An excerpt from the Press Release is below.
A copy has been lodged with the Smith Commission on Scottish finances
22 October 2014
WHAT IS THE RIGHT BUDGET CONSTRAINT FOR SCOTLAND?
An analysis by Professor Paul Hallwood (University of Connecticut) and Professor Ronald MacDonald (University of Glasgow)
Highlighted recommendations include:
- Block grants from Westminster should not be elastic in the sense that if the Scottish Parliament cannot finance its chosen spending level out of the existing block grant and own-sourced taxes, the block grant is not automatically or quickly increased.
- Any extra taxes raised by Scotland are not shared with Westminster.
- If the Scottish Parliament’s tax policy led to a smaller tax base (a shrinking economy), it should have to live with that during the extended period of non-adjustment.
- Borrowing by the Scottish Government should be regulated.
The fiscal design proposals of all the main Scottish political parties are examined against these criteria. Only those of the Scottish Liberal Democrats and Scottish Conservatives are shown to be workable.
CHOICE magazine reviewed Professor Hallwood’s Economics of the Oceans: Rights, Rents and Resource, Routledge, Oxford, 2014. It awards the book a “highly recommended” saying: “This unique study combines ecological concepts and neoclassical economic models with case studies to analyze critical problems relating to the oceans. Using the perspectives of law and economics, Hallwood (Univ. of Connecticut) provides both historical context and a discussion of how conflict resolution institutions may help solve problems pertaining to oceans. The book’s parts describe the study’s topical domain: historic wrecks, modern pirates; enclosure; fisheries economics; fisheries regime formation; marine mammals; coral reefs, marine protected areas, wetlands; pollution; and minerals. Each part includes one to four chapters. In every instance, the author couches problems in economic terms: free rider problems relate to maritime piracy; microeconomics concepts apply to resolving maritime boundaries; the Coase theorem applies to fisheries management.”
As other graduate students battle the winter snow, PhD student Sining Wang will be spending a week in January in Southern California. Sining has been selected to participate in IFREE’s Twentieth Annual Visiting Graduate Student Workshop in Experimental Economics. IFREE is the International Foundation for Research in Experimental Economics and was established in 1997 by Vernon L. Smith, a Nobel Prize winner for his pioneering research bringing experimental methods to economics. The workshop will be held at Chapman University, Vernon Smith’s academic home. In the week-long session, Sining will participate in experiments, learn about experimental results and techniques, and have a chance to present his own research to leading faculty in experimental economics.
Professor Jorge Agüero is spending this academic year at the Research Department of the Inter-American Development Bank (IDB), the leading source of development financing for Latin America and the Caribbean. Professor Agüero will be part of the visiting scholar program at IDB, a program created to address the Bank’s growing demand for knowledge to support the design of public policies and operational loans in public policy areas to prevent and reduce violence in Latin America and the Caribbean. Professor Agüero will contribute to this goal through his research on domestic violence in the region.
Research by Assistant Professor Ling Huang and her co-author, Martin Smith has been accepted for publication in the American Economic Review. The article, entitled “The Dynamic Efficiency Costs of Common-Pool Resource Exploitation” makes use of a dynamic game to understand the Common-Pool resource extraction. Natural resources management is a dynamic problem by its nature. Economists have worked on this important area for a very long time in the context of optimal control theory. However, the theoretical framework is very hard to be directly applied to empirical quantification. Based on multiple generations of research, hinged on the data availability and recent methodological development in dynamic discrete choice modeling, this paper is novel in its use of real data and a comprehensive dynamic game framework to empirically quantify the effect of the “tragedy of the commons.” It is the first paper in the fishery field published in AER after three decades.
We conduct the first empirical investigation of common-pool resource users’ dynamic and strategic behavior at the micro level using real-world data. Fishermen’s strategies in a fully dynamic game account for latent resource dynamics and other players’ actions, revealing the profit structure of the fishery. We compare the fishermen’s actual and socially optimal exploitation paths under a time-specific vessel allocation policy and find a sizable dynamic externality. Individual fishermen respond to other users by exerting effort above the optimal level early in the season. Congestion is costly instantaneously but is beneficial in the long run because it partially offsets dynamic inefficiencies.
Professor Kathy Segerson was recently appointed to the National Academy of Sciences (NAS) National Research Council (NRC) Committee to Advise the U.S. Global Change Research Program. The U.S. Global Change Research Program (USGCRP) (http://www.globalchange.gov/) was mandated by Congress in the Global Change Research Act (GCRA) of 1990 to “assist the Nation and the world to understand, assess, predict, and respond to human-induced and natural processes of global change.” Every four years it prepares the National Climate Assessment (NCA), which provides an overview of what is currently known about the impacts of climate change on the United States, now and in the future. In May 2014, the USGCRP released the third NCA (http://nca2014.globalchange.gov/). The NRC Committee provides ongoing and focused advice to the USGCRP, including formal reviews of the NCAs. It is comprised of 20 individuals from academia, government, and the private sector, with a wide range of disciplinary backgrounds, including economics, engineering, risk communication, sociology and ecology. Professor Segerson’s appointment to the Committee is for three years.
