SSRN Author: Martin F. HellwigMartin F. Hellwig SSRN Content
https://www.ssrn.com/author=282332
https://www.ssrn.com/rss/en-usFri, 15 Oct 2021 01:09:07 GMTeditor@ssrn.com (Editor)Fri, 15 Oct 2021 01:09:07 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0New: Public-Good Provision with Macro Uncertainty about Preferences: Efficiency, Budget Balance, and RobustnessThe paper studies efficient public-good provision in a model with private values whose distribution depends on a macro shock; conditionally on this shock, values are independent and identically distributed. A generalization of the Bayesian mechanism of d’Aspremont and Gérard-Varet is shown to implement an efficient provision rule with budget balance. However, first-best implementation and budget balance are incompatible with a requirement of weak robustness whereby incentive compatibility of the mechanism is independent of the stochastic specification within the class of specifications defined by the structure of the model. Budget imbalances with robust implementation are small if there are many participants, as surplus from the Clarke-Groves mechanism converges to zero in probability when the number of participants becomes large. In the limit, with a continuum of agents, a first-best provision rule with equal cost sharing is robustly incentive-compatible. In this limit, information ...
https://www.ssrn.com/abstract=3941832
https://www.ssrn.com/2068312.htmlThu, 14 Oct 2021 16:22:09 GMTNew: Social Choice in Large Populations with Single-Peaked PreferencesAn anonymous social choice function for a large atomless population maps cross-section distributions of preferences into outcomes. Because any one individual is too insignificant to affect these distributions, every anonymous social choice function is individually strategy-proof. However, not every anonymous social choice function is group strategy-proof. If the set of outcomes is linearly ordered and participants have single-peaked preferences, an anonymous social choice function is group strategy-proof if and only if it can be implemented by a mechanism involving binary votes between neighbouring outcomes with nondecreasing thresholds for “moving higher up”. Such a mechanism can be interpreted as a version of Moulin’s (1980) generalized median-voter mechanism for a large population.
https://www.ssrn.com/abstract=3941828
https://www.ssrn.com/2068310.htmlThu, 14 Oct 2021 16:14:00 GMTNew: 'Capitalism: What Has Gone Wrong?' Who Went Wrong? Capitalism? The Market Economy? Governments? 'Neoliberal' Economics?The paper contributes to a symposium of the Oxford Review of Economic Policy on “Capitalism: What has Gone Wrong, What Needs to Change, and How can it be Fixed?”. The analysis starts from the observation that, in the United States, the United Kingdom and continental Europe, widespread discontent has become an important political force. I attribute this discontent to a sense on unfairness in developments of the past few decades. I relate this sense of unfairness to: (i) negative effects of structural change, including joblessness and regional decline, (ii) the observation of extraordinary growth in executive remuneration and financial-sector remuneration, coupled with government bailouts in the global financial crisis, and (iii) changes in public policy and public discourse, with a retrenchment of public services and public investment, except for bailouts and a focus on “efficiency”, the meaning of which is driven by the perceptions of corporate executives rather than standard welfare ...
https://www.ssrn.com/abstract=3903244
https://www.ssrn.com/2050738.htmlFri, 13 Aug 2021 16:01:22 GMTREVISION: Dynamic Inefficiency and Fiscal Interventions in an Economy with Land and Transaction CostsIn the discussion whether real interest rates smaller than real growth rates can be taken as evidence of dynamic inefficiency that calls for fiscal interventions, a seemingly killing objection points to land, a non-produced durable asset in positive supply, as a reason why dynamic inefficiency can be ruled out. If real interest rates were expected to be below real growth rates forever, the value of land would be unbounded, which is incompatible with equilibrium. The paper shows that this objection is not robust to the presence of an arbitrarily small per-unit-of-value transaction cost. The paper also specifies fiscal interventions that provide for Pareto improvements even though they involve a resource cost. For the debate about public debt policy, the land argument is a red herring because it is incompatible with the presence of fiat money and debt denominated in units of fiat money.<br>
https://www.ssrn.com/abstract=3553843
https://www.ssrn.com/2025777.htmlTue, 18 May 2021 08:47:21 GMTREVISION: Safe Assets, Risky Assets, and Dynamic Inefficiency in Overlapping-Generations EconomiesThe paper gives conditions for dynamic inefficiency of laissez-faire allocations in an overlapping-generations model with safe and risky assets. If the rate of population growth is certain, the conditions given depend only on how the rate of return on safe assets compares to the growth rate. If no safe assets are held, the implicit relative price for non-contingent intertemporal exchanges takes the place of the safe rate of return. Returns on risky assets do not enter the comparison. The conclusion holds regardless of whether welfare assessments are made from an interim perspective, taking account of the information that people have, or from an ex ante perspective. If a laissez-faire allocation is dynamically inefficient, a Pareto improvement can be implemented by a suitable fiscal policy intervention, which includes specific taxes or subsidies that neutralize incentive effects on risky investments and the price effects they induce.
