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My avian flu blog days
Circa 2004 or so, it seemed to me that America was grossly underprepared for a possible pandemic. I started reading up on the topic, and I produced a very basic, simple Mercatus policy paper on avian flu. For obvious reasons, much of it is out of date and some of the recommendations have been adopted, but here is the first part of the Executive Summary:
1. The single most important thing we can do for a pandemic—whether avian flu or not—is to have well-prepared local health care systems. We should prepare for pandemics in ways that are politically sustainable and remain useful even if an avian flu pandemic does not occur.
2. Prepare social norms and emergency procedures which would limit or delay the spread of a pandemic. Regular hand washing, and other beneficial public customs, may save more lives than a Tamiflu stockpile.
3. Decentralize our supplies of anti-virals and treat timely distribution as more important than simply creating a stockpile.
4. Institute prizes for effective vaccines and relax liability laws for vaccine makers. Our government has been discouraging what it should be encouraging.
5. Respect intellectual property by buying the relevant drugs and vaccines at fair prices. Confiscating property rights would reduce the incentive for innovation the next time around.
6. Make economic preparations to ensure the continuity of food and power supplies. The relevant “choke points” may include the check clearing system and the use of mass transit to deliver food supply workers to their jobs.
7. Realize that the federal government will be largely powerless in the worst stages of a pandemic and make appropriate local plans.
8. Encourage the formation of prediction markets in an avian flu pandemic. This will give us a better idea of the probability of widespread human-to-human transmission.
9. Provide incentives for Asian countries to improve their surveillance. Tie foreign aid to the receipt of useful information about the progress of avian flu.
10. Reform the World Health Organization and give it greater autonomy from its government funders.
And also from later on:
4. We should not expect to choke off a pandemic in its country of origin. Once a pandemic has started abroad, we should shut schools and many public places immediately.
5. We should not obsess over avian flu at the expense of other medical issues. The next pandemic or public health crisis could come from any number of sources. By focusing on local preparedness and decentralized responses, this plan is robust to surprise and will also prove useful for responding to terrorism or natural catastrophes.
Still relevant today. For a while I also wrote an avian flu blog with Silviu Dochia, archived here.
Why are people getting worse at The Price is Right?
Americans are worse at The Price Is Right than they used to be. On the game show, which has been running since 1972, four contestants are asked to guess the price of consumer products, like washing machines, microwaves, or jumbo packs of paper towels. The person who gets closest to the actual price, without going over, gets to keep playing and the chance to win prizes like a new car. In the 1970s, the typical guess was about 8% below the actual price. People underestimate the price by more than 20% in the 2010s.
This finding comes from recently released research by Jonathan Hartley, a data analyst currently studying public policy at Harvard University. A longtime fan of the show, Hartley was inspired to conduct his research after reading a research paper from 1996 that reveals contestants don’t use optimal bidding strategies—they too rarely bid just a dollar over the highest previous bid—and is one of the early economics papers to show how people could be irrational. Hartley wondered what else the data might show. He found that the accuracy of people’s guesses sharply decreased from the 1970s to the 2000s, and then stabilized in the 2010s.
And why? There are three main hypotheses:
First, inflation in the US was much higher and much less stable in the 1970s and 80s. When inflation is high and variable, people become more attentive to prices, noticing they are paying more for goods than before.
Second, the rise of e-commerce may have made people less sensitive to price. Research by the economist Alberto Cavallo finds that online competition has made prices more similar across sellers, both online and off. As a result, people may feel less of a need to do price comparisons.
Third, there are more products than ever. There are 50 times as many products at a grocery store than 80 years ago, according to the economist James Bessen.
Here is the full 2019 piece by Dan Kopf, via Rasool Somji.
The Nobel Prize in Economic Science Goes to Banerjee, Duflo, and Kremer
The Nobel Prize goes to Abhijit Banerjee, Esther Duflo and Michael Kremer (links to home pages) for field experiments in development economics. Esther Duflo was a John Bates Clark Medal winner, a MacArthur “genius” award winner, and is now the second woman to win the economics Nobel and by far the youngest person to ever win the economics Nobel (Arrow was the previous youngest winner!). Duflo and Banerjee are married so these are also the first spouses to win the economics Nobel although not the first spouses to win Nobel prizes–there was even one member of a Nobel prize winning spouse-couple who won the Nobel prize in economics. Can you name the spouses?
