Normative implications of equilibrium models: homogenous expectations and other artificialities

Article Abstract:

The current debate on the validity and usefulness of Capital Asset Pricing Model (CAPM) in predicting and explaining average returns is said to mainly involve the normative implications of equilibrium-restricted beta statistics in CAPM's framework in particular and the normative applications in general. The study showed that normative applications of CAPM, which believes that an investor will buy the same market portfolio and lending and borrowing at similar level of riskless interest rate, have been conducted in a number of fields, such as accounting, cost of capital and capital budgeting.

Asset Accounting, Asset Valuation & Distribution, Models, Pricing, Assets (Accounting), Capital assets pricing model, Capital asset pricing model

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Idealogy and the theory of financial economics

Article Abstract:

The Efficient Markets Hypotheses is used to contest the position of economic positivists such as Milton Friedman that financial economics is 'value-neutral.' It is argued that the purported objectivity of financial economics is due to ontology - the principle of cause and effect, and epistemology, the correlation between initial conditions and final outcomes. This position is, however, considered faulty because the presence of ideology in finance means that the methodologies therein are value-laden and cannot be objective.

Analysis, Beliefs, opinions and attitudes, Efficient market theory

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Minimum wage laws: what does an employment increase imply about output and welfare?

Article Abstract:

An efficiency wage model was developed in lieu of a standard supply and demand model foe assessing how minimum wage laws affect employment. card and Krueger (1995) have demonstrated that minimum wages contribute to employment failure. Results reveal that predicted welfare increases are not supported by higher levels of employment. Minimum wages which increase employment are shown to contribute to output but decreases labor force participation and puts those already unemployed at a further disadvantage.

Wages & Hours Regulation, Labor law, Wages, Wages and salaries, Minimum wage, Welfare economics, Economic security

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