G. Galeotti* and M. Marrelli** *Universita di Perugia **Universita di Napoli 1. The economic analysis of optimal taxation has permitted considerable steps to be taken towards the understanding of a number of problems: the appropriate degree of progression, the balance between different taxes, the equity-efficiency trade-off etc .. Though at times considered as abstract and of little use in policy design, the issues it addresses are real ones and very much on the agenda of many countries. As usual in scientific debate, criticisms have contributed to the correct understanding of the theoretical problems involved and made clear that, at the present state of the art, definitive conclusions may be premature. A first well-taken criticism addresses the assumption, underlying optimal taxation models, of a competitive economy with perfect information on the part of individual agents and full market clearing. Once we leave the Arrow-Debreu world, it is no longer necessarily the case that taxes and transfers introduce distortions on otherwise efficient allocations.

Positive conceptions of healthy aging are rightly displacing negative ageist perceptions of older members of our society. Nevertheless, at some stage, most elderly citizens will require some form of assistance from other members of society. When the body or mind begins to fail, a legitimate need for intervention and care will arise. This second volume on Aging discusses this theme.

Despite abundant literature on transaction costs, there is little to no in-depth analysis regarding what the transaction is or how it works. Drawing on both Old and New Institutional Economics and on a variety of interdisciplinary sources, this monograph traces the history of the meaning of transaction in institutional economics, mapping its topicality and use over time. This manuscript treats the idea of 'transaction' as a construct with legal, competitive and political dimensions, and connects different approaches within institutional economics. The book covers the contributions of key thinkers from different schools, including (in alphabetical order) Ronald H. Coase, John R. Commons, Robert Lee Hale, Oliver Hart, Mancur Olson, Thorstein Veblen and Olver E. Williamson. This book will be of interest to advanced students and researchers of institutional economics, law and economics, and economics, and the history of economic thought.

The European Commission and its member states, along with many others, are wrestling with the problem of how to implement the scheduled liberalization of the postal sector while maintaining the universal service obligation. This book addresses some of these concerns. It is comprised of original essays chosen from among several dozen presented at the 13th Conference on Postal and Delivery Economics, which was held in Antwerp, Belgium, in June, 2005.

This book is devoted to investment decision-making under uncertainty. The book covers three basic approaches to this process: the stochastic dominance approach; the mean-variance approach; and the non-expected utility approach, focusing on prospect theory and its modified version, cumulative prospect theory. Each approach is discussed and compared. In addition, this volume examines cases in which stochastic dominance rules coincide with the mean-variance rule and considers how contradictions between these two approaches may occur.

Clear, insightful, and nondogmatic, this book gives us a new appreciation for one of our most ubiquitous institutions.

From the wild swings of the stock market to the online auctions of eBay to the unexpected twists of the world's post-Communist economies, markets have suddenly become quite visible. We now have occasion to ask, "What makes these institutions work? How important are they? How can we improve them?"

Taking us on a lively tour of a world we once took for granted, John McMillan offers examples ranging from a camel trading fair in India to the $20 million per day Aalsmeer flower market in the Netherlands to the global trade in AIDS drugs. Eschewing ideology, he shows us that markets are neither magical nor immoral. Rather, they are powerful if imperfect tools, the best we've found for improving our living standards. A New York Times Notable Book.

"You may have heard that economics is the dismal science. Not in McMillan's hands. Here economics is fun, fascinating, ... fruitful."—Peter L. Bernstein, author of Against the Gods

"There could be no better guide to the modern view of markets than McMillan's new book."—Joseph E. Stiglitz, 2001 Nobel Prize winner in Economics

"Lively [and] instructive... A colorful and authoritative look at how markets work and don't work in today's economy."—Hal R. Varian, author of Information Rules: A Strategic Guide to the Network Economy

"Required reading for anyone who wants to understand the "magic" of markets... Lucidly explained, brilliantly analyzed, and delightfully explored."—Reed E. Hundt, former chairman of the Federal Communications Commission

"McMillan's rich knowledge of ... current economic theory and ... economies in transition is well embodied in this ... sophisticated survey."—Kenneth J. Arrow, 1972 Nobel Prize winner in Economics