Michael Kremer wrote two of my favorite papers ever. The first is Patent Buyouts which you can find in my book Entrepreneurial Economics: Bright Ideas from the Dismal Science. The idea of a patent buyout is for the government to buy a patent and rip it up, opening the idea to the public domain. How much should the government pay? To decide this they can hold an auction. Anyone can bid in the auction but the winner receives the patent only say 10% of the time–the other 90% of the time the patent is bought by the government at the market price. The value of this procedure is that 90% of the time we get all the incentive properties of the patent without any of the monopoly costs. Thus, we eliminate the innovation tradeoff. Indeed, the government can even top the market price up by say 15% in order to increase the incentive to innovate. You might think the patent buyout idea is unrealistic. But in fact, Kremer went on to pioneer an important version of the idea, the Advance Market Commitment for Vaccines which was used to guarantee a market for the pneumococcal vaccine which has now been given to some 143 million children. Bill Gates was involved with governments in supporting the project.
My second Kremer paper is Population Growth and Technological Change: One Million B.C. to 1990. An economist examining one million years of the economy! I like to say that there are two views of humanity, people are stomachs or people are brains. In the people are stomachs view, more people means more eaters, more takers, less for everyone else. In the people are brains view, more people means more brains, more ideas, more for everyone else. The people are brains view is my view and Paul Romer’s view (ideas are nonrivalrous). Kremer tests the two views. He shows that over the long run economic growth increased with population growth. People are brains.
Oh, and can I add a third Kremer paper? The O-Ring Model of Development is a great and deep paper. (MRU video on the O-ring model).
The work for which the Nobel was given is for field experiments in development economics. Kremer began this area of research with randomized trials of educational policies in Kenya. Duflo and Banerjee then deepened and broadened the use of field experiments and in 2003 established the Poverty Action Lab which has been the nexus for field experiments in development economics carried on by hundreds of researchers around the world.
Much has been learned in field experiments about what does and also doesn’t work. In Incentives Work, Dufflo, Hanna and Ryan created a successful program to monitor and reduce teacher absenteeism in India, a problem that Michael Kremer had shown in Missing in Action was very serious with some 30% of teachers not showing up on a typical day. But when they tried to institute a similar program for nurses in Putting a Band-Aid on A Corpse the program was soon undermined by local politicians and “Eighteen months after its inception, the program had become completely ineffective.” Similarly, Banerjee, Duflo, Glennerster and Kinnan find that Microfinance is ok but no miracle (sorry fellow laureate Muhammad Yunus). A frustrating lesson has been the context dependent nature of results and the difficult of finding external validity. (Lant Pritchett in a critique of the “randomistas” argues that real development is based on macro-policy rather than micro-experiment. See also Bill Easterly on the success of the Washington Consensus.)
Duflo, Kremer and Robinson study How High Are Rates of Return to Fertilizer? Evidence from Field Experiments in Kenya. This is an especially interest piece of research because they find that rates of return are very high but that farmers don’t use much fertilizer. Why not? The reasons seem to have much more to do with behavioral biases than rationality. Some interventions help:
Our findings suggest that simple interventions that affect neither the cost of, nor the payoff to, fertilizer can substantially increase fertilizer use. In particular, offering farmers the option to buy fertilizer (at the full market price, but with free delivery) immediately after the harvest leads to an increase of at least 33 percent in the proportion of farmers using fertilizer, an effect comparable to that of a 50 percent reduction in the price of fertilizer (in contrast, there is no impact on fertilizer adoption of offering free delivery at the time fertilizer is actually needed for top dressing). This finding seems inconsistent with the idea that low adoption is due to low returns or credit constraints, and suggests there may be a role for non–fully rational behavior in explaining production decisions.
This is reminiscent of people in developed countries who don’t adjust their retirement savings rates to take advantage of employer matches. (A connection to Thaler’s work).
