All posts by Konrad Sarzyński

The Deferral of Attacks: SP/A Theory as a Model of Terrorist Choice when Losses Are Inevitable

Authors: Peter J. Phillips, Gabriela Pohl
Published Online: 2017-02-07

When a terrorist group’s aspirations far exceed the outcomes that can be expected to result from any of the available attack methods, an outcome below the terrorist group’s aspiration level is inevitable. A primary prediction of SP/A theory when applied to the study of terrorist behaviour is that when losses are inevitable the terrorist group will be risk averse and inclined to defer further action until expected outcomes improve, new attack method innovations are developed or the memory of the event that shaped aspirations has faded sufficiently that the aspiration level can be ‘reset’. This complements existing predictions of loss aversion and risk seeking behaviour over the domain of avoidable losses and provides a starting point for developing explanations for patterns of behaviour that are observed in the terrorism context, including pauses in violence, even during brutality contests, and time-lags between terrorist attacks.

Keywords: SP/A TheoryTerrorist BehaviourRiskUncertaintyInevitable LossesAspirationBrutalityViolenceContestsAttacksAvoidable Losses

10th International Scientific Conference “Business and Management 2018”

10th International Scientific Conference “Business and Management 2018”

As Organizers state, the basic objective of the Conference is “to bring together researchers, scientists for a scientific discussion about the ongoing changes in economics and management in the context of globalization and to discuss up-to-date problems of business and management.

Important dates
  • January 19, 2018 – Abstract and application submission
  • January 29, 2018 – Notification of abstract acceptance
  • February 21, 2018 – Submission of full papers
  • March 5, 2018 – Notification of papers acceptance
  • March 19, 2018 – Submission of final full papers
  • March 26, 2018 – Deadline for registration payment
  • May 3-4, 2018 – Conference

Official website:

How to nudge people and get Noble Prize for that?

Richard H. Thaler from University of Chicago received Nobel Prize in Economics this week. It’s not only a prestigues award. As it is broadly commented in mass media, winners become celebrities not only in academia. And did I mentioned that Thaler played a scene with Selena Gomez in Big Short?

We asked editors from Open Economics for comments on that choice. Is it important for academia? Will it change our everyday life?


Thaler represents behavioral economics. He created a model of price reactions to information, but is also known for his and Cass Sunstein’s nudge theory (see Nudge: Improving Decisions About Health, Wealth, and Happiness, Yale University Press, 2008). Nudging can help people make better choices, by creating whole choice architecture, where such details as a number of choices or the way they are described matters. These theories can be controversial, though. As critics often point, that it can lead to limitations of individual autonomy by manipulating and limiting choices.

Luisa Blanco-Raynal (Pepperdine University) is enthusiastic about this year’s winner:

His work is extremely interdisciplinary in nature and has important policy applications. This award says something about the significant role economists play improving the wellbeing of individuals. 

Jeffrey DeSimone (University of Alabama at Birmingham) agrees that Thaler’s work not only can improve our lives in future but did it already, even if we are not aware of that:

I think Thaler is a great choice for the Nobel Prize in Economics.  Ideas from the field he helped build, behavioral economics, not only are appreciated by lots of people who might otherwise have little additional knowledge of economics, but moreover have likely improved the lives of many who, without realizing, have benefitted from policies that rely on these ideas (such as behavioral nudges). 

University of Chicago has 29 affiliated prize winners (check the list here), which makes it most awarded university in the world. It’s also an ideal example of how heterogeneous university can be. Zijun Wang (University of Texas at San Antonio) makes a good point on that:

In 1995, University of Chicago professor Robert Lucas won the Nobel Prize in economics for his contributions to rational expectations theory. At the same year, the university also made a rational decision to hire Richard Thaler who now also won the prize for his contributions to behavior economics. So, the two schools of thoughts can prosper under the same roof only if economics research is open.

The Prize can also be a clear sign for new scientists, that it’s not only mainstream that matters. Jeffrey DeSimone points, that as documented by Michael Lewis in The Undoing Project, his humble beginnings in the profession, and rise to prominence only after following his interests and intuition despite resistance within the discipline, is somewhat of an inspiration.

Will this year’s Nobel Prize herald a shift in mainstream economics towards less rational, more emotional models? And will economics be more and more interdisciplinary? The future of economics looks exciting!

Read more:

About the Prize in Economic Sciences 2017 (Official Website of the Nobel Prize)

Richard Thaler’s website

The Shapiro-Stiglitz Model with Non-constant Marginal Utility

Authors: Joseph S. K. Wu / Chi Pui Ho
Published Online: 2017-09-06 |

source: Fig. 3 from presented article


The Shapiro-Stiglitz model plays an important role in the employment theory. Woodford pointed out the theoretic limitation of the linear worker’s utility function in that model. He questioned the model’s implication of the secular decline in the unemployment rate when such rate was in fact trendless. He proposed to resolve this by allowing diminishing marginal utility of income. In this paper, the Shapiro- Stiglitz model is generalized using a nonlinear utility function implicit in the Stiglitz Efficiency-wage paper, thus linking these two well-known models. The nonlinear utility function in this generalized model not only allows for diminishing marginal utility of income but also allows for the analysis of parameters representing various factors affecting the secular unemployment rate. In particular, we can specify the condition under which the diminishing marginal utility can cause such rate to be trendless.