"McMillan's prose resembles single malt, going down easy as it stimulates."—Kirkus Reviews

"The perfect book for the Age of Enron."—New York Times Book Review

"An illuminating refresher course in how economies really work."—Harvard Business Review

"An insightful, common-sense, jargon-free tour of all sorts of markets."—Washington Post

Growth of the electric industry Electric generating stations and the associated transmission and distribu tion systems are high ticket items as are the costs of fuel and of operating the industry. The country presently spends about $150 billion annually on electricity. It is the country's largest industry, with assets of over $400 billion (Edison Electric Institute Statistical Year book, 1985). The country's electric generating capacity and the end use of electricity grew exponentially for about 70 years, starting at the beginning of the century, with a doubling period of roughly seven years (see figurelO-1). Over much of this period electric utility planning could simply consist of laying a ruler on such a logarithmic plot. The utilities could then, know ing plant construction times, write out purchase orders. Improvements in power generating technology allowed electric rates to decline, which permitted the market to expand to accommodate the additional supply. The prospective growth was a heady vision and provided much of the stimulus for the supporters of nuclear power. An example of such extra polation made in 1971 is shown in figure 10-2 (The U. S. Energy Problem, 1971). Another forecast (Electrical Power Supply and Demand Forecasts for the United States Through 2050, 1972) projected an installed capacity of 1. 5 million MV(e) in the year 2000, of which 45 percent was to be nuclear. For the year 2050 the installed capacity would have risen to 5. 2 million MW(e), of which 88 percent was to be nuclear."

A management agency --such as a publicly or privately owned electric utility -- must, if it is to be efficient in carrying out its day-to-day tasks, have a means of monitoring its performance to assess the efficiency of its operations and the effectiveness of its planning. For example, how did the demand for electricity compare with that assumed in planning? How effective were the incentives applied to induce energy conservation by users? Such ex post analyses are essential for improving the planning process and hence for improving decisions with respect to efficiency and resource allocation. Unfortunately, it seems to be very difficult for public agencies to make such ex post evaluations an integral part of agency activities, whether the agencies are "producers," e. g. , the Corps of Engineers or the Bureau of Reclamation with respect to water resources management, or are regulatory agencies such as the Environmental Protection Agency or the Food and Drug Administration. Here and there a few ex post analyses of agency programs have been done, but rarely by the responsible agency itself. These analyses have attempted to compare the results actually achieved with the results estimated in planning, either in terms of project outputs or in terms of effectiveness of regulatory and/or economic incentives in inducing desired changes in behavior.

Our intention with this book is to extend the efficiency literature to the case of intertemporal models. We do this in steps. First, we introduce static network models which will serve as building blocks for our intertemporal budgeting models and our dynamic models. Next, we devote two chapters to productivity measurements, which we think of as comparative static models. Intertemporal budgeting models and dynamic models are taken up after that. Each chapter, except Chapter One, contains an empirical applica- tion. These applications are coauthored with colleagues and stu- dents; thanks are due to Runar Brannlund, Yijan He, Julius Hor- vath, Pontus Roos, Jerry Whittaker and S. (Lek) Yaisawarng . . We would also like to thank Dale Boisso and Kathy Hayes for gra- ciously sharing their data on Illinois municipalities with us. Two of the applications are already published, namely: "Environmental Regulation and Profitability: Applications to Swedish Pulp and Pa- per Mills," Environmental and Resource Economics 6: 23-36, 1995, (Section 2. 5) and "Productivity and Quality Changes in Swedish Pharmacies," International Journal of Production Economics 39: 137-144, 1995, (Section 3. 5). We are grateful to Kluwer Academic Publishers and Elsevier Science for kindly allowing us to reproduce these publications here. During the summer 1995 we spent a very enjoyable two months at the Center for Economic Studies (CES) at the University of Munich.

Modeling North American Economic Integration presents descriptions of the models and the central results obtained by four teams of economic modelers who analyze the impact of the North American Free Trade Agreement (NAFTA) on the economies of Canada, Mexico and the USA. Preliminary versions of these four modeling efforts were presented at a conference with the same title as the book, held in March 1991 at the Federal Reserve Bank of Minneapolis and sponsored by El Colegio de Mexico and the Institute for Empirical Macroeconomics. The book also includes a Foreword by Jaime Serra-Puche, the former Secretary of Trade and Industrial Development in Mexico and that country's chief negotiator of NAFTA, plus two essays by the editors. The first provides an overview and discussion of the results obtained by the modeling groups, and the second provides a critical survey of the sort of applied general equilibrium model employed by these groups. A final chapter discusses the results of the models in relation to the 1994-95 financial crisis in Mexico.