Duflo and Banerjee have conducted many of their field experiments in India and have looked at not just conventional questions of development economics but also at politics. In 1993, India introduced a constitutional rule that said that each state had to reserve a third of all positions as chair of village councils for women. In a series of papers, Duflo studies this natural experiment which involved randomization of villages with women chairs. In Women as Policy Makers (with Chattopadhyay) she finds that female politicians change the allocation of resources towards infrastructure of relevance to women. In Powerful Women (Beaman et al.) she finds that having once had a female village leader increases the prospects of future female leaders, i.e. exposure reduces bias.
Before Banerjee became a randomistas he was a theorist. His A Simple Model of Herd Behavior is also a favorite. The essence of the model can be explained in a simple example (from the paper). Suppose there are two restaurants A and B. The prior probability is that A is slightly more likely to be a better restaurant than B but in fact B is the better restaurant. People arrive at the restaurants in sequence and as they do they get a signal of which restaurant is better and they also see what choice the person in front of them made. Suppose the first person in line gets a signal that the better restaurant is A (contrary to fact). They choose A. The second person then gets a signal that the better restaurant is B. The second person in line also sees that the first person chose A, so they now know one signal is for A and one is for B and the prior is A so the weight of the evidence is for A—the second person also chooses restaurant A. The next person in line also gets the B signal but for the same reasons they also choose A. In fact, everyone chooses A even if 99 out of 100 signals are B. We get a herd. The sequential information structure means that the information is wasted. Thus, how information is distributed can make a huge difference to what happens. A lot of lessons here for tweeting and Facebook!
Banerjee is also the author of some original and key pieces on Indian economic history, most notably History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India (with Iyer).
Duflo’s TED Talk. Previous Duflo posts; Kremer posts; Banerjee posts on MR.
Before last year’s Nobel announcement Tyler wrote:
I’ve never once gotten it right, at least not for exact timing, so my apologies to anyone I pick (sorry Bill Baumol!). Nonetheless this year I am in for Esther Duflo and Abihijit Banerjee, possibly with Michael Kremer, for randomized control trials in development economics.
As Tyler predicted he was wrong and also right. Thus, this years win is well-timed and well-deserved. Congratulations to all.
Friday assorted links
1. Paul Krugman on Riverside Park and NYC.
2. “It’s possible that in the long run, then, we face a choice: Fixed money supply. Proof of work. Adequate security. Pick two (at most). How Bitcoin addresses this trilemma will be fascinating to watch. If not in 2020, then at some point.” Link here.
3. The next Nobel laureates as predicted by citations? And further predictions.
4. Tools for transformative thought, by Andy Matuschak and Michael Nielsen. A better way of learning?
Saturday assorted links
Sunday assorted links
1. The rise and rise of Bangladesh.
2. James M. Buchanan did not oppose school integration.
3. “Once world capital of oil-painting copies, Chinese town tries move into original art.”
4. The mundanity of excellence.
5. What Dan Wang learned in 2018. Recommended.
6. Lottery-like prizes to induce savings (NYT).
Cohort effects and life expectancy and many other facts about the history of American medicine
The cohort reaching age 55 around 1982 (born around 1927) has significantly higher mortality than the cohort 10 years younger. That higher mortality continues through the cohort passing through that age range in the mid-1990s, roughly, when the cohort born in 1933 reaches age 65. That same cohort also has higher mortality when they are 65-74 and 75-84. The story is not one of selection – a handful of less healthy people who die and leave behind healthier stock. Rather, it seems that an entire generation was rendered vulnerable by being born during and just before the Great Depression (Lleras-Muney and Moreau, 2018).
That is from a new NBER history of health care paper by Maryaline Catillon, David Cutler, and Thomas Getzen. This piece is interesting on virtually every page. For instance, on the rise of American science:
Of the 18 Nobel Prizes in Physiology or Medicine awarded 1901-1920, none went to US researchers. Over the next two decades, four out of twenty-four did, then for the rest of the century, more than half.
Then:
…our analysis of Massachusetts data does not support a large impact of medical care supply on mortality in the pre-antibiotic era.
Using the best data I’ve seen to date, apart from RCTs, the authors conclude from their statistical work:
…there is little evidence that access to medical care plays a role in mortality over the entire 1965-2015 period, but it appears to have had an effect during recent years.
