergistical effects that are characterized as management results in the systems cause the change of quality, and are the adequate instrument of providing of economic security.

The Inefficiency of the Neoclassical Paradigm in the Promotion of Subjective Well-Being and Socioeconomic, and Environmental Sustainability: An Empirical Test for the Spanish Case

The recent literature developed in the field of happiness economics highlights the overvaluation of income and material prosperity as determinants of happiness, and calls into question many of the assumptions of traditional economic theory linked to “rationality” and the “non-satiety” of the consumer. This article aimed to study which factors explain individual subjective well-being, paying special attention to the role of income and the incidence of social variables and focusing on the case of Spain. As a novelty, this research introduces variables such as trust or the perception of justice, among others. Based on the analysis of the European Social Survey and through the estimation of an ordered logit, we find that, in line with the theory of happiness economics, the material aspects do not play a relevant role as explanatory of subjective well-being, unlike social aspects, such as sociability and trust in people (social capital). In addition, our results indicate that in the case of Spain, the most materialistic people are associated with a lower level of happiness. Thus, it seems that the excess of concern for material and economic issues in the pursuit of happiness undermines socioeconomic and environmental sustainability by causing the “wealth destruction effect”.

Three Scenarios of the Future of Work: Technological Unemployment, Compensation, Hollowing Out

This study compares the dominant narratives on the future of work. It shows that a paradigm shift is underway in the context of scenario analysis, as a consequence of the impetuous development of robotic and computer technologies. Near the two main traditions of thought, which respectively emphasize ‘technological unemployment’ and ‘compensation,’ a third vision of the future is emerging that examines trends and scenarios ignored by traditional economic theories. This third narrative places particular emphasis on the ‘hollowing out’ phenomenon. It states that automation will not cause the complete disappearance of work, but only of the average qualified one. In other words, in the absence of corrective interventions, the society of the future will be characterized by the presence of a minority of privileged citizens, who will be able to fully enjoy the fruits of automation, surrounded by a majority of citizens engaged in precarious and degrading jobs. This study shows that the third narrative is only relatively new. Socio-technical expectations went full circle, reviving a prognosis already present in Karl Marx’s works.

TRADE LIBERALIZATION: THEORY, PREDICTING THE CONSEQUENCES OF IMPLEMENTATION AND PRACTICAL REALITIES

TRADE LIBERALIZATION: THEORY, PREDICTING THE CONSEQUENCES OF IMPLEMENTATION AND PRACTICAL REALITIES

How Economic Globalization Changes International Investment Decisions

This paper explains the need and development of new economic models to evaluate the possible outcomes of foreign investment. I consider the importance of foreign investment to emerging economies in a global economy, the effectiveness of traditional economic theory to accurately identify and quantify non-financial factors that affect investment outcomes, and the appearance of new economic models to more accurately reflect the complexity of foreign investment.Following an extensive review of publicly available data, I find that capital flows to emerging economies is less than capital flows from developing countries, thereby producing a net loss of productive capacity. I conclude that, despite the use of new economic models, the level of global foreign investments by investor nations will continue to decline over the medium term due to a rise in anti-trade rules and regulations to retain capital and secure domestic employment within the borders of the industrialized investing nations.

Free Riding without Dead Weight Losses

Traditional economic theory assumes that dead weight loss due to free riding on public goods is inevitable. This study demonstrates that free riding without dead weight losses can theoretically exist through Bowen’s model. To this end, this study uses the consumer surplus analysis to present the conditions for free-riding that do not involve dead weight losses, as well as to demonstrate that policy choices that satisfy both the value of efficiency and equity in the supply of public goods are possible. This article formularizes the conditions under which such exceptional cases occur and examines what policy implications the presence of such conditions have in making decisions about the provision of public goods. The discussion of possibility and conditions for free-riding without dead weight losses is significant in that it suggests theoretical and policy implications for policies to raise equity as another important value, not just providing a solution to market failure.

Biophysical Economics as a New Economic Paradigm

ABSTRACTGlobal civilization is experiencing social and economic turmoil. Human are experiencing deterioration of environment and uncontrollable declines in GDP. Traditional economic theory has been continuously advancing yet seems unable to predict these crises or provide adequate public policies to address them. A biophysical version of economic theory uses mass and energy flows as well as environmental constraints to describe the delivery of goods and services. Ongoing development in biophysical economic theory may provide some new guidance. In this review paper, Authors analyze the progression of historical economic arguments, explore their assumptions and their development and compare them to the currently developing biophysical economics framework which, instead of focusing on investment, debt, and growth, focuses on sustainable energy and mass flows to deliver goods and services to civilization.

Estimating the Environmental Cost of Land Use Project

Environmental degradation is becoming a worldwide problem. However, traditional economic theory often disregards the value of environment in decision making, and the development of land use project usually ignore their damage on the land. As a result, a model needs to be proposed to calculate the cost of environment. We construct an environmental cost evaluation index system for land development projects, in order to calculate the cost of land resources loss. The land resources loss is caused by the destruction of the original land, we analyse it from the value that the land has, including land products value and ecological value. The project pollution cost is resulted from the various pollution that the projects produce after construction, we calculate the pollution treatment cost to estimate the pollution. Moreover, our model can be adjusted to the change of time easily, as we use many constants, such as prices of products and unit grain yield.