The standard rationality hypothesis is that behaviour can be represented as the maximization of a suitably restricted utility function. This hypothesis lies at the heart of a large body of recent work in economics, of course, but also in political science, ethics, and other major branches of the social sciences. Though this hypothesis of utility maximization deserves our continued respect, finding further refinements and developing new critiques remain areas of active research. In fact, many fundamental conceptual problems remain unsettled. Where others have been resolved, their resolutions may be too recent to have achieved widespread understanding among social scientists. Last but not least, a growing number of papers attempt to challenge the rationality hypothesis head on, at least in its more orthodox formulation. The main purpose of this Handbook is to make more widely available some recent developments in the area. Yet we are well aware that the final chapter of a handbook like this can never be written as long as the area of research remains active, as is certainly the case with utility theory. The editors originally selected a list of topics that seemed ripe enough at the time that the book was planned. Then they invited contributions from researchers whose work had come to their attention. So the list of topics and contributors is largely the editors' responsibility, although some potential con tributors did decline our invitation. Each chapter has also been refereed, and often significantly revised in the light of the referees' remarks."

The theoretical claims for eco-tariffs are rigorously analyzed within a unified framework formed of an international trade model enriched with both a domestic and a global externality. During the course of the analysis the model is modified to analyze an array of contexts for which eco-tariffs have been claimed to improve environmental quality or welfare. The circumstances and conditions are characterised under which such tariffs can be shown to improve environmental quality and social welfare, taking account of general equilibrium effects. The theoretical results are applied in a policy analysis of eco-tariffs and other trade instruments in the context of domestic and global environmental policy in order to assess the relevance of the eco-tariffs that have been subjected to the theoretical analysis. Finally, the GATT/WTO rules and regulations are presented, since to date these have banned the use of eco-tariffs. The rules and regulations are mapped against the theoretical results to show which rules ought to be changed.

This book is a substantially revised and enlarged version of the monograph General Equilibrium with Increasing Returns, published by Springer-Verlag as a Lecture Notes volume in 1996. It incorporates new topics and the most recent developments in the field. It also provides a more systematic analysis of the differences between production economies with and without convex production sets. Five out of twelve chapters are new, and most of the remaining ones have been reformulated. An outline of contents appears in chapter 1. As its predecessor, this book contains a formal and systematic exposition of the main results on the existence and efficiency of equilibrium, in production economies where production sets need not be convex. There is an explicit attempt at making of it a suitable reference both for graduate students and researchers interested in theory (not necessarily specialists in mathematical economics). With this twofold purpose in mind, the work has been written according to three key principles: (i) To provide a uhified approach to the problems involved. For that we construct a basic model that is rich enough to encompass the different models appearing throughout, and to derive all the results as coroilaries of a reduced number of general theorems. (ii) To maintain a relatively low mathematical complexity. Thus, when the estimated cost of generality exceeds the benefit of simplicity, we shall state and prove the theorems under assumptions that need not be the most general ones.

Financial Risk and Derivatives provides an excellent illustration of the links that have developed in recent years between the theory of finance on one hand and insurance economics and actuarial science on the other. Advances in contingent claims analysis and developments in the academic and practical literature dealing with the management of financial risks reflect the close relationships between insurance and innovations in finance. The book represents an overview of the present state of the art in theoretical research dealing with financial issues of significance for insurance science. It will hopefully provide an impetus to further developments in applied insurance research.