That is from p.33
Death rates from influenza/pneumonia and cancer seem most responsive to access to medical care. And I had not known this:
The period from 1935 to 1950 saw the most…decline in infant and child mortality of any time period since 1900. It is unclear how much of this change would have happened without antibiotics, but blood banking and advances in surgical techniques were among the host of distinct and incremental improvements that added to life expectancy while the health share of GDP increased only slightly.
Recommended.
Cam Girl Economics
Former Cam Girl Aella offers a detailed, analytical, and interesting guide to the economics of the industry.
My credentials: I was a camgirl for five years. My highest earning month was $50,000, and my highest rank (on MFC) was #7, meaning I earned the 7th most money that month. I was, at one point, one of the most (if not the most) widely known working camgirls thanks to some viral content. My average income per hour was $200. Getting there was not easy and took a ton of mistakes and work, so I hope this helps you.
I was initially surprised that a cam girl can make more money than a prostitute. But the reason is simple, a cam girl is selling a non-rival good and can thus have more customers at a point in time than a prostitute. (In other words, the same economics as online education!) I suspect women would prefer to be cam girls than prostitutes so we should expect the supply of cam girls to increase and the supply of prostitutes to decrease thus raising the price of hiring a prostitute.
Male psychology plays an important role for the clever cam girl:
Men want a few things, and probably one of the biggest is winning a competition.
You see, you’re not just trying to get a guy to pay you – you’re trying to get a guy to pay you in front of a bunch of other guys. This is a super key. A man wants to feel attention from an attractive women on him, and this is made even more satisfying when it’s to the exclusion of those around him. He is showing off his power by buying your happiness.
So, when tipped, make sure you say his name (or username). A lot of girls use subtly masculine-competition language when referring to high tippers, such as “hero,” “champion,” or “winner”. I often would ask questions like “who is going to save my night?” or “who is going to be the one to make me feel x”?
The ‘control show’ I mentioned above plays into this. Give men a way to fight against each other, with tokens. A common tactic is to have guys buy into “teams”, and whichever team tips the most, wins (with the prize being a video or literally anything – you’d be surprised at how many competition prizes are just the guy’s name being listed on the girl’s profile). Have guys fight to put on or off your clothes, or force you/rescue you from doing something gross.
The most profitable thing I ever did was have a ‘war’ with another camgirl, and it became my tipping members vs. hers. Competition is bread and butter. Competition is love. Competition is life. Competition is your key to a life full of luxury handbags and butlers.
Just don’t be too obvious about it. All of this stuff I’m saying can be done with too heavy a hand, and then guys feel gross and leave.
Intrinsic and extrinsic incentives:
Divorce what you’re doing from money as much as you can. Never refer to tokens as money!! Refer to tokens as little as you can while still being clear. One of my camgirl friends would use the technique where she’d say, “This is like – I’m sitting at a bar, all alone over here. Is someone gonna be a gentleman and get me a drink?” And then someone would tip and she’d drink.
Classic marketing advice:
How do you get whales? A lot of it is high variance – a tiny fraction of the camwatching population is made out of very rich men, and so you might get one passing through your cam room once a week without you ever knowing, and you have no idea when or if you’ll be doing something interesting at that point.
But one technique to help is to give them something to do. If you have listed tip options as “40 tokens spank! 20 tokens kiss the mirror!” and your whale has 40,000 tokens he wants to drop today, then the best he’s going to get from you is some crying and screaming.
Thus, always have the absurd “nobody would ever buy that that would be insane” option.
Hat tip: Emil O W Kirkegaard.
Science is getting less bang for its buck
By Patrick Collison and Michael Nielsen in The Atlantic:
…we ran a survey asking scientists to compare Nobel prizewinning discoveries in their fields. We then used those rankings to determine how scientists think the quality of Nobel prizewinning discoveries has changed over the decades…
Our graph stops at the end of the 1980s. The reason is that, in recent years, the Nobel Committee has preferred to award prizes for work done in the 1980s and 1970s. In fact, just three discoveries made since 1990 have yet been awarded Nobel Prizes. This is too few to get a good quality estimate for the 1990s, and so we didn’t survey those prizes.
