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ECONOMIC ISSUES

Volume 2 (1997)

Part 1, March

Please select from the titles below:

Part 2, September

Please select from the titles below:

Part 1, March

New Methods and Understanding in Economic Dynamics? An Introductory Guide to Chaos and Economics (p.1)

by J Kemp

Abstract: This paper considers the relevance of chaos theory to economics. It provides an introductory survey of the central ideas of chaos and non-linear dynamical systems at a level which is appropriate for the non-technical reader, and provides pointers to accessible reading. The failures of linear modelling are outlined, after which the major features of non-linear and chaotic dynamical systems are explained and explored. This is followed by sections discussing the implications for economic methodology and the directions of theoretical and empirical research.

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The Unitary Model of the Peasant Household: an Obituary? (p.27)

by H Akram-Lohdi

Abstract: This paper explains the logic of the new household economics (NHE) by examining its application to peasant households in contemporary developing economies. The paper begins by explaining the origins of the NHE. A typical NHE model is then developed. Next, an influential NHE model of the peasant household is presented. Finally, a critique of the NHE analysis of the peasant household is offered. The paper argues that the neoclassical NHE approach to the peasant household fails to address the issue of socially constructed norms of agency and contestation, norms which are central to any understanding of the peasant household and indeed of any household.

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Bank Credit in the EU: Long-run Independence or Integration with Germany? (p.43)

by M J Holmes

Abstract: This study examines the long-run role of Germany in the determination of bank credit in the EU. For a sample of nine EU members, the Johansen procedure is employed to test for common trends and bivariate cointegrating relationships with Germany. Long-run causality is investigated through tests which are based on the speed of adjustment towards long-run equilibrium. Long-run equilibrium relationships with Germany are identified in most cases. However, the results lend limited support to the German dominance hypothesis since credit provision appears to be more interactive in nature.

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Advertising Investment in the Brewing Industry: An Empirical Analysis (p.55)

by A J Abbott, K A Lawler and M C H Ling

Abstract: This article analyses the significance of long-run advertising investment in the UK brewing industry. The Johansen multivariate cointegration procedure is utilised to estimate a model of the demand for beer to compare the effectiveness of `main-media' and `below the line' advertising. An error correction model is estimated to depict the short-run movements to equilibrium. The empirical analysis shows that both forms of advertising have no significant impact on the total barrelage sales in the UK. One reason for this may be that advertising influences the distribution of barrelage sales between brewers rather than the total quantity of beer sold.

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The Economics of UK Agri-Environmental Policy: Present and Future Developments (p.67)

by I Fraser and N Russell

Abstract: UK agricultural policy is evolving with the development of agri-environmental legislation which aims to protect and improve the rural environment.. The growing importance of agri-environmental policy is further emphasised by its role in the 1992 MacSharry Reform of the CAP and its position in the 1995 Uruguay Round of the GATT. This paper provides a broad overview of the economics of agri-environmental policy in the UK. The reasons why agri-environmental policy exists, its form and the potential implications of the recent reforms are considered. It is suggested that the future development of policy in this area will need to take more seriously the conditions required by the GATT.

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Part 2, September

What Could the `New' Growth Theory Teach Smith or Ricardo? (p.1)

by H Kurz

Abstract: The paper contains a report of a discussion between Adam Smith and David Ricardo serving on a newly installed research evaluation committee `On the Advancement of Knowledge in Growth Economics, Paying Special Attention to the Contribution of "New" Growth Theory'. The two economists screen some of the most prominent `new' growth models and assess their original novelties. These argue that the main contribution of these models boils down to the suggestion that there is a technology producing a surrogate for what used to be called `labour'. That factor has been given new names and enters the stage as `human capital' or `knowledge'. In this way, labour is rendered an accumulable factor, generated endogenously, and thus cannot constrain economic growth via a falling rate of profit due to diminishing returns to capital as capital accumulates.

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Uncertainty in a Strong Sense: Meaning and Sources (p.21)

by D Dequech

Abstract: This paper advocates a strong, or radical, notion of uncertainty, in which knowledge due to the paucity of evidence is incomplete to an extent that makes it not completely reliable as a guide to conduct. The paper begins by examining how this notion is expressed by Keynes's epistemic approach in his A Treatise on Probability and by Davidson's emphasis on nonergodicity. Discussing the relation between epistemology and ontology, I identify some compatibility between these two approaches. Next, I discuss the Expected Utility model and some attempts to generalize it. These attempts go beyond standard EU theory but fail to face the issues of creativity and structural change. I then turn to the issue of the possible gradability of uncertainty in a strong sense. In the final part, before the conclusion, creativity and structural change are highlighted as the most relevant sources of strong uncertainty for economic analyses.

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Scientific Metaphors, Socio-economic Theory and Reductionism (p.45)

by E Khalil

Abstract: A number of economists and social theorists refrain from the use of biological metaphors in the substantive sense out of fear of reductionism. Reductionism is understood here as the explanation of properties of one phenomenon in terms of the properties of the components that make up that phenomenon. The paper shows that the fear of biological metaphors is misplaced. Firstly, it distinguishes between methodological individualism in general and biological reductionism in particular. Secondly, it is argued that even when biological metaphors are used in the substantive sense, they need not entail biological reductionism. Social scientists may rather benefit from the employment of biological metaphors insofar as they are used to reveal the unity of phenomena at hand. The exposed similarity between biological and social processes does not necessarily promote a reductionist mode of analysis.

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Convergence and Common Cycles in the European Union (p.59)

by H Bai, S Hall, D Shepherd

Abstract: An important question facing the European Union is whether the degree of economic convergence among the member states is sufficient to ensure the smooth operation of a unified monetary system. In this paper we use the common features test to identify the degree of short-run (cyclical) convergence among the larger EU countries. Our results suggest that GDP growth, exchange rates and nominal interest rates exhibit common cyclical features (represented by common serial correlation features), In contrast, we find that there are generally no common features in real interest rate movements.

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Globalisation: Myth and Reality (p.73)

by G Ietto-Gillies

Abstract: The paper takes P Hirst and G Thompson, Globalization in Question (1996) as the basis for developing some arguments on the globalization debate. Following a summary of the book, the paper focuses on three points. Firstly, the need to divorce the issue of globalism from the issue of liberalism. Secondly, the authors' thesis that very little has changed in the international scene in the last few decades is criticised. It is argued that the major changes are due to the fact that integration is now brought about by the activities of transnational companies rather then through those of uninational companies. Moreover, the paper stresses that trade and foreign direct investment are complementary and they are both controlled by the transnational companies. From this perspective, the major change is seen as due to the fact that the new integration process takes on an ownership rather than a territory configuration. Thirdly, it is claimed that a major qualitative change in the new integration process is due to the dichotomy between those actors in the economic systems that have transnational power and those that do not.

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