SOME QUALMS ABOUT THE TEST OF THE INSTITUTIONALIST HYPOTHESIS OF THE LONG-RUN BEHAVIOR OF VELOCITY

This paper expresses econometric qualms about Bordo and Jonung's [1981] analysis of long-run velocity. They did not recognize that, for U.S. and Canadian data, the log of velocity has a unit root. Hence, estimation of a log level regression may produce spurious regressions.
When Bordo and Jonung's velocity equation is reestimated in rate of change form, permanent income is significant, contrary to their earlier conclusion. Moreover, using this approach gives a stronger result for one of the institutional variables in the velocity function, in the sense that the remaining variables become more significant.     

THE PLACE OF ECONOMIC HISTORY IN THE DISCIPLINE OF ECONOMICS

Despite the dominance of the field of economic history by trained economists who use the tools of economics, the output and services of economic historians are declining in demand. The explanation advanced in this address is that economic historians have not proved their value to economics. To play an essential role in economics, we must broaden the questions we ask and concommittently devise a set of theoretical tools to provide meaningful and testable theories about the structure and performance of economies over time. This address suggests the direction that such theory should take in order to make the field an indispensable part of the discipline of economics.     

THE ECONOMIC CONSEQUENCES OF POLITICAL PHILOSOPHY

Workers' incentives to seek employment and remain employed are affected by a number of government policies. The policies themselves are in turn influenced by the political beliefs of the electorate about what working conditions and incomes should be. Using a simultaneous equations model of political climate and labor market conditions, this study shows that political liberalism may lead to decreased labor force participation and higher unemployment, particularly for women.     

THE ETHICS OF ECONOMIC INTERACTIONS IN THE NETWORK ECONOMY

The rise of the network economy brought about the strong conviction that economic interactions in the network economy could be based on cooperative, informed and transparent communication, which would counteract the negative welfare effects of unequal bargaining power, the opacity of the intentions of the parties, opportunistic behaviors, monopolies and market failures. So the contracts of the network economy nowadays do not at all remind us of agreements based on the cooperation of free, equal individuals who follow their values and self-interest, during which they take into consideration the increase of each other's well-being as well as the mutual sharing of benefits and risks. The network economy reached the limits set by the segmentation of network architecture, the restrictive regimes of copyrights, the digital privatizations of the public domains, the right holder's control over digitalized contents, the regulatory furors of the different states and international organizations, the 'private legislation' of the corporations, and so forth. The commoditization of knowledge, information and communication and the monopolies have had negative welfare effects. Of course, this in itself does not overthrow the validity of the philosophical, moral-philosophical and economic arguments brought up to support the contractual coordination of economic interactions. On the contrary: On the basis of the current setback of the development of the network economy, we could, rather, conclude that the business model, which is trying to expropriate the positive externalities of the network effect with legal and technical means, leads to a general decrease of social profit. So, not only does this model of the new economy violate rights and is also contrary to moral principles but it cannot, either, be maintained in the long run from the point of view of the market.     

ECONOMIC ACTIVITY IN THE SHADOW OF CONFLICT

Appropriation possibilities significantly alter economic fundamentals in a production and exchange economy. This is the primary lesson of our model, which combines Ricardian trade and the potential for predator/prey behavior. The model shows how conflict can be subdued by mutual gains from trade, but at a resource cost that modifies the exchange itself. On the other hand, it identifies conditions wherein appropriation incentives are so strong that specialized production and trade are precluded altogether. The model also reveals a new way to think about and measure the gains from trade. ( JEL C72, D51, D74, F10)     

THE REACTION OF EXCHANGE RATES TO ECONOMIC NEWS

This paper examines the short-run responses of spot exchange rates to several types of economic news. Survey data are used to divide economic announcements into expected and unexpected components with the latter measuring news. The results indicate that exchange rates are systematically related to unexpected money announcements after the October 1979 switch in Federal Reserve operating procedures but not before. This response does not appear to have changed, however, after the October 1982 Federal Reserve regime change. Short-run exchange rate movements are not systematically related to news on inflation or real activity.     

FIELD EXPERIMENTS ON THE ANCHORING OF ECONOMIC VALUATIONS

A pillar of behavioral research is that preferences are constructed during the process of choice. A prominent finding is that uninformative numerical “anchors” influence judgment and valuation. It remains unclear whether such processes influence market equilibria. We conduct two experiments that extend the study of anchoring to field settings. The first experiment produces evidence that some consumers' valuations can be anchored in novel situations; there is no evidence that experienced agents are influenced by anchors. The second experiment finds that anchors have only transient effects on market outcomes that converge to equilibrium predictions after a few market periods. (JEL C93, D11)     

AN ECONOMIC ANALYSIS OF THE DEMAND FOR ABORTIONS

This study uses an economic model of fertility control to estimate the demand for abortions. The results show that the fundamental law of demand holds for abortions, with the price elasticity of demand equal to –.81. Abortions are a normal good with an income elasticity of demand equal to .79. The demand for abortions is also positively related to the labor force participation of women and to being unmarried. Catholic religion, education and the poverty status of women were found to have no statistically significant impact on the demand for abortions.