Must Milton Friedman Embrace Stakeholder Theory?

Milton Friedman famously stated that the only social responsibility of business is to increase its profits, a position now known as the shareholder model of business. Subsequently, the stakeholder model, associated with Edward Freeman, has been widely seen as a heuristically stronger theory of the responsibilities of the firm to the society in which it is situated. Friedman's position, nevertheless, has retained currency among many business thinkers. In this article, we argue that Friedman's economic writings assume an economy in which businesses operate under the protections of limited liability, which allows corporations to privatize their gains while externalizing their losses. By accepting limited liability, Friedman must also accept a view of business as embedded in social interdependency, which serves as the logical and moral foundation for corporate social responsibility (CSR). To achieve consistency with his economic principles, Friedman must either abandon limited liability or modify his doctrine on CSR and his related shareholder model of business.     

The ins and outs of unemployment and the assimilation of recent immigrants in Spain

We study the employment assimilation of the recent wave of immigration in Spain for the period 2002–2006. We differentiate the immigrants by their year of arrival in Spain. Following Shimer (Am Econ Rev 95(1):25–49, 2005) and using data from the Spanish Labor Force Survey, we calculate the job finding and the job exit rates. Throughout the period, immigrants show higher job finding and job exit rates. We also present a search and matching model with search intensity, where natives, new immigrants, and old immigrants compete in the labor market. The simulated model is able to reproduce the differences observed in their job finding and unemployment rates.     

Experientia Docet: Professionals Play Minimax in Laboratory Experiments

We study how professional players and college students play zero‐sum two‐person strategic games in a laboratory setting. We first ask professionals to play a 2 × 2 game that is formally identical to a strategic interaction situation that they face in their natural environment. Consistent with their behavior in the field, they play very close to the equilibrium of the game. In particular, (i) they equate their strategies' payoffs to the equilibrium ones and (ii) they generate sequences of choices that are serially independent. In sharp contrast, however, we find that college students play the game far from the equilibrium predictions. We then study the behavior of professional players and college students in the classic O'Neill 4 × 4 zero‐sum game, a game that none of the subjects has encountered previously, and find the same differences in the behavior of these two pools of subjects. The transfer of skills and experience from the familiar field to the unfamiliar laboratory observed for professional players is relevant to evaluate the circumstances under which behavior in a laboratory setting may be a reliable indicator of behavior in a naturally occurring setting. From a cognitive perspective, it is useful for research on recognition processes, intuition, and similarity as a basis for inductive reasoning.     

Family Trajectories and Terminations in Conditional Cash Transfer Programs: The Case of Chile's Ethical Family Wage Program

ABSTRACT

On an international scale, conditional cash transfer (CCT) programs have rapidly expanded. Since their boom in the 1990s newer modalities have emerged, incorporating some innovative components. The following study sought to examine one particular CCT program heralded as innovative due to its psychosocial and socio employment accompaniment components: Chile's Ethical Family Wage program. Utilizing administrative data from the Ministry of Social Development this exploratory study sought to examine family trajectories in the program with a particular focus on those families who were terminated from the program due to not meeting conditionalities. Findings from the study indicate that the program deviates sharply from its theoretical implementation. Furthermore, the probabilities of program termination increased in those families headed by younger adults, female and single-headed households, households with higher levels of education as well as larger families. However, a greater number of children decreased the probabilities of program termination as was homeownership. Implications of the findings for policy and practice are discussed.     

"Then Let's Have a Dialogue": Interdependence and Negotiation in a Cohesive Regulatory System

Public and private organizations deal closely with each otheron regulatory issues. Newer forms of regulation rely on sharedenforcement and supervisory responsibilities, regulatory negotiation,and other methods that try to get beyond remote public commandswhile maintaining effective public involvement. This articleexamines how regulators and firms deal with each other, theinterdependence that forms between them in the course of theirwork, and the benefits and liabilities of the strong ties thatmay develop out of this interdependence. We use the securitiesindustry as a context for discussion but indicate that the pointsapply more generally. We pay special attention to the potentialbenefits and risks of cohesive regulatory networks. Regulardealings among regulators and firms outside of regular rulemakingor enforcement proceedings enhance cooperation, reduce informationdisparities, strengthen regulatory cultures, and arguably lowerthe threshold of external pressure required to effect changeswithin firms. The conditions enhancing these benefits, however,also will restrict the flow of information, perspectives, andcriticism from outsiders, potentially leading to erosion ofperformance standards and eventually serious problems. We describethe circumstances under which these tensions are more likelyto be managed without damage from these problems and the broaderimplications for research and teaching in public managementand policy.     

