The paper explores the notion of freedom of choice which is of considerable importance in welfare economics and the theory of social choice. Three plausible axioms are introduced for ranking alternative opportunity sets in terms of the degrees of freedom that they offer to the agent making choices. It is shown that, under these axioms, judgements about degrees of freedom of choice have to be based on the naive principle of simply counting the number of available options.

We try to operationalise Sen’s concept of the living standard using questionnaire data on the economic situation of the Belgian unemployed. We use factor analysis to reduce the number of basic functionings and to avoid possible overlap between them. The factors obtained can be interpreted in a natural and transparent way : they refer to social isolation, general feeling of happiness, physical functioning, microsocial contact, degree of activity and financial situation. Factor scores on these functionings are related in a meaningful way to the socioeconomic characteristics of the respondents.

The editors of this journal have kindly offered me the opportunity to write a “reply” to the essays included in this special number. It is not easy to respond adequately to such a rich collection of challenging ideas and contributions, nor to hide the fact that I am delighted — and feel tremendously honoured — by the occasion and by this wonderful set of essays. The papers cover a wide variety of fields : social choice theory and welfare economics (Blackorby, Donaldson and Weymark; Moulin); bargaining theory and social choice (Roemer); social justice and equality (Cohen; Van Parijs); evaluation of freedom (Pattanaik and Xu); rights and consequentialism (Steiner); evaluation of poverty (Bourguignon and Fields); standards of living (Schokkaert and Van Ootegem). I shall follow the authors from territory to territory, like a solitary “groupie”. But I shall also crane my neck in trying to view one territory from another, to explore some interconnections.

In his Tanner Lecture of 1979 called Equality of What? Amartya Sen asked what metric egalitarians should use to establish the extent to which their ideal is realised in a given society. In this study I comment on answers to Sen’s question in recent philosophical literature. I describe and criticize what a number of authors (and notably Rawls and Sen) of egalitarian persuasion have said about the dimension(s) or respect(s) in which people should be made more equal, when the price in other values of moving towards greater equality is not intolerable.

The dramatic rise in bank failures over the last decade has led to a search for leading indicators so that costly bailouts might be avoided. While the quality of a bank’s management is generally acknowledged to be a key contributor to institutional collapse, it is usually excluded from early-warning models for lack of a metric. This paper describes a new approach for quantifying a bank’s managerial efficiency, using a data-envelopment-analysis model that combines multiple inputs and outputs to compute a scalar measure of efficiency. This new metric captures an elusive, yet crucial, element of institutional success: management quality. New failure-prediction models for detecting a bank’s troubled status which incorporate this explanatory variable have proven to be robust and accurate, as verified by in-depth empirical evaluations, cost sensitivity analyses, and comparisons with other published approaches.

This paper analyzes the optimal allocation of a given antipoverty budget consistent with various usual measures of poverty. It is shown that it is generally optimal to give all the budget either to the poorest or to the richest of the poor. It is only with the Sen index of poverty that it is sometimes optimal to combine both types of allocation. This property may be related to the normalization rule used in the derivation of that measure and sheds some new light on the axiomatics of poverty measurement.

People vary in both tastes and talents. What is the most sensible formulation of the egalitarian ideal once this fact is fully taken into account? The paper examines a number of answers that have been offered to this question, in particular Ronald Dworkin’s counterfactual insurance schemes, and argues against them. It then presents an alternative proposal. The latter generalizes Bruce Ackerman’s notion of undominated genetic diversity, it can be interpreted as a condition of potential envy-freedom, and it is consistent with, though more specific than, Amartya Sen’s capability-based approach.

The interest shown in territorialized productive organizations does not simply account for a geographical phenomenon but above all highlights the territorial dimension of development and innovation processes. In the wake of the work done on Italian industrial districts, numerous studies have been conducted that have made it possible to identify similar forms of localized productive organizations. The aim of the present paper is to attempt a synthesis of the way in which these territorialized productive organizations work. To do so, we shall select two concepts: the localized production system and the milieu. The fundamental question is then to identify which logic influences the way a localized production system works: the milieu-actuated territorial logic or the functional logic, which corresponds to industrial organization of an hierarchical nature.

Le critère d'absence d'envie dérivait traditionnellement sa pertinence de la difficulté d'égaliser le bien-être des individus dans un cadre purement ordinal. Les développements récents des théories de l'égalité (Rawls, Dworkin, Sen, etc.), conduisant à préconiser l'égalité des ressources ou des chances, et non du bien-être, mettent en lumière la véritable signification du critère d'absence d'envie et lui confèrent une valeur nouvelle. Cet article introduit à cette problématique «post-welfariste», et en propose une formalisation qui fait apparaître certains arbitrages entre le possible et le souhaitable.

Le fait qu'aucun individu ne préfère l'allocation d'un autre à la sienne propre est identique à l'égalité de la liberté qui est —en un sens large — la forme nécessaire de la justice dans la société. Cet article montre les propriétés et sens principaux de ce critère et les développements centraux auxquels il a conduit.

We will define a supplier of a single product to be «dynamically discriminating» if he offers the product for sale at a sequence of different prices. Obviously the extent of such discrimination that is possible will depend on buyers’ expectations of future price movements and on any dynamic properties of buyers’ demand functions. The objective of this paper is to examine the extent of price discrimination that can take place in a market characterised by buyers’ perfect foresight and where the value each buyer places on the product changes as the number of sales increase.