https://www.ssrn.com/abstract=3835685
https://www.ssrn.com/2023968.htmlWed, 12 May 2021 08:45:07 GMTREVISION: Safe Assets, Risky Assets, and Dynamic Inefficiency in Overlapping-Generations EconomiesThe paper gives conditions for dynamic inefficiency of laissez-faire allocations in an overlapping-generations model with safe and risky assets. If the rate of population growth is certain, the conditions given depend only on how the rate of return on safe assets compares to the growth rate. If no safe assets are held, the implicit relative price for non-contingent intertemporal exchanges takes the place of the safe rate of return. Returns on risky assets do not enter the comparison. The conclusion holds regardless of whether welfare assessments are made from an interim perspective, taking account of the information that people have, or from an ex ante perspective. If a laissez-faire allocation is dynamically inefficient, a Pareto improvement can be implemented by a suitable fiscal policy intervention, which includes specific taxes or subsidies that neutralize incentive effects on risky investments and the price effects they induce.
https://www.ssrn.com/abstract=3835685
https://www.ssrn.com/2019844.htmlFri, 30 Apr 2021 11:28:51 GMTREVISION: Incomplete-Information Games in Large Populations with AnonymityThe paper provides theoretical foundations for models of strategic interdependence under uncertainty that have a continuum of agents and a decomposition of uncertainty into a macro component and an agent-specific micro component, with a law of large numbers for the latter. This macro-micro decomposition of uncertainty is implied by a condition of exchangeability of agents' types, which holds at the level of the prior if and only if it also holds at the level of agents' beliefs, i.e., posteriors. Under an additional condition of anonymity in payoffs, agents' behaviours are fully determined by their macro beliefs about the cross-section distribution of types and other macro variables and about the cross-section distribution of other agents' strategies. Any probability distribution over cross-section distributions of types and other macro variables is compatible with a fully specified belief system, but not every macro belief function is compatible with a common prior. The paper gives ...
https://www.ssrn.com/abstract=3676323
https://www.ssrn.com/2001113.htmlThu, 11 Mar 2021 09:50:38 GMTREVISION: Incomplete-Information Games in Large Populations with AnonymityThe paper provides theoretical foundations for models of strategic interdependence under uncertainty that have a continuum of agents and a decomposition of uncertainty into a macro component and an agent-specific micro component, with a law of large numbers for the latter. This macro-micro decomposition of uncertainty is implied by a condition of exchangeability of agents' types, which holds at the level of the prior if and only if it also holds at the level of agents' beliefs, i.e., posteriors. Under an additional condition of anonymity in payoffs, agents' behaviours are fully determined by their macro beliefs about the cross-section distribution of types and other macro variables and about the cross-section distribution of other agents' strategies. Any probability distribution over cross-section distributions of types and other macro variables is compatible with a fully specified belief system, but not every macro belief function is compatible with a common prior. The paper gives ...