Effect of an Accessibility Measure in a Model for Choice of Residential Location,Workplace, and Type of Employment

A three-level nested logit model for the choice of residential location, workplace, and type of employment is used to assess the effect of an individual-specific measure of accessibility to employments that takes into account the attractiveness of different occupations when the choice of workplace is anticipated in the decision of residential location. The model allows for variation in the preferences for types of employment across individuals and accounts for individual heterogeneity of preferences at each choice level in education, age, gender, and children. Using data from the Île-de-France region, the model shows that the individual-specific accessibility measure is an important determinant of the choice of residential location and its effect differs along the life cycle. The attractiveness of the types of employment is a better predictor of the workplace location than the usual total number of employments.     

Participation of seniors in the Argentinian labour market: An option value model*

The aim of this article is to define the factors which determine seniors' decisions to continue to participate in the labour market in Argentina. An option value model is developed. This model is used to produce estimates based on micro‐data drawn from household surveys. These indicate the relative importance of the impact of conditions governing eligibility for benefits on decisions to remain actively employed. Work history is found to be the main factor in such decisions. Inadequacy of social security benefits and accumulated human capital also create incentives for economic participation in old age. On the basis of these findings, compensatory policy adjustments, to improve coverage, increase benefit levels and improve employment conditions for seniors, are proposed.     

The Aversion to the Sequential Resolution of Uncertainty

This paper sets forth and offers an explanation for preferences for the form of the timing of resolution of uncertainty; namely for uncertainty to be resolved all at one time rather than sequentially. The explanation is based on a weakening of the independence axiom, in particular on the notion of disappointment aversion developed in Gul's (1991) axiomatic model of preferences. Implications of this aversion are discussed for issues in finance, intertemporal decision making under uncertainty, high stakes risky situations and consumer self-regulation. The analysis encourages a formulation of preferences over all attributes of interest to the decision maker, including psychological satisfaction.     

Social norms, partnerships and children

This paper presents a social norms interpretation to explain cross-country differences in partnership formation rates. Social norms are modeled as a constraint on the allocation of household labor that diminishes the gains of entering a partnership, especially for highly educated women with a higher opportunity cost of time. Results using individual level data from 7 waves of the European Community Household Panel (1995?C2001) confirm the predictions from the theory. These results are robust to controlling for country varying factors such as childcare policies and divorce rates, and are mostly driven by marriage (as opposed to cohabitation) decisions. Given that household formation is a necessary prerequisite to having children, our results potentially shed light onto the process of below replacement fertility and the economic challenges associated with it.     

Back to Basics

Nonprofits are under increased accountability pressures to demonstrate their effectiveness. Output measurement (how much is produced) is disregarded as simplistic. Emphasis is made instead on measuring outcomes (changes in the lives of beneficiaries) or impacts (effects developed relative to the mission of the nonprofit, or the overall public good), and a growing portion of organizations state that they measure these effects. However, we question the assumption that outputs such as the number of beneficiaries served are being adequately measured. We first review existing research gaps on results measurement practices and discuss the main types of obstacles to the quality and utility of evaluation data. In this context, we argue for the need to reground nonprofit evaluation in the profound knowledge available about beneficiary populations. We discuss the potential and limitations of reach, a basic output indicator that is defined as the number of individuals directly affected by a nonprofit, and explore the organizational drivers of reach measurement. Evidence from 2,229 nonprofits shows they still lack adequate data on the beneficiaries they serve, face relevant conceptual and practical hurdles when trying to identify them, and are significantly influenced by organizational factors in their capacity to track them. Our research not only shows that nonprofits fail to adequately measure outputs, but also that measuring the number of beneficiaries served and how they are served is not as straightforward as outcome and impact advocates suggest. Practitioners and funders are reminded of the need to place beneficiaries at the core of their evaluation efforts.