However, the paucity of prizes since 1990 is itself suggestive. The 1990s and 2000s have the dubious distinction of being the decades over which the Nobel Committee has most strongly preferred to skip back and award prizes for earlier work. Given that the 1980s and 1970s themselves don’t look so good, that’s bad news for physics…
Why has science gotten so much more expensive, without producing commensurate gains in our understanding?
There is much more evidence and argument at the link. This appendix provides more detail on their empirical work. Self-recommending, if there ever was such a thing.
Tuesday assorted links
1. Twenty questions with Chris Kraus.
3. Me on NPR on Planet Money, including on Stubborn Attachments.
4. Are China’s provincial boundaries misaligned?
Whiners, in this case whiners about Airspace
We could call this strange geography created by technology “AirSpace.” It’s the realm of coffee shops, bars, startup offices, and co-live / work spaces that share the same hallmarks everywhere you go: a profusion of symbols of comfort and quality, at least to a certain connoisseurial mindset. Minimalist furniture. Craft beer and avocado toast. Reclaimed wood. Industrial lighting. Cortados. Fast internet. The homogeneity of these spaces means that traveling between them is frictionless, a value that Silicon Valley prizes and cultural influencers like Schwarzmann take advantage of. Changing places can be as painless as reloading a website. You might not even realize you’re not where you started…
The profusion of generic cafes and Eames chairs and reclaimed wood tables might be a superficial meme of millennial interior decorating that will fade with time. But the anesthetized aesthetic of International Airbnb Style is the symptom of a deeper condition, I think.
Why is AirSpace happening? One answer is that the internet and its progeny — Foursquare, Facebook, Instagram, Airbnb — is to us today what television was in the last century…
That is all from Kyle Chayka at The Verge. I found this article interesting, well-written, and making a valid point. Still, is it not mostly your fault if you are stuck in “Airspace,” as it is called? Northern Virginia has some of the wealthiest counties in the United States, yet most of the terrain still is not Airspace or anything close to it. Nor is most of San Francisco this way, or most of Manhattan, much less the other boroughs. (And might you not prefer Airspace for the NYC subway?) Seoul is a city which has its share of Airspace, but again is hardly dominated by it — the dense, low-slung neighborhoods of small restaurants are fascinating and mostly retro.
I think of Airspace as a 2-3% of our living space condition, yet a 2-3% that you can immerse yourself in if you are so inclined.
Which I am not.
Via edmundogs.
My Fall Industrial Organization reading list
This is only part one for the class, do not panic over whatever you think might be completely left out. That said, suggested additions are welcome, here goes:
Competition
Bresnahan, Timothy F. “Competition and Collusion in the American Automobile Industry: the 1955 Price War,” Journal of Industrial Economics, 1987, 35(4), 457-82.
Bresnahan, Timothy and Reiss, Peter C. “Entry and Competition in Concentrated Markets,” Journal of Political Economy, (1991), 99(5), 977-1009.
Asker, John, “A Study of the Internal Organization of a Bidding Cartel,” American Economic Review, (June 2010), 724-762.
Whinston, Michael D., “Antitrust Policy Toward Horizontal Mergers,” Handbook of Industrial Organization, vol.III, chapter 36, see also chapter 35 by John Sutton.
“Benefits of Competition and Indicators of Market Power,” Council of Economic Advisors, April 2016.
Jan De Loecker and Jan Eeckhout, “The Rise of Market Power and its Macroeconomic Implications,” http://www.janeeckhout.com/wp-content/uploads/RMP.pdf. My comment on it is here: https://marginalrevolution.com/marginalrevolution/2017/08/rise-market-power.html
Me on intangible capital, https://marginalrevolution.com/marginalrevolution/2017/09/intangible-investment-monopoly-profits.html.
Traina, James. “Is Aggregate Market Power Increasing?: Production Trends Using Financial Statements,” https://research.chicagobooth.edu/-/media/research/stigler/pdfs/workingpapers/17isaggregatemarketpowerincreasing.pdf
Shapiro, Carl. “Antitrust in a Time of Populism.” UC Berkeley, working draft from 24 October 2017, forthcoming in International Journal of Industrial Organization.
Klein, Benjamin and Leffler, Keith. “The Role of Market Forces in Assuring Contractual Performance.” Journal of Political Economy 89 (1981): 615-641.
