Giffen Behavior

A recent article in Oceanography "Evolutionary Control of Economic Strategy in Fishes: Giffen Behaviour could be a Common Economic Strategy on the Earth?"  by Eduardo Costas, Beatriz Baselga-Cervera, Camino García-Balboa and Victoria Lopez-Rodas quotes an article that I published with Charles van Marrewijk (Giffen Goods and the Subsistence Level, History of Political Economy (1990) 22 (2), pp. 145 148). The article in Oceanography provides an unexpected link to Earth Economics

The existence of Giffen behaviour (i.e. the opposite situation to the Law of Demand in which consumers respond to a rising price of a certain good by demanding more of it) associated with poor consumers is one of the major controversies in economics. However, economists rarely consider that nothing makes sense except in light of evolution. In this paper, we prove the existence of Giffen behaviour in animals that exhibit no intelligent reasoning. Sardines feed on phytoplankton, and zooplankton. If the amount of phytoplankton is greater than zooplankton, then Sardines fit the Law of Demand, but if the amount of phytoplankton is smaller, the Sardines apparently show Giffen behaviour. Evolutionary population genetics models show that Giffen behaviour has more adaptive value than follow the Law of Demand under resource scarcity. Since overwhelming animal species live in poverty, Giffen behaviour may be the common economic strategy on the Earth.

Earth's worth

Equitable Representation in Councils: Theory and an Application to the United Nations Security Council

Matthew Gould and Matthew Rablen develop a theoretical framework for equity in council voting games (CVGs). In a CVG, a fully representative voting body delegates decision-making to a subset of the members, as describes, e.g., the United Nations Security Council (UNSC). A general framework for analysing country- and region-level equitability in councils is developed under alternate assumptions regarding preference correlation and differing ex-ante and ex-post notions of equity. Allowing for a ternary set of voting possibilities in the council, we use our framework to evaluate the equitability of the UNSC, and the claims of those who seek to reform it. 

available at http://wp.peio.me/wp-content/uploads/PEIO8/Gould,%20Rablen%2018.11.2014.pdf

Book: chapter 14

Global Heterogeneity

A recent background paper for the UN Commission for Development Planning takes up the issue of hetrogenity pointing out that whereas for the group of developing countries heterogeneity has increased global hetrogeneity is decreasing after a rise in the 1980 and 1990s. The working paper provides an alsternative measure (coefficient of variantion op per capita GDP) although for a much shorter period) for the metrics of global fragmentation applied in Chapters 13 and 14 of Earth Economics (C1 to C4 ratio and Herfindahl). The underlying data sources are identical.

Source Alonso, J. A., Cortez, A. L., & Klasen, S. (2014). LDC and other country groupings: How useful are current approaches to classify countries in a more heterogeneous developing world? CDP Background Paper No. 21 /ESA/2014/CDP/21

Exercise: compare world fragmentation 1950-2008 according to figure 13.4 in Earth Economics to the UNCDP findings. What are your observations?

World real interest rates

New and exciting information appears in a new voxeu publication on secular stagnation
Global interests on average have moved into unknown territories. This makes the concept of the liquidity trap very relevant.

Book 5.1 pp 53-4
Book 7.3 pp. 81-84

Global perspective on macroprudential policies

"Macroprudential Policies in a Global Perspective" 
CEPR Discussion Paper No. DP9875

OLIVIER JEANNE, Johns Hopkins University - Department of Economics
Email: ojeanne@jhu.edu

This paper analyzes the case for the international coordination of macroprudential policies in the context of a simple theoretical framework. Both domestic macroprudential policies and prudential capital controls have international spillovers through their impact on capital flows. The uncoordinated use of macroprudential policies may lead to a "capital war" that depresses global interest rates. International coordination of macroprudential policies is not warranted, however, unless there is unemployment in some countries. There is scope for Pareto-improving international policy coordination when one part of the world is in a liquidity trap while the rest of the world accumulates reserves for prudential reasons. 

Book: chapters 6 and 9

A nuanced view on globalisation

"The Evidence on Globalization" 
CESifo Working Paper Series No. 4708

NIKLAS POTRAFKE, CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute
Email: potrafke@ifo.de

Globalization is blamed for many socio-economic shortcomings. I discuss the consequences of globalization by surveying the empirical globalization literature. My focus is on the KOF indices of globalization (Dreher 2006a and Dreher et al. 2008a), that have been used in more than 100 studies. Early studies using the KOF index reported correlations between globalization and several outcome variables. Studies published more recently identify causal effects. The evidence shows that globalization has spurred economic growth, promoted gender equality, and improved human rights. Moreover, globalization did not erode welfare state activities, did not have any significant effect on labor market interaction and hardly influenced market deregulation. It increased however within-country income inequality. The consequences of globalization thus turn out to be overall much more favorable than often conjectured in the public discourse. 

Book: 152-154