What do climate change winners owe, and to whom?

Climate ethics have been concerned with polluter pays, beneficiary pays and ability to pay principles, all of which consider climate change as a single negative externality. This paper considers it as a constellation of externalities, positive and negative, with different associated demands of justice. This is important because explicitly considering positive externalities has not to our knowledge been done in the climate ethics literature. Specifically, it is argued that those who enjoy passive gains from climate change owe gains not to the net losers, but to the emitters, just as the emitters owe compensation to the net losers for the negative externality. This is defended by appeal to theoretical virtues and to the social benefits of generating positive externalities, even when those positive externalities are coupled with far greater negative externalities. We call this the Polluter Pays, Then Receives (‘PPTR', or ‘Peter') Principle.

Seeing Things for What They Are

Patterns need not be combinations of numbers. For example, employees—ranging from clerks to CEOs—who do their jobs extremely well are often less successful when they are promoted to new positions—a disappointment immortalized by the Peter Principle: “managers rise to the level of their incompetence.” Patterns in observational data can be misleading because of self-selection bias, in that observed differences among people making different choices may be due to the type of people making such choices. When compelled to use observational data, it is important that the theories to be tested are specified before looking at the data. Otherwise, we are likely to be fooled by phantom patterns.

Mirror, mirror on the wall …: modelling the US Congress as an internal labour market

Almost one third of all who served in the US Senate between 1943 and 2020 ascended to their positions in that legislative body directly from the US House of Representatives. Thus, we model the legislative branch of the US government as an internal labour market, wherein members of the lower chamber seek ‘promotion’ (that is, election) to positions in the more prestigious upper chamber. This process includes the possibility that some US representatives are being promoted to positions in the Senate for which they are not competent, a situation referred to as the Peter Principle. Another possibility is that the ‘most ineffective’ US representatives are using this internal labour market to attain promotion to the Senate, an outcome that is referred to as the Dilbert Principle. Gallup polling data on the job approval by the public of the US Congress, along with absenteeism data on members of the US Senate, support both possibilities from our formal model.

A Bias of Screening

This paper deals with the issue of screening. It focuses on a decision maker who, based on noisy unbiased assessments, screens elements from a general set. Our analysis shows that stricter screening not only reduces the number of accepted elements, but possibly reduces their average expected value. We provide a characterization for optimal threshold strategies for screening and also derive implications to cases where such screening strategies are suboptimal. We further provide various applications of our results to credit ratings, auctions, general trade, the Peter Principle, and affirmative action. (JEL C38, D44, F10, G24, J15)

Promotions and the Peter Principle*

The best worker is not always the best candidate for manager. In these cases, do firms promote the best potential manager or the best worker in their current job? Using microdata on the performance of sales workers at 131 firms, we find evidence consistent with the Peter Principle, which proposes that firms prioritize current job performance in promotion decisions at the expense of other observable characteristics that better predict managerial performance. We estimate that the costs of promoting workers with lower managerial potential are high, suggesting either that firms are making inefficient promotion decisions or that the benefits of promotion-based incentives are great enough to justify the costs of managerial mismatch. We find that firms manage the costs of the Peter Principle by placing less weight on sales performance in promotion decisions when managerial roles entail greater responsibility and when frontline workers are incentivized by strong pay for performance.