https://www.ssrn.com/abstract=3676323
https://www.ssrn.com/1984925.htmlWed, 27 Jan 2021 12:04:19 GMTREVISION: Dynamic Inefficiency and Fiscal Interventions in an Economy with Land and Transaction CostsIn the discussion whether real interest rates smaller than real growth rates can be taken as evidence of dynamic inefficiency that calls for fiscal interventions, a seemingly killing objection points to land, a non-produced durable asset in positive supply, as a reason why dynamic inefficiency can be ruled out. If real interest rates were expected to be below real growth rates forever, the value of land would be unbounded, which is incompatible with equilibrium. The paper shows that this objection is not robust to the presence of an arbitrarily small per-unit-of-value transaction cost. The paper also specifies fiscal interventions that provide for Pareto improvements even though they involve a resource cost. For the debate about public debt policy, the land argument is a red herring because it is incompatible with the presence of fiat money and debt denominated in units of fiat money.<br>
https://www.ssrn.com/abstract=3553843
https://www.ssrn.com/1983225.htmlFri, 22 Jan 2021 09:42:18 GMTREVISION: Probability Measures on Product Spaces with Uniform MetricsFor a countable product of complete separable metric spaces, with a topology induced by a uniform metric, the σ-algebra generated by the open balls, which was introduced by Dudley (1966), coincides with the product σ-algebra. Any probability measure on the product space with this σ-algebra is quasi-separable in the sense that, for any union of open balls that has full measure, there is a countable sub-union that also has full measure. With suitably adapted definitions, the topology of weak convergence on the space of such measures is equivalent to the topology induced by the Prohorov metric. The projection mapping from such measures to sequences of measures on the first l factors, l = 1; 2; ...; is a homeomorphism if the range of this mapping is also given a uniform metric. These findings are relevant for the theory of games of incomplete information, where a topology on the space of belief hierarchies that is based on a uniform metric has been proposed as being more appropriate for ...
https://www.ssrn.com/abstract=2962868
https://www.ssrn.com/1980315.htmlWed, 13 Jan 2021 10:37:20 GMTREVISION: A Homeomorphism Theorem for the Universal Type Space with the Uniform TopologyThe paper shows that there is no tension between the Mertens-Zamir (1985) program of constructing a "bottom up" foundation for the type space model of Harsanyi (1967/68) and the requirement that the topology on the universal type space reect the continuity properties of strategic behaviour as embodied in the uniform topologies that Dekel et al. (2006) and Chen et al. (2010, 2017) proposed in order to take account of the fact that beliefs of arbitrarily high orders in agents' belief hierarchies can have a significant impact on strategic behaviour. With these topologies, as in Mertens and Zamir (1985), the universal type space is homeomorphic to the space of probability measures (beliefs) over exogenous data and other agents' belief hierarchies. The canonical mapping from abstract type spaces with continuous belief functions to the universal type space with the uniform topology is an embedding if the range of belief functions has the topology of convergence in total variation.
https://www.ssrn.com/abstract=2871310
https://www.ssrn.com/1980314.htmlWed, 13 Jan 2021 10:37:09 GMTREVISION: A Homeomorphism Theorem for the Universal Type Space with the Uniform TopologyThe paper shows that there is no tension between the Mertens-Zamir (1985) program of constructing a "bottom up" foundation for the type space model of Harsanyi (1967/68) and the requirement that the topology on the universal type space reect the continuity properties of strategic behaviour as embodied in the uniform topologies that Dekel et al. (2006) and Chen et al. (2010, 2017) proposed in order to take account of the fact that beliefs of arbitrarily high orders in agents' belief hierarchies can have a significant impact on strategic behaviour. With these topologies, as in Mertens and Zamir (1985), the universal type space is homeomorphic to the space of probability measures (beliefs) over exogenous data and other agents' belief hierarchies. The canonical mapping from abstract type spaces with continuous belief functions to the universal type space with the uniform topology is an embedding if the range of belief functions has the topology of convergence in total variation.
https://www.ssrn.com/abstract=2871310
https://www.ssrn.com/1969659.htmlTue, 08 Dec 2020 10:22:52 GMTNew: Twelve Years after the Financial Crisis – Too-big-to-fail is still with us. Comments on the Financial Stability Board’s Consultation Report ‘Evaluation of the Effects of Too-big-to-fail Reforms’The paper contains comments made on the Financial Stability Board’s (FSB) Consultation Report concerning the success of regulatory reforms since the global financial crisis of 2007-2009. According to these comments, the FSB’s assessment of the role of equity is too narrow, being phrased in terms of bankruptcy avoidance and risk taking incentives, without attention to debt overhang creating distortions in funding choices, as well as the systemic impact of ample equity reducing deleveraging needs after losses and equity contributing to smoothing of lending and asset purchases over time. The FSB’s treatment of systemic risk pays too little attention to mutual interdependence of different parts of the system that is not well captured by linear causal relationships. Finally, the comments point out that bank resolution of systemically important institutions is still not viable, for lack of political acceptance of single-point-of-entry procedures, for lack of funding of banks in resolution ...
https://www.ssrn.com/abstract=3719062
https://www.ssrn.com/1956230.htmlWed, 28 Oct 2020 11:51:48 GMT