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Introduction

There are different articles in economic journals that explain different aspects of our economy. The objective of this paper is to give a summary of five articles in the Open-Access, Open-Assessment E-Journal as well as my reactions to these articles.

Summary of critique 1: Credit Money and Macroeconomic Instability in the Agent-

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Based Model and Simulator Eurace

This is an article that shows the relationships between monetary aggregates, dynamics and variability of output and firms dependence on credit market as a source of capital. In this article, the authors identify the source of the credit money given to different firms as the commercial banks. Fiat money created by the central bank through the quantitative easing monetary policy affects the supply of credit money to firms. This problem is explained by the authors by means of an agent-based model and simulator, called Eurace. Other factors stated by the authors that affects supply of credit money may include equity base, and the demand of credit from firms as a form of capital.

A firm has diverse ways of raising capital through credit market. Other than the above mentioned option, the authors have discussed how firms raise credit money by setting different dividend policies. This results to endogenous business cycles. The authors explain that the endogenous business cycles are affected by the economic activity of the firm and its capital acquisition through credit money. According to this article, amplitude to business cycle arises when a firm pays a large percentage of their profits as dividends. This increases its viability to fund its activities through credit market. On the other hand, commercial banks view this strategy as bankruptcy and may be reluctant to supply credit money to the interested firm.

Reactions to this critique:

This article is able to clearly address two main issues in the economy. First, it explains the effect of varies financial management decision making of the firms on the percentage of dividends paid out. Second, the article is able to show the advantage of the central bank to buying treasury bills in the financial market, through quantitative easing. This article has been able to clearly explain how the government can be able to control economic meltdowns by using the second option. In my opinion, this is a good option as it will prevent increase in taxation rates. I highly recommend this article especially because of the increasing economic crisis affecting the whole world.

Summary of critique 2: Price-Concentration Analysis in Merger Cases with

Differentiated Products

This article studies the interplay between the merger cases and prices of differentiated products. Investigative authorities are interested in finding out whether these relationships increases the prices of differentiated commodities in the market. This article helps the authority to investigate how price concentration affects the prices in the market area. This article tackles this problem by making three major contributions

First, the article provides a structural econometric model of competition. This model helps authority make more informed judgment. This is because as compared to other options that rely on mere analysis, the model gives accurate deductions on price –concentration analysis. The article also gives an analysis of how the model can be applied in different business sectors. The main example where this model can be applied as stated by this article is cinemas in UK. Third, the articles give the key points that authorities should use while making decisions. The article provides the different assumptions that should be made while using this model. Population of an area also affects merge cases because it influences the demand of a product. It is important that all key areas are followed while using this model. This is because any omissions made will cause as inaccurate decisions.

Reactions to this critique:

I strongly support the articles argument that increased merge cases can lead to high prices on differentiated products. Hence regulatory measures need to be addressed to ensure that a consumer is not exploited. The model used in this article to address the above problem is semi-nonparametric. Therefore the t regulatory authorities using this model make only minimum assumptions.  This is a strong point for this model as it gives almost accurate information. However the model used has its own shortcomings. One of the main shortcomings is that it is only applicable in large scale applications. This model will be inappropriate in small scale operations because large samples of data are required as inputs.

Summary of critique 3: Selection Wages and Discrimination

In this article the, the authors look at two factors that affect the wages level in a given firm. These two factors are productivity of the workforce and the gender issues. The authors argue that the number of applicants of any post is affected by the wages offered. A firm can increase the standards of hiring by offering high wages to a given post. This is because high wages increases the number of applicants and increases the ability of a firm to find highly qualified personnel. The selected applicant will posses the highest qualification and these will improve the productivity of the firm.  These wages level that are affected by the productivity of the workforce are referred to as selection wages.

In terms of gender, the article argues that men are more affected by wage differential than women. This is because men are more attracted to high wages than men. Hence the articles argue that firms which follow this policy should implement a larger percentage of higher wages for women than men. However, the authors argue that this is not based on sex discriminative terms but rather on human behavior to respond to increased wages.  By doing so, the firm will have caused equal consideration of both genders.

Reactions to this critique

I agree with this article’s idea that increase of wages results to increase in the number of applicants of a particular post. This is because a person will be motivated to increase his output in a given assignment if he expects to earn more from it. However I disagree with the fact that men react more to wage differential than women. This assumption could be wrong because women have acquired the same skills that men have. A woman’s role is no longer tied to home chores hence the there is possibility that the number of applicant men are equal to that of women. If wages are raised unequally, it could lead to gender discrimination.

Summary of critique 4: Statistical Theories of Income and Wealth Distribution

According to this article, the social, political and economic condition of a country plays a big role in the distribution of wealth and income in that given country. Different main features influenced by the above factors are as a result of the current trend of the distribution of income and wealth in a country. These articles explain the main forms of distribution of wealth. It also explains how these forms cause unequal distribution of wealth in a given region. This article reviews major information gathered on this problem by use of different models. It also gives its point on the above issue by using a simple microeconomic framework as a basic model. This model clearly explains the assumptions to be considered, the inputs and the expected outputs while using his model. It also explains the rules to be observed while using the above model. This article addresses major issues in the distribution of wealth. It investigates on factors that cause unequal distribution of wealth. It also investigates whether these factors are universal or they vary across countries.

Reactions to this critique

I agree with this article’s idea that different features influence the unequal distribution of income and wealth. Some of the features could be universal while some vary across countries. However the model used to give this conclusion is based on varying assumptions. In order to accurately determine the feature that influences wealth distribution, the inputs used in the model should be accurately selected. Failure to these the mode will give inaccurate features. In my opinion, it’s difficult to clearly state the universal features that influence wealth distribution. This is because different countries have different or the same economic system that influences wealth distribution across these countries.

Summary of critique 5: Disclosure Requirements, the Release of New Information and Market Efficiency: New Insights from Agent-based Models

The prices of various commodities in the market are influenced by any new information on financial markets. This article argues that disclosure requirements regulate the release of new information on financial markets. These regulatory requirements affect the dynamics of financial markets. According to this article, a firm may more opt to frequently inform the public and sponsors on the conditions of the market. This is due to factors such as frequent change of firm’s basic values. However a firm may be reluctant to release new information to the public. This could be due to limited information processing capabilities of the firm

According to this article there is a close relationship between disclosure requirements, the release of new information and market efficiency. This article uses three agent-based financial market models to explain these relationships. These three models are  Lux and Marchesi (1999, 2000), Chiarella et al. (2006a, b) and Franke and Westerhoff (2009a, b).

Deductions made from these  models  show that if a firm delays the release  of new information, the  average deviation between market prices and fundamental values increases. However , the average price volatility is not affected by this issue .This delay of new information could cause increase in the financial risk.

Reactions to this critique

This article has tried to give realistic views on the regulatory requirements of release of new information of various to the firms. I support this article view that a firm could result in more frequent release of new information if it constantly changes its value. Based on the models used, this article concludes that market efficiency can benefit if the firms releases they information more frequently. However in my opinion , more frequent release  of new information in the markets may prove to be more expensive especially to infant firms. It may also lead to false assumptions of the firms trends by a given firm.

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