Franco Modigliani: 1918-2003, In Memoriam
On
Entrepreneurship, Growth and Rent-Seeking: Henry George Updated
Information and the Change in the Paradigm in Economics, Part 2
The Strategic Use of Convertible Debt in "Deep Pocket" Predatory Games
Franco Modigliani: 1918-2003, In Memoriam
by Lall Ramrattan and Michael Szenberg
On September 25, 2003 the profession of economics and finance lost one of its prominent players. Born in Italy in 1918, Professor Franco Modigliani demonstrated his exceptional abilities when he enrolled in the University of Rome at the age of seventeen, two years ahead of the norm, and earned his Doctor Juris in 1939, by studying on his own. Later that year, in response to the alarming developments in Europe, Modigliani landed in the United States just days before the beginning of World War II. More…
On
Entrepreneurship, Growth and Rent-Seeking: Henry George Updated
By William
J. Baumol
Progress and Poverty, that memorable work of Henry George, leaves
us with three main messages: first, that the rent of land is an egregious
contributor to inequality; second, that rent, unlike other income sources,
can be taxed without detrimental incentive effects; and third, that this
is so because pure rent is payment for which the recipient provides no
production to society in return. These ideas continue to stir his followers
to this day, which at once raises a question. Since, as a share of the
Nation's income, the rent of land has fallen to a mere two percent, how
can anything so minuscule merit our attention, or the attention of the
designers of economic policy? More…
Information
and the Change in the Paradigm in Economics, Part 2
By Joseph
E. Stiglitz
The new
theory of the firm and the foundations of modern macro-economics:
of all the market failures, the extended periods of underutilization of
resources-especially human resources-is of the greatest moment, the consequences
of which in turn are exacerbated by capital market imperfections, which
means that even if future prospects of an unemployed individual are good,
he cannot borrow to sustain his standard of living. More…
The
Strategic Use of Convertible Debt in "Deep Pocket" Predatory
Games
By Aron A. Gottesman
A model
is developed to argue that an entrant can use noncallable convertible
debt to avoid predation in a "deep pocket" predatory game. Adverse-selection
problems force the entrant to enter the market heavily leveraged compared
to the incumbent monopolist. The model demonstrates that there exist conversion
ratios for which creditors only have incentive to convert if the entrant
is high quality. The entrant can therefore issue convertible debt to signal
quality to investors. Before production decisions are made, the creditors
convert, preventing predation. The conclusions are relevant to both the
convertible debt literature and the product market competition literature.
More…
The
Sensitivity Analysis of the FHA Technique of Housing Market Analysis:
the Effect of Ratios and Variables, and Their Perturbations on Family
and Elderly Demand Estimates.
By Lall Ramrattan and Michael Szenberg
This paper
applies the sensitivity analysis to the Federal Housing Administration's
(FHA) techniques for reviewing family and elderly housing market conditions
through the perturbations of its fundamental parameters. Models are presented
for estimating the demand on the family and the elderly housing, and empirical
illustrations for the practitioners of a housing market analysis are indicated.
We elevate the FHA technique from a descriptive level within an engineering
paradigm that did not change for over half a century to an evolutionary
statistical model. Housing market analysts will find the model a useful
supplement to their regular operations in terms of the diagnostic checks
for their estimates. More…