Professors Paul Hallwood and Thomas Miceli have just completed the manuscript of their book, Maritime Piracy and its Control: An Economic Analysis, which will be published by Palgrave-Macmillan. A brief synopsis follows:
Piracy is the oldest international crime, and in international law pirates are regarded as the ‘enemies of mankind’. While prevalent in the seventeenth and eighteenth centuries, piracy has not gone away. Today it primarily afflicts the waters off two continents – East and West Africa and Southeast Asian. It is a serious threat to international shipping, and it imposes high financial costs as well as costs in terms of human life and welfare. Over the last ten years 3,000 or more pirate attacks, actual or attempted, have been reported, with annual costs estimated to be in the range of $6 billion to $7 billion.
The application of economic theory to maritime piracy is a direct application of the economic theory of law enforcement, and relies on two fundamental principles: first, that pirates behave rationally in the sense that they respond to threatened sanctions in deciding whether or not to commit illegal acts, and second, that an enforcement authority (whether under the control of a single government or a coalition of governments) stands ready to enforce those sanctions. With respect to the first of these claims, there is considerable evidence that domestic offenders do in fact respond to threatened punishments. As for modern-day pirates, the huge material gain that they can earn from their criminal activity is surely an important objective, notwithstanding claims that Somali pirates are acting in response to overfishing and other unfair practices by foreign agents in Somali waters.
As to enforcement, we offer several reasons for the apparent insufficiency of enforcement efforts against maritime piracy. These include the public good nature of law enforcement in general; the high cost of detaining, prosecuting, and incarcerating pirates; and inconsistent (or in some cases non-existent) national laws against piracy. To understand why these problems have been allowed to persist, we examine the main features of international law that governs the conduct of nations, and conclude by reviewing several proposals that have been made for improving international enforcement efforts. Our hope is that the application of economic theory to maritime piracy will lead to a better understanding of the nature of the problem while improving the quality of the debate regarding alternative responses.
Professor Mike Shor has had his paper, “Reducing Choice Overload without Reducing Choices,” accepted for publication by the Review of Economics and Statistics. The paper is coauthored with Tibor Besedeš, Cary Deck, and Sudipta Sarangi, co-PIs on Professor Shor’s NIH grant that supported the research.
Previous studies have demonstrated that a multitude of options can lead to choice overload, reducing decision quality. Through controlled experiments, we examine sequential choice architectures that enable the choice set to remain large while potentially reducing the effect of choice overload. A specific tournament-style architecture achieves this goal. An alternate architecture in which subjects compare each subset of options to the most preferred option encountered thus far fails to improve performance due to the status quo bias. Subject preferences over different choice architectures are negatively correlated with performance, suggesting that providing choice over architectures might reduce the quality of decisions.
Prof. Steve Ross‘s essay with Jason Fletcher on “Minority mortgage market experiences leading up to and during the financial crisis” was published on Friday (Aug 22) in Vox: Research-based policy analysis and commentary from leading economists. In this essay, Professor Ross describes his research on the incidence of high cost loans, delinquency and foreclosure among minority borrowers. He finds large racial differences in all dimensions, but much of the racial differences in the incidence of high cost loans is explained by the identity of the lender and concentrated among lower education, potentially less financially sophisticated borrowers. On the other hand, racial differences in delinquency and foreclosure are concentrated primarily among borrowers who are faced with higher unemployment risk, rather than traditional factors related to subprime lending.
Three Department of Economics faculty members have published papers in the recently released Oxford Handbook of Land Economics, edited by Joshua Duke and Junjie Wu. The Oxford Handbook Series is a collection of specialized volumes, each containing papers from a particular area of economic research.
A chapter on “Regulatory Takings,” by Professors Thomas Miceli and Kathleen Segerson, offers a more general analysis of government actions that reduce private property values, pointing out that the difference between these partial “takings” and outright seizures of private property is largely a matter of degree. Their model offers a unified approach to the wide variety of issues associated with zoning, environmental and safety regulations, historic landmark designation, requirements to provide access for the disabled, and many other public restrictions on private land use. In addition to their economic analysis, they review key elements of the case law and legal literature on regulatory takings.
In another chapter, titled “Open Space Preservation: Direct Controls and Fiscal Incentives,” Professor Dennis Heffley and his co-author Ekaterina Gnedenko (Lecturer, Tufts University) review the economic literature on various types of land use controls, especially programs designed to protect and preserve open space. They also develop and simulate a model showing that state grants to local governments, intended to reduce local fiscal pressure to permit more development, may actually result in more land being zoned for development and a reduction in open space. An econometric analysis of fiscal data and satellite-image land use data for Connecticut towns further attests to the policy problem illustrated by the simulations