Uncertainty could be associated with wisdom, enterprise, and discovery. In ordinary speech, however, it has mostly negative connotations. There is "fear of the unknown" and "ignorance is bliss;" there are maxims to the effect that "what you don't know doesn't hurt you" (or: "bother you") in several languages. This volume suggests that we need be bothered by the excessive confidence with which scientists, particularly social scientists, present some of their conclusions and overstate their range of application. Otherwise many of the questions that should be raised about all the major uncertainties attending a particular issue routinely may continue to be thwarted or suppressed. Down playing uncertainty does not lead to more responsible or surer action, it sidetracks research agendas, and leaves the decision makers exposed to nasty surprise. This volume demonstrates that recognizing the many forms of uncertainty that enter into the development of any particular subject matter is a precondition for more responsible choice and deeper knowledge. Our purpose is to contribute to a broader appreciation of uncertainty than regularly accorded in any of the numerous disciplines represented here. The seventeenth-century French philosopher Descartes, quoted in this volume, wrote that "whoever is searching after truth must, once in his life, doubt all things; insofar as this is possible. " White areas left on maps of the world in past centuries were a much more productive challenge than marking the end of the known world with the pillars of Hercules.

Technological Infrastructure Policy provides a systematic treatment of technological infrastructure (TI) and Technological Infrastructure Policy (TIP) which are emerging fields of interest both for academic economists and for policy makers in both advanced and developing economies. The specific topics covered include: the role of TI in economic growth and development; the nature and definition of TI; TI-components; the relationships between TI and markets; salient features of TIP. Technological Infrastructure Policy reflects the distinction made between basic and advanced TI. Basic TI involves the collective absorption of foreign technology for subsequent diffusion to domestic firms. Several chapters explicitly deal with this process with an emphasis on the supply of advisory services to small and medium enterprises. Advanced TI involves precompetitive, cooperation research and development in cutting edge technologies undertaken by consortia of firms. Several examples of advanced TIP are given. The novel integration of various conceptual and practical aspects of TI and TIP is the strong point of this book.

Expected utility provides simple, testable properties of the optimum behavior that should be displayed by risk-averse individuals in risky decisions. Simultaneously, given the existence of paradoxes under the expected utility paradigm, expected utility can only be regarded as an approximation of actual behavior. A more realistic model is needed. This is particularly true when treating attitudes toward small probability events: the standard situation for insurable risks. Non-Expected Utility and Risk Management examines whether the existing results in insurance economics are robust to more general models of behavior under risk.

Changing preferencesis a phenomenonoften invoked but rarely properlyaccounted for. Throughout the history of the social sciences, researchers have come against the possibility that their subjects' preferenceswere affected by the phenomenato be explainedor by otherfactorsnot taken into accountin the explanation.Sporadically, attempts have been made to systematically investigate these in uences, but none of these seems to have had a lasting impact. Today we are still not much further with respect to preference change than we were at the middle of the last century. This anthology hopes to provide a new impulse for research into this important subject. In particular, we have chosen two routes to amplify this impulse. First, we stress the use of modellingtechniquesfamiliar from economicsand decision theory. Instead of constructing complex, all-encompassing theories of preference change, the authors of this volume start with very simple, formal accounts of some possible and hopefully plausible mechanism of preference change. Eventually, these models may nd their way into larger, empirically adequate theories, but at this stage, we think that the most importantwork lies in building structure.Secondly, we stress the importance of interdisciplinary exchange. Only by drawing together experts from different elds can the complex empirical and theoretical issues in the modelling of preference change be adequately investigated.

In the wake of the publication of Forrester's World Dynamics and Meadow's The Limits to Growth-books which in The Netherlands may have received ex cessive attention from the public at large-the Netherlands Organization for Applied Scientific Research (TNO) established a commission under the chair manship of the late Professor R. Timman. The commission received the task of trying to find a sound philosophical basis for world modelling and to stimulate the building of models that incorporated those aspects of society which are usu ally left out of mathematical models because of technical difficulties. The study that is discussed in this text was started under the auspices of the TNO commis sion. Timman died early in 1975. The commission then came under the chair manship of Professor P. de Wolff. TNO generously provided the means to acquire the computer time necessary to continue our study. We also wish to express our gratitude to the Statistical Office of the European Communities (SOEC) for their willingness to put the necessary data at our dis posal in a form suitable for computer processing. Mr. H. Krijnse Locker's expert knowledge in the field of input-output statistics has especially been of great sup port to us. We are much indebted to Professor A. P. J. Abrahamse for his interest in our work and for all the valuable comments and corrections we received from him. v vi PREFACE We are grateful to Mr. P. van Batenburg, Mr. F."

