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Freiburg School of Law and Economics, Freiburg (Lehrstuhl-)Tradition and the Genesis of Norms
(2014)
The paper analyzes the parallels and differences between the Freiburg School of Law and Economics represented by the works of Eucken (and Röpke) and the Freiburg (Lehrstuhl-)Tradition represented by the works of Hayek and Vanberg. The parallels are illustrated by making use of the constitutional economics concepts Ordnungspolitik (i.e., order of rules/choices over rules) as well as freedom of privileges and discrimination. The differences, which have received surprisingly little attention, include the following aspects: 1. philosophy of science and epistemology, 2. genesis of norms, and 3. political philosophy. The paper tackles these issues in three steps. The second chapter presents Vanberg’s constitutional economics theory with special emphasis on the concepts of citizen sovereignty and normative individualism. The third chapter reviews the ordoliberal concepts of science and the state which are – to a certain degree – elitist and expertocratic, that is, they rely to a considerable degree on intellectual experts (in particular, scientists) being part of the societal elite. The fourth chapter differentiates two kinds of genesis of norms: an evolutionary one and an elitist-expertocratic one allowing for a differentiation between Eucken’s and Röpke’s Ordoliberalism on the on the hand and Vanberg’s Hayekian -- and Buchanan-style constitutional economics approach on the other hand. The paper ends with a summary of the main findings.
A second Yalta
(2014)
With the current conflict in Gaza going full tilt, the usual questions have popped up: Who is to blame, what is everyone’s motivation and strategy, how to stop the bloodshed, how to end the conflict. And as usual, the two-state solution, i.e. two separate, sovereign states within the borders of the 1949 armistice agreement, keeps popping up as a purported solution. This is especially prominent in the statements of politicians in countries not directly involved in the conflict. Countries that at least claim to want to help end the conflict, be it through mediation or other diplomatic measures. But for those countries, the two-state solution has become an idea to hide behind. It does not help solve the conflict, neither in the short- nor mid-term. Clinging to the idea merely prolongs the status quo. However, it does allow the rest of the world to avoid facing the facts, which would force them to reevaluate their position on who to support and actually do something about the conflict as it currently is. But it’s high time we face the music and admit it: The two-state solution is no longer a viable option when it comes to mediating this conflict...
The bloody rebellion in Syria has aroused hostilities between Sunni and Shiite Muslims, a religious conflict that dates back to the first Muslim civilwar and the Battle of Siffin in 657 AD which took place on the banks of the Euphrates river, in what is now Ar-Raqqah, Syria. Today we see how the conflict is again spreading from Syria to the rest of the Middle East in places like Tripoli in Libanon, Falludscha in Iraq and Sad’ah in Yemen. But how did it come to this?
On January 29, 2014, EU Commissioner Barnier published a draft law proposing a ban for proprietary trading by big banks in Europe. In this opinion piece, published in a German newspaper on 30 January, 2014, Jan Pieter Krahnen, who was a member of the Liikanen Commission, argues that the proposal could prove to be effective in preventing systemic risk.
We study consumption-portfolio and asset pricing frameworks with recursive preferences and unspanned risk. We show that in both cases, portfolio choice and asset pricing, the value function of the investor/ representative agent can be characterized by a specific semilinear partial differential equation. To date, the solution to this equation has mostly been approximated by Campbell-Shiller techniques, without addressing general issues of existence and uniqueness. We develop a novel approach that rigorously constructs the solution by a fixed point argument. We prove that under regularity conditions a solution exists and establish a fast and accurate numerical method to solve consumption-portfolio and asset pricing problems with recursive preferences and unspanned risk. Our setting is not restricted to affine asset price dynamics. Numerical examples illustrate our approach.
We propose a novel approach on how to estimate systemic risk and identify its key determinants. For US financial companies with publicly traded equity options, we extract option-implied value-at-risks and measure the spillover effects between individual company value-at-risks and the option-implied value-at-risk of a financial index. First, we study the spillover effect of increasing company risks on the financial sector. Second, we analyze which companies are mostly affected if the tail risk of the financial sector increases. Key metrics such as size, leverage, market-to-book ratio and earnings have a significant influence on the systemic risk profiles of financial institutions.