Is Pollution a Giffen Good? General-Equilibrium Analysis and Some Policy Implications

This paper takes a simple model with pollution and environmental quality and derives some novel results. In particular, pollution is shown to be a Giffen good. This is a very important finding with clear policy implications, namely that carbon taxes (and pollution permits) are counter-productive, as they lead to increase in pollution, and instead governments should administratively set emission caps.

On Three Standard Results in the Theory of Insurance Demand

This article re-examines three standard results in the theory of insurance demand: (i) full coverage with a fair premium and partial coverage with an unfair premium; (ii) insurance is an inferior good under decreasing absolute risk aversion (DARA) and (iii) insurance may be a Giffen good under DARA. It has been shown recently that (i) holds for the class of insurance policies in which maximum coverage fully covers the potential loss. We show that whether (i) holds beyond this class of policies is indeterminate. In addition, we employ a unified framework to investigate the effects of changes in initial wealth and price. In particular, we show that both (ii) and (iii) hold for a certain class of insurance policies which include all commonly-used types of policies. The result also provides a unified treatment of several results in the extant literature.

The Z Curve:

The demand for a Giffen good is atypical, i.e. it increases as prices rise. The traditional representation for this phenomenon is a simple upward sloping demand curve. This model is very problematic, because it implies that demand can oscillate between infinity and negative infinity, an unrealistic scenario to say the least. In this paper we briefly discuss the problems with the traditional model and propose a better one: the Z curve. Because Giffen goods are a consequence of a reduction in the consumer’s income, the Z curve illustrates the effects of this change on wealth. Our goal here is not to dismiss the mental construction of Giffen Goods entirely . Rather, we bring forth what we believe to be a more precise method to graphically represent Giffen Goods.

The Giffen good — a praxeological approach

The Giffen good — a praxeological approachIn the present paper, we argue that the shape of any respectable demand curve must be monotonic non-increasing. By doing so, we follow the footsteps of Murray Rothbard, who regarded the demand curve as derived from the law of diminishing marginal utility. However, our caveat is that the horizontal axis must represent the units of the same economic good. Equipped with the notion of the same economic good, we also argue that Giffen or Veblen goods do not pose any real problem for analysis. Rather, they behave as any other good — that is the demand curve for them is also and necessarily downward sloping.

The Irish Famine and Unusual Market Behaviour in Cork

Scholars have long debated whether there was enough food in Ireland to feed the population during the Great Irish Famine; there has been less detailed examination of high-frequency data to understand how markets distributed food after the harvests failed. This article explores a hitherto unused weekly price and quantity data set from the Cork city markets to analyse how markets may have hindered the distribution of available food from 1846 to 1849. Although, historically, economists have long suspected that raw data on the market for potatoes during the Irish Famine behaved like that for a classical ‘Giffen’ good, there is little evidence for this among foodstuffs available throughout the crisis in Cork. But bacon pigs – a food that never reached a stable equilibrium but completely disappeared from the market in 1847 – exhibited some characteristics which do not appear to accord with the classical law of demand. Further analysis of this data suggests that middle-class purchasing power outbid the poorest people in Ireland at a time when there was a surplus of superior foods and a deficiency of inferior foods. These circumstances indicate that unusual market behaviour may have made the crop failure’s redistributive consequences – as well as its mortality toll – much worse.

On the Existence of "Giffen Goods" again

Whether Giffen goods exist or not has long been a argument in economics academic circle. This paper analyzes and evaluates the two opposing arguing points represented by Zhang Wuchang and Wang Dingding. At the same time, through analyzing in depth the explanation offered by Hicks Decomposition to Giffen goods in economics textbook,the paper points out that Hicks Decomposition to Giffen goods is against the axiom of Diminishing Marginal Utility, so that Giffen good is not likely to exist in reality.