Deregulation has introduced competition into traditionally monopolistic markets, particularly telecommunications and electric utilities. This book brings together ten essays that were presented at the Center for Research in Regulated Industries at Rutgers University and funded by several regulated companies. The authors, who include young scholars as well as established and highly regarded consultants and researchers, address some of the major issues now facing network industries and regulators - deregulation, competition, stranded assets, diversification, pricing, and mergers and acquisitions.

Risk Management and the Environment: Agriculture in Perspective is a modern academic work that seeks to bring out both to the private and the policy sectors the importance of risk management in relation to the envi ronment in agriculture, as the world moves towards freer markets. Many efforts were pooled together in making this book. Three years ago, an attempt was made by one of the editors to get a project on 'Agri cultural Risk Management and Sustainabilty' (ARMAS) funded by the European Commission. Probably deeming the proposal as prematurely novel for Europe, the Commission's screening experts abandoned its evaluation. Following that experience it became apparent that the literature on the theme ought to be strengthened and emphasized through a book by a well known publishing house. The editorial team was formed relatively quickly and an invitation to known experts in the field for contributions was issued. Subsequently, Kluwer Academic Publishers, evaluated an edited volume proposal package, and final revisions were made prior to submitting the entire manuscript for publication. We are gratefully acknowledging the moral support of several individu als as well as the patience of our publishers."

Chapters in Game Theory has been written on the occasion of the 65th birthday of Stef Tijs, who can be regarded as the godfather of game theory in the Netherlands. The contributors all are indebted to Stef Tijs, as former Ph.D. students or otherwise. The book contains fourteen chapters on a wide range of subjects. Some of these can be considered surveys while other chapters present new results: most contributions can be positioned somewhere in between these categories. The topics covered include: cooperative stochastic games; noncooperative stochastic games; sequencing games; games arising form linear (semi-) infinite programming problems; network formation, costs and potential games; potentials and consistency in transferable utility games; the nucleolus and equilibrium prices; population uncertainty and equilibrium selection; cost sharing; centrality in social networks; extreme points of the core; equilibrium sets of bimatrix games; game theory and the market; and transfer procedures for nontransferable utility games. Both editors did their Ph.D with Stef Tijs, while he was affiliated with the mathematics department of the University of Nijmegen.

Provides a conceptual set of tools for how to approach environmental issues in a rigorous and thoughtful manner, based on an analysis of incentives, property rights, market failure, supply and demand constraints, and insights from behavioral economics. Easy-to-read and filled with real-world examples of the most complex environmental challenges, ""this book demonstrates that sound economic analysis and reasoning can be one of the environmental community's strongest allies.

Economic turmoil has spread throughout the western world, but terrorists and other threats to national security have not been put out of business by the Great Recession. "Economic Instruments of Security Policy" explores the critical question: does the United States and its allies still maintain effective economic tools to influence the behavior of those who seek to cause us harm? Governments have at their disposal many economic instruments to promote national security, such as sanctions, foreign aid, international trade, international finance, and laws blocking funds for international terrorism. This book examines the use of theses economic policies and addresses how best to measure their effectiveness.

The International Institute for Applied Systems Analysis (IIASA) has had risk as a research topic on its agenda right from its inception in 1972. Risk has played a - jor role in the Energy Program, with research being carried out both in-house and in cooperationwith other internationalinstitutions like the InternationalAtomic - ergy Agency (IAEA) and national research centers. Research areas were primarily the evaluationof all possible risks within one categoryof energysupply like nuclear ?ssion or fusion or fossil fuels and, even more important, the comparisonof risks of different energy-supplystrategies. Later on an independent program was started which still exists today under the name Risk and Vulnerability. There is a large amount of literature on risks to which IIASA's research programs have contributed signi?cantly over the years, and there is, of course, an abundance of published work on international negotiations, part of which is a result of the work of the Processes of International Negotiation (PIN) Program. There are, however, so far no studies on the combination of these two strands. Therefore, and as research on both topics is housed at IIASA, we are happy that our PIN Program has undertaken the dif?cult and important task of analyzing what the editors of this book have called negotiated risks.