Volume 11, Issue 4

This article discusses the provision of sophisticated architecture from the perspective of welfare economics. Given that rational real estate investors do not take into account the external effects of building design quality on the neighborhood, there is a risk of underinvestment into the external appearance of buildings in the market equilibrium. Whether public interventions as well as recent attempts to promote urban economic development by architectural landmark projects are justified, however, essentially depends on the existence of significant spillovers. On this background, we discuss evidence on architectural externalities available for Berlin, Germany and provide fist estimates of aggregated external benefits.

This article discusses the provision of sophisticated architecture from the perspective of welfare economics. Given that rational real estate investors do not take into account the external effects of building design quality on the neighborhood, there is a risk of underinvestment into the external appearance of buildings in the market equilibrium. Whether public interventions as well as recent attempts to promote urban economic development by architectural landmark projects are justified, however, essentially depends on the existence of significant spillovers. On this background, we discuss evidence on architectural externalities available for Berlin, Germany and provide fist estimates of aggregated external benefits.

The Queen’s question “Why did no one see it coming” provoked professional economists as well. A fierce discussion arose how to modify and improve theory andmodels. A survey of the literature reveals that almost a hundred analyses warned against the instability of several mechanism, be it bubbles, oversupply of funds, financial innovations, behaviour of financial institutions or regulation. Most observers predicted a recession, nobody a worldwide crisis. The crisis arose as all these mechanisms worked together and produced a surprise. Surprises appear to be the central elements of deep financial crises. Therefore the chances are odd for forecasting.

This study aims at estimating the losses in old-age wealth and forfeited returns. The analysis is based on the German SAVE study in 2008. In comparison to a scenario without the crisis individuals on average lost 4.3% of their financial wealth. Considering only wealth in investment classes specific for old-age provision the average loss is 2%. Comparing wealth losses at retirement entry reveals that the rates of return of cohorts born between 1940 and 1990 decreased by around 0.1 percentage points (old-age provision wealth) or 0.2 percentage points (financial wealth), respectively.

Life satisfaction in Germany has decreased since 2001 in contrast to increasing material prosperity. This paper provides evidence that publicly and privately provided social security measures contribute to the explanation of this development. The analysis is based on survey data of the Socio-Economic Panel for the period from 1992- 2007 and is conducted by an Ordered Logit Model and an OLS Model with individual fixed effects. The results offer suggestions for economic policy as they indicate that public and private social spending matters. Concerns about job security and the respondents’ financial situation clearly reduce life satisfaction. Evidence is provided that perceived social security strongly depends on net household income and employment which are at the same time the basis for public social spending and private insurance against risks.