Breit, William. “Resale Price Maintenance: What do Economists Know and When Did They Know It?” Journal of Institutional and Theoretical Economics (1991).
Bogdan Genchev, and Julie Holland Mortimer. “Empirical Evidence on Conditional Pricing Practices.” NBER working paper 22313, June 2016.
Sproul, Michael. “Antitrust and Prices.” Journal of Political Economy (August 1993): 741-754.
McCutcheon, Barbara. “Do Meetings in Smoke-Filled Rooms Facilitate Collusion?” Journal of Political Economy (April 1997): 336-350.
Crandall, Robert and Winston, Clifford, “Does Antitrust Improve Consumer Welfare?: Assessing the Evidence,” Journal of Economic Perspectives (Fall 2003), 3-26, available at http://www.brookings.org/views/articles/2003crandallwinston.htm.
FTC, Bureau of Competition, website, http://www.ftc.gov/bc/index.shtml., an optional browse, perhaps read about some current cases and also read the merger guidelines.
Parente, Stephen L. and Prescott, Edward. “Monopoly Rights: A Barrier to Riches.” American Economic Review 89, 5 (December 1999): 1216-1233.
Demsetz, Harold. “Why Regulate Utilities?” Journal of Law and Economics (April 1968): 347-359.
Armstrong, Mark and Sappington, David, “Recent Developments in the Theory of Regulation,” Handbook of Industrial Organization, chapter 27, also on-line.
Shleifer, Andrei. “State vs. Private Ownership.” Journal of Economic Perspectives (Fall 1998): 133-151.
Xavier Gabaix and David Laibson, “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=728545.
Strictly optional most of you shouldn’t read this: Ariel Pakes and dynamic computational approaches to modeling oligopoly: http://www.economics.harvard.edu/faculty/pakes/files/Pakes-Fershtman-8-2010.pdf
http://www.economics.harvard.edu/faculty/pakes/files/handbookIO9.pdf
Economics of Tech
Farrell, Joseph and Klemperer, Paul, “Coordination and Lock-In: Competition with Switching Costs and Network Effects,” Handbook of Industrial Organization, vol.III, chapter 31, also on-line.
Weyl, E. Glenn. “A Price Theory of Multi-Sided Platforms.” American Economic Review, September 2010, 100, 4, 1642-1672.
Tech companies as platforms, Tyler Cowen chapter, to be distributed.
Gompers, Paul and Lerner, Josh. “The Venture Capital Revolution.” Journal of Economic Perspectives (Spring 2001): 145-168.
Paul Graham, essays, http://www.paulgraham.com/articles.html, and on Google itself, http://www.slate.com/blogs/blogs/thewrongstuff/archive/2010/08/03/error-message-google-research-director-peter-norvig-on-being-wrong.aspx
Acemoglu, Daron and Autor, David, “Skills, Tasks, and Technologies: Implications for Employment and Earnings,” http://econ-www.mit.edu/files/5607
Robert J. Gordon and Ian Dew-Becker, “Unresolved Issues in the Rise of American Inequality,”http://www.people.fas.harvard.edu/~idew/papers/BPEA_final_ineq.pdf
Song, Jae, David J. Price, Fatih Guvenen, and Nicholas Bloom. “Firming Up Inequality,” CEP discussion Paper no. 1354, May 2015.
Andrews, Dan, Chiara Criscuolo and Peter N. Gal. “Frontier firms, Technology Diffusion and Public Policy: Micro Evidence from OECD Countries.” OECD working paper, 2015.
Mueller, Holger M., Paige Ouimet, and Elena Simintzi. “Wage Inequality and Firm Growth.” Centre for Economic Policy Research, working paper 2015.
Readings on blockchain governance, to be distributed.
Haltiwanger, John, Ian Hathaway, and Javier Miranda. “Declining Business Dynamism in the U.S. High-Technology Sector.” Ewing Marion Kauffman Foundation, February 2014.
Organization and capital structure
Ronald Coase and Oliver Williamson on the firm, if you haven’t already read them, but limited doses should suffice.
Gibbons, Robert, “Four Formal(izable) Theories of the Firm,” on-line at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=596864.
