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About PHILIP E GRAVES

I have worked in a number of areas, including monetary economics, urban/regional economics, environmental economics, and miscellaneous areas:
1) MONETARY ECONOMICS. The idea underlying my articles in this area is quite simple. Kenneth Arrow (who has won the Nobel Prize) believes in something called "the increasing relative risk aversion" (IRRA) hypothesis. The notion is that "safety," freedom from risk, is a superior good in the economic sense. In portfolio terms, this hypothesis suggests that richer people would be expected to hold lower risk portfolios other things equal, portfolios with a higher share of safe assets.
Yet another way of thinking about this is that, under the IRRA hypothesis, you would be less willing to take a bet if both it and your wealth were doubled. Both implications seemed counter-intuitive to me (stocks are quite risky, yet held predominantly by rich people, while doubling a $5 bet and, say, $50,000 wealth to $10 and $100,000 would, I suspect, cause most people to be more prone to take the bet). Arrow supported his position with the time series money demand work of Milton Friedman (who also won the Nobel Prize). In that work, Friedman found that, as U.S. incomes (a proxy for wealth in Arrow's context) grew over a hundred year period, money holdings as a percentage of income increased.
I felt that many other things (urbanization, changes in family size, etc.) were changing over such a long time period and that income was mistakenly getting credit for the influences of these other (omitted) variables.

2)URBAN/REGIONAL ECONOMICS. Much of my professional output has been in the area of urban/regional economics, with main analytical thread being again quite simple.
Prior to my work, urban and regional growth and decline were largely seen as being determined by demand-side forces. I felt that growth and decline were much more closely related (particularly if one's interest is in long-run influences) to climate and other amenities that affect our well-being and are spatially varying. With generally rising incomes in the U.S. households will have increased demands for normal or superior goods and decreased demands for inferior goods. But, some of the goods that we demand more of as we get richer (e.g. pleasant temperatures, low humidity, scenic vistas and the like) can only be "bought" by moving. This, in a nutshell, is the motivation for the important on-going effect of amenities on human migration.
3) ENVIRONMENTAL ECONOMICS. I have done a number of things in the environmental area, but am particularly interested in public good valuation. Samuelson (1954) first characterized formally how to value public goods, but recognized that it would be difficult to acquire the information to do so. Non-excludability makes the private sector unable to supply such goods and renders it difficult for government to know what and how much to supply, because of the well-known "free riding" behavior in output markets (incentives to under-reveal true demands since public goods, if they exist, can be used without paying and any individual's demands are too small to have any impact on the likelihood of provision).
There is, however, an additional problem that went unrecognized. Those who desire large quantities of ordinary goods will realize they must obtain the income with which to buy them. But, suppose the goods that some people (everyone to some extent) really care for are public goods--they will know that how much income they individually obtain will have no bearing on how much of the public good is actually produced. They are too small to matter in that collective decision, and know that. Hence, they will fail to generate income (get an education with a big monetary payoff, work long hours on your job, etc.) to purchase such goods. They will just "buy" more leisure (or even "drop out" in the parlance of the '60s). Hence, overall aggregate income is too small, and all of that income would, under "independence," have gone to expenditure on public goods, like environmental quality. Individuals will generate the income to buy private good substitutes for the public good, leading to over-suburbanization in the case of location-varying public goods.
Other miscellaneous topics of research have less in the way of "common themes," and I am only uploading a few of the papers on my C.V. in the areas discussed above--please feel free to contact me for copies of anything of interest.

Positions

Present University of Colorado, Boulder, University of Colorado
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Present Professor of Economics, University of Colorado
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Curriculum Vitae



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Environmental Economics/Public Economics (26)