Insurance customer behavior: Lessons from behavioral economics

AbstractIn economics it has traditionally been assumed that people make all their decisions like the so‐called homo oeconomicus – that is, maximizing (expected) utility of total wealth. In recent years, economics increasingly recognized that people often exhibit behavioral patterns which are incompatible with the idea of the homo oeconomicus. The field of behavioral economics incorporates insights from the field of psychology to explain discrepancies between predictions of traditional economic theory and actual observed behavior. In this paper, we summarize a selection of well‐established behavioral patterns observed in reality and discuss their relevance for the insurance industry when it comes to better understanding and predicting customer behavior. We also explain that people are not always risk‐averse and give a brief overview over Prospect Theory (probably the most popular behavioral economics alternative to Expected Utility Theory), its shortcomings for predicting behavior over a long time horizon, and its extensions. In total, we point out that, since dealing with risks and insurance products requires complex decision making processes, a deep understanding of the impacts of behavioral factors is essential to better assess and explain costumer behavior.

호텔 상품의 선택과부화가 구매 선택 결정에 미치는 영향

The primary objective of this study was to identify whether the choice overload phenomenon exists and investigate why choice overload effect occurs and how it can be attenuated in the tourism industry field. Traditional economic and psychological theories have suggested that having more options is to beneficial to product suppliers to win competitive market environment. However, according to choice overload concept, having too many choice options can sometimes cause consumers to make 'no-choice' or increase perceived choice regret. To achieve of this study, using a scenario method, respondents were randomly assigned to one of six different questionary included scenarios(2destination types × 3choice set). The result of this study showed that having more 16 choices increased the likelihood of making no-choice. However, potential tourism consumers who have familiar with the destination were not influenced by number of choice and they prefer to choice from large assortments. Furthermore, they who have maximizer tendency perceived less choice regret in the large assortments. These findings indicate whether having both familiarity and maximizer tendency are significant predictors of choice overload effect. Based on these results, this study contribute to the academic and practical implications on tourists behavior, travel decision making, and choice overload.

Do traditional economic theories of free riding behavior explain spatial clustering of HPV vaccine uptake?

RationaleGeographic clusters of low vaccination uptake reduce the population-level efficacy of vaccination programs. However, little is known about the mechanisms that drive geographic patterns in vaccination rates. Traditional economic theory considers vaccination as a classic public good and suggests that free riding—individuals taking advantage of public goods by relying on others’ immunization behavior without contributing toward them—is a primary cause of low vaccination rates. However, behavioral economics suggests that free riding does not fully explain observed individual behavior, and the presence of both high and low clusters of vaccination rates suggest that this theory alone does not fully explain geographic patterns of vaccination.ObjectiveWe assessed geographic clustering of HPV vaccination uptake and examined the evidence for or against free riding in HPV vaccination decisions.MethodsWe analyzed HPV vaccination decisions of low-income adolescent females (N = 601) residing in urban neighborhoods in Dallas, Texas, USA during 2011–2012. Spatial econometric models were estimated to assess the relationship between neighborhood vaccination rates and individual vaccination decisions.ResultsWe found a positive and significant relationship between individual HPV vaccination choices and the average neighborhood vaccination rate at the time parents were making vaccine decisions for their adolescent daughters while controlling for neighborhood sorting and other confounders.ConclusionIndividuals were more likely to complete the HPV vaccination series when others in their neighborhood had already completed the series. We do not find evidence for free riding in HPV vaccination decisions.

How Housing Price Fluctuation Affects Resource Allocation: Evidence from China

ABSTRACT A large number of recent proofs indicate the irrationality of optimal resource allocation assumption in traditional economic growth theory, wherein resource misallocation (misallocation of capital and labor among heterogeneous enterprises) is regarded as the important reason for the difference in total factor productivity (TFP). In this article, we study resource allocation from the perspective of housing price, and measure the resource allocation efficiency of industrial enterprises in China based on industrial enterprises database covering the period of 1999–2007. We find that to some extent rising housing price has ameliorated resource allocation efficiency in China recently. We further find that rising housing price ameliorates resource allocation mainly in Central and Western areas and in labor-intensive industries.

Growth of international finance and emerging economies: Elements for an alternative approach

This paper examines the increasing cross-border flows of capital involving developing and emerging economies in the past few decades. The discussion challenges the traditional economic theories based on net capital flows and deficits in current accounts to explain international borrowing by developing countries, and on the current account imbalances approach to explain financial crises. We argue that the increasing involvement of the private sector in developing countries’ external debt and the fact that the public sector, previously reliant almost entirely on official credit, has become able to access private debt markets, reflect the increasing integration of developing countries into the global financial system, and this process has particular features. A closer look at data on gross capital flows reveals that net capital flows neither explain nor capture this global financial integration. Online Appendix JEL codes : F3, F6, G1, G3, H6

Global Value Chains and Economic Diplomacy

Economic diplomacy scholarship should pay close attention to new trends in international business. Traditional economic diplomacy theories have been built on the premise that firms predominantly go abroad to reach foreign consumers, an increasingly antiquated way of thinking. Nowadays, many firms also use international business to develop more efficient production processes, diminish supply chain risks and enhance access to foreign knowledge. We discuss how incorporating global value chain concepts into economic diplomacy frameworks leads to the development of more effective economic diplomacy strategies.