Van den Steen, Eric, “Interpersonal Authority in a Theory of the Firm,” American Economic Review, 2010, 100:1, 466-490.
Lazear, Edward P. “Leadership: A Personnel Economics Approach,” NBER Working Paper 15918, 2010.
Oyer, Paul and Schaefer, Scott, “Personnel Economics: Hiring and Incentives,” NBER Working Paper 15977, 2010.
Tyler Cowen chapter on CEO pay, to be distributed.
Cowen, Tyler, Google lecture on prizes, on YouTube.
Ben-David, Itzhak, and John R. Graham and Campbell R. Harvey, “Managerial Miscalibration,” NBER working paper 16215, July 2010.
Glenn Ellison, “Bounded rationality in Industrial Organization,” http://cemmap.ifs.org.uk/papers/vol2_chap5.pdf
Miller, Merton, and commentators. “The Modigliani-Miller Propositions After Thirty Years,” and comments, Journal of Economic Perspectives (Fall 1988): 99-158.
Myers, Stewart. “Capital Structure.” Journal of Economic Perspectives (Spring 2001): 81-102.
Hansemann, Henry. “The Role of Non-Profit Enterprise.” Yale Law Journal (1980): 835-901.
Kotchen, Matthew J. and Moon, Jon Jungbien, “Corporate Social Responsibility for Irresponsibility,” NBER working paper 17254, July 2011.
Strictly optional but recommended for the serious: Ponder reading some books on competitive strategy, for MBA students. Here is one list of recommendations: http://www.linkedin.com/answers/product-management/positioning/PRM_PST/20259-135826
Production
American Economic Review Symposium, May 2010, starts with “Why do Firms in Developing Countries Have Low Productivity?” runs pp.620-633.
Dani Rodrik, “A Surprising Convergence Result,” http://rodrik.typepad.com/dani_rodriks_weblog/2011/06/a-surprising-convergence-result.html, and his paper here http://www.hks.harvard.edu/fs/drodrik/Research%20papers/The%20Future%20of%20Economic%20Convergence%20rev2.pdf
Serguey Braguinsky, Lee G. Branstetter, and Andre Regateiro, “The Incredible Shrinking Portuguese Firm,” http://papers.nber.org/papers/w17265#fromrss.
Nicholas Bloom, Raffaella Sadun, and John Van Reenen, “Recent Advances in the Empirics of Organizational Economics,” http://cep.lse.ac.uk/pubs/download/dp0970.pdf.
Nicholas Bloom, Raffaella Sadun, and John Van Reenen, the slides for “Americans do I.T. Better: US Multinationals and the Productivity Miracle,” http://www.people.hbs.edu/rsadun/ADITB/ADIBslides.pdf, the paper is here http://www.stanford.edu/~nbloom/ADIB.pdf but I recommend focusing on the slides.
Bloom, Nicholas, Raffaella Sadun, and John Van Reenen. “Management as a Technology?” National Bureau of Economic Research working paper 22327, June 2016.
Syerson, Chad “What Determines Productivity?” Journal of Economic Literature, June 2011, XLIX, 2, 326-365.
David Lagakos, “Explaining Cross-Country Productivity Differences in Retail Trade,” Journal of Political Economy, April 2016, 124, 2, 1-49.
Casselman, Ben. “Corporate America Hasn’t Been Disrupted.” FiveThirtyEight, August 8, 2014.
Decker, Ryan and John Haltiwanger, Ron S. Jarmin, and Javier Miranda. “Where Has all the Skewness Gone? The Decline in High-Growth (Young) Firms in the U.S. National Bureau of Economic Research working paper 21776, December 2015.
Furman, Jason and Peter Orszag. “A Firm-Level Perspective on the Role of Rents in the Rise in Inequality.” October 16, 2015.
http://evansoltas.com/2016/05/07/pro-business-reform-pro-growth/
Furman, Jason. ”Business Investment in the United States: Facts, Explanations, Puzzles, and Policy.” Remarks delivered at the Progressive Policy Institute, September 30, 2015, on-line at https://m.whitehouse.gov/sites/default/files/page/files/20150930_business_investment_in_the_united_states.pdf.
Scharfstein, David S. and Stein, Jeremy C. “Herd Behavior and Investment.” American Economic Review 80 (June 1990): 465-479.