If potential buyers are ‘myopic’ and believe that the current price of a commodity is not going to change in the future, then they will purchase if the current price is no more than their current reservation price. Given a distribution of reservation prices, a monopolist supplier can perfectly discriminate in this market by, say, first offering the commodity at a very high price and selling to those customers with the highest reservation price, and then gradually reducing the price, collecting more custom, and allowing no consumers’ surplus to exist.

I.1. Toutes les données statistiques analysées dans le présent article proviennent des Tableaux Analytiques du Commerce Extérieur, Importations 1958 — (Office statistique des Communautés Européennes, Bruxelles, 1960).

Ces tableaux mentionnent les valeurs (unité: 1.000 dollars) et dans certains cas les quantités (unités variables) importées par les 5 pays de la C.E.E., soit l’Allemagne, la France, l’Italie, les Pays-Bas et l’Union Economique Belgo-Luxembourgeoise. Les importations sont ventilées par articles, selon la Classification Statistique et Tarifaire (C.S.T.) à 4 chiffres, et par pays d’origine. Les pays de la Communauté figurant parmi ces pays d’origine, on peut établir les chiffres d’exportation de chacun des 5 pays vers les 4 autres en partant de tableaux d’importation.

This paper is a first attempt to analyse the consequences of establishing the internal market when taking account of labour market effects of product market integration. Our main focus is on market power, and we show that both labour unions and firms may lose market power when product markets become integrated. If this happens, it is likely that both workers and capitalists become better off. On the other hand, if the firms reestablish their market power through mergers or cooperation, capitalists gain, whereas workers lose. If neither firms nor unions lose market power, there are no effects of integration.

Une appréhension adéquate du concept d’équilibre en économie implique qu’il soit resitué dans le contexte de l’histoire intellectuelle tant de la physique que de l’économie. Dans cette perspective, la notion d’Equilibre Général, concept-pivôt de la théorie néo-classique, se révèle anachronique, pour des raisons à la fois “internes” et “externes à l’histoire de la pensée et des méthodes économiques. Les difficultés internes sont examinées à l’aide des catégories d’Invariants, d’Existence, d’Unicité et de Stabilité. L’article se termine par une évocation des travaux de Benoit Mandelbrot comme exemple d’un discours économique qui, tout en étant d’une grande sophistication mathématique, ne repose pas sur la notion d’équilibre.

You don't see something until you have the right metaphor to perceive it. R. Shaw, quoted in Gleick (1987), p. 262.
When you reach an equilibrium in biology you're dead. Arnold Mandell, quoted in Gleick (1967), p. 298.

Solid budgetary discipline is an essential condition for the success of Economic and Monetary Union (EMU). The “Excessive Deficit Procedure” and the “Stability and Growth Pact” allow some flexibility for the conduct of budgetary policies during severe economic slowdowns. The paper examines whether European Union Member States will have to change their budgetary policies carried out during and after severe recessions, once these procedures become fully operational in the third stage of EMU. The results of this analysis suggest that, when starting from a budgetary position of close-to balance or in surplus, the risk of breaching the 3% reference value is relatively low during one-year recessions but increases in case of deep or protracted recessions. The early years of EMU, when some countries might still have a deficit of about 2% of GDP, are likely to prove highly problematic in the event of a severe recession.

We develop a game-theoretic model of doping which focuses on the economic aspects of competitive sports. According to the model, incentives for athletes to use doping increase when (i) the efficiency of the drug test system is low, (ii) the number of competitions during one season is high, (iii) the spread of prizes from sports events is large, (iv) the perceived health cost is low. Implications for anti-doping policy are derived. We also discuss the optimal (anti-doping) competition design.

Technical efficiency measure can be classified as either radial or nonradial. While the theorical question of which is the better type of measure is unresolved, the radial measures enjoy much greater popularity than the nonradial measures in the empirical literature. To assess the impact of choice of measure, this paper offers an empirical comparison of one radial and three nonradial measures of technical efficiency, relative to a variable returns to scale DEA model with strong disposability. The distributions and ranking of these efficiency scores are examined for a sample of US banks.

Ce texte se propose d’étudier le rôle de l’imitation dans le fonctionnement des marchés financiers. Si la présence de tels comportements n’a paséchappé à certains analystes des vagues spéculatives, sa théorisation reste, quant à elle, parfaitement marginale dans la pensée économique. Ce rejet a des racines profondes; il est consubstantiel aux présupposés de cette discipline. Effectivement l’hypothèse mimétique met en scène un sujet marchand aux antipodes de l’homo œconomicus des manuels: il est indécis, influençable, perpétuellement soumis aux rumeurs qui circulent, à l’emprise du regard des autres. Cette analyse place alors, au centre de ses préccupations, les dynamiques de contagion, d’influence réciproque, autrement dit les phénomènes de foule. Or, comme l’indique J.P. DUPUY, « l’économie se présente comme la négation de la foule: l’économie se dresse tout entière contre la foule, c’est le retour de la foule qu’elle se donne pour mission à tout prix d’empêcher ». Car, pour la théorie utilitariste, la rationalité de l’ordre marchand, son efficacité s’identifient à l’individualité calculatrice.