Keywords: MacroeconomicsEfficiency-WageS-shaped Effort SupplyShirking model

The 29th Annual EAEPE Conference 2017

The 29th Annual EAEPE Conference 2017

The role of the State in Economic Development.
State Capacity, State Autonomy and Economic Development

Development studies provide a variety of strategies and models that various states used for their catching-up and convergence. The concepts usually included strongly articulated state policies (intervention) to accelerate growth, establish solid institutional background, support business development, create potent innovation system and good quality education. The actual implementation depended on the world economic environment. Historically, successful cases were less frequent than failures. The good examples of Germany, Japan, South Korea, Finland and Ireland more recently and some other countries served as benchmark for others.

The latecomers who copied the elements of successful models of developmental state were usually less successful yet, in some cases good progress could be achieved with significant amendments or case specific combinations of these elements. The question could be put to what extent existing good practices could be copied? Another important question was the extent of state intervention. Was success achieved due to state guidance of development or was it rather a lucky coincidence of autonomous factors and Hayekian criticism on excessive state influence is due? Were development failures simply the result of mismanaged public policies, or were they due to the misinterpreted role of the state, along with a lack of expertise, capacity and autonomy for managing the process of catching-up?

These questions always received new attention when world economic setting changed. We are witnessing such fundamental changes today. The questions about the results and efficiency of existing development models under the circumstances of globalization emerge in a new light. What happened to Japan or South Korea? Have their “miracles” faded out because they reached their development targets of catching up, or are there inherent tensions in the models that were amplified by the process of globalization? What are the determinants of the new development success stories of China, Indonesia, India or Viet-Nam? What about their applicability in other countries and regions? How about the transition process in Central and Eastern Europe? Did these countries choose appropriate solutions? Was their development mode coherent?

What is the proper response of states to economic globalization, a process that transforms the world economy into an organic system? To what extent can the state still be a formative (f)actor in the era of constantly deepening economic interdependencies? Can the state be the main driving force for economic development by facilitating the integration of the national economy into the global market on the one hand and by moderating the vulnerability of certain sectors and actors of the national economy in a globalized world economy on the other? States are certainly not obsolete, but to what extent are they effective and capable in promoting economic development? And how have changes in technology, capital and communication transformed the state–society relationship in both successful and unsuccessful transformers? The several decades-old question on state capacity and state autonomy, i.e., whether these are prerequisites to a successful development or are they merely a consequence of successful catching up, is back again and is more relevant than ever.

Legacies and current options of avenues of economic development and catching-up offer substantial variety of topics and research methods. Scholars are encouraged to join the discussion of active state policies fostering economic development and opportunities, as well as the limitations of their applicability.

Official website:

ENTRENOVA Conference (ENTerprise REsearch InNOVAtion Conference)

ENTRENOVA Conference (ENTerprise REsearch InNOVAtion Conference) is a multi-disciplinary conference dedicated to examining, comprehending and discuss the economic, management, organizational, marketing and other issues related to innovation, information technology, and R&D, driven by enterprises.  This theme includes a number of challenges related to the invention of new knowledge (R&D), the diffusion of new knowledge (e.g. through knowledge management), and the exploitation of new knowledge (e.g. innovation in the field of products, processes and/or services).

ENTRENOVA bridges the gap between academia and industry, promote EU programs and international cooperation.

ENTRENOVA is organized by IRENET, Society for Advancing Innovation and Research in Economy, in cooperation with the Faculty of Tourism and Hotel Management, Kotor, Montenegro and the University North, Varazdin, Croatia. The conference, having an international focus, takes place on 7-9th September. It was previously organized in Kotor, Montenegro (2015) and Rovinj, Croatia (2016).

Official website:

Applied Modeling in Economics, Finance and Social Sciences

The International Conference “Applied Modeling in Economics, Finance and Social Sciences (AMEFSS 2017)” to be held on the 27-31 August 2017 in Hisar, Bulgaria. The main organizers are Sofia University “St. Kl. Ohridski” (Faculty of Economics and Business Administration), Plovdiv University “Paisii Hilendarski” ( Faculty of Economy and Social Science), Shumen University “Bishop Konstantin Preslavsky” (College Dobrich).

The conference will cover a wide range of topics on the most recent developments and modeling in Economics, Management and Social Sciences. Researchers are encouraged to exchange their experience in resolving practical challenges they have encountered and discuss contemporary economic policies and issues.

The event also offers the opportunity to visit Hisarya, a unique location in the Plovdiv Province, Bulgaria.

Official website: 

Shadow Economy: Estimation Methods, Problems, Results and Open questions

Friedrich Schneider / Andreas Buehn
Published Online: 2017-05-16


This paper presents various methods used for estimating the size of the shadow economy. Each method is evaluated and its strengths and weaknesses are discussed, as well as results each method yields. The purpose of the paper is threefold: Firstly, to demonstrate that there is no single infallible method for estimating the size and development of the shadow economy and results can differ significantly between different approaches. The MIMIC approach, discussed in greater detail, is often used due to its flexibility. Secondly, the paper discusses the very definition of the shadow economy and factors contributing to its growth. Finally, latest estimations of the size of the shadow economies of 143 countries over the period 1996 to 2014 are presented.

Keywords: shadow economy estimatesMIMIC approachmethods to estimate the shadow economyadvantages and disadvantages of the methodsMIMIC-methodcalibration procedurelight intensity approach