Stein, Jeremy C. “Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior.” Quarterly Journal of Economics 104 (November 1989): 655-670.
Sectors: finance, health care, education, others
Gorton, Gary B. “Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007,” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1401882, published on-line in 2009.
Erel, Isil, Nadault, Taylor D., and Stulz, Rene M., “Why Did U.S. Banks Invest in Highly-Rated Securitization Tranches?” NBER Working Paper 17269, August 2011.
Healy, Kieran. “The Persistence of the Old Regime.” Crooked Timber blog, August 6, 2014.
More to be added, depending on your interests.
The Most Momentous Place?
The old city of Jerusalem is astonishingly small for a city with so many momentous places. One can walk from Christianity’s holiest site to the holiest site of Judaism, pausing to look at one of the holiest sites of Islam, in less time than it takes to walk from my office on the campus of George Mason University to the campus Starbucks. Jerusalem is actually smaller than the GMU campus. GMU has had a few big events to its credit–two Nobel Prizes, several presidential speeches and so forth–but few people come here on pilgrimage. GMU doesn’t compete with Jerusalem.
Is there another parcel of land of similar size to the old city of Jerusalem that can lay claim to being similarly momentous? The signing of the Declaration of Independence in Philadelphia was pretty important but not much has happened there since. Cape Canaveral gets a nod but doesn’t span multiple fields of endeavor. Rome was important for a long time but its momentous events have faded compared to those that occurred in Jerusalem.
My best guess for a momentous parcel of land of similar size to old Jerusalem would be Cambridge University in the UK. Cambridge can lay claim to being the place of Newton, Darwin, Maxwell, Babbage, Turing, Oppenheimer, and Crick and Watson and many others in the fields of politics, literature and the social sciences including economists such as Keynes, Marshall and Sen. Overall, Cambridge gives Jerusalem a run for its money. Jerusalem had its momentous period between say the building of the first temple in 957 BCE and Muhammad’s night journey around 621 CE, a period of roughly 1600 years, while Cambridge has had only an 800 year run since being built in 1231 so controlling for a time a case can be made that Cambridge beats Jerusalem. Perhaps you disagree but then Cambridge is still racking up momentous events while Jerusalem hasn’t had much in the past 1400 years so Cambridge is certainly catching up. Of course, one big event could put Jerusalem back on top.
Aside from Cambridge, cases can be made for other universities such as Oxford, Harvard and even newcomer Chicago. But it’s interesting that universities come to mind as perhaps the only places in real competition with Jerusalem. Are there others?
Simplifiers vs. constructors in science
Simplifiers give one a better overall picture of how the world works, whereas constructors are trying to build something. The balance seems to be shifting, for instance in physics:
Within the Physics label…we find the simplifiers dominated three quarters of the Nobel Prizes from 1952 to 1981, but more recently constructors have edged the balance with more than half of those from 1982 to 2011.
There is also a shift toward constructors in chemistry, though it is less abrupt. In the fields of physiology and medicine, however, simplifiers reign supreme and there has been no shift across time. Three-quarters of the prizes are still going to simplifiers.
Does that mean we should be relatively bullish about progress in those areas, based on forthcoming fundamental breakthroughs?
All these points are from Jeremy J. Baumberg’s new and interesting The Secret Life of Science: How It Really Works and Why It Matters.
The excellent Kevin A. Bryan on innovation
He has a forthcoming JET paper with Jorge Lemus, here is the abstract:
We construct a tractable general model of the direction of innovation. Competition leads firms to pursue inefficient research lines, because firms both race toward easy projects and do not fully appropriate the value of their inventions. This dual distortion will imply that any directionally efficient policy must condition on the properties of hypothetical inventions which are not discovered in equilibrium, hence common R&D policies like patents and prizes generate suboptimal innovation direction and may even generate lower welfare than laissez faire. We apply this theory to radical versus incremental innovation, patent pools, and the effect of trade on R&D.
Here is a slightly different version of the abstract, along with other research papers. Here is Kevin on travel. Kevin is at the University of Toronto, and also is author of the excellent blog A Fine Theorem.
Here is Kevin’s reading list on innovation, recommended.