137 research outputs found
Rational expectations
No full textEconomists have recently been working with models in which individuals form expectations of key variables in a "rational" manner, such that these expectations are consistent with actual economic environments. Professor Sheffrin first explores the logical foundation of the concept and the case for employing it in economic analysis. Subsequent chapters investigate its use in macroeconomics, financial markets, and microeconomics. A final chapter assesses its impact on theoretical and empirical work in economics and policy arenas. The author argues that although expectations are still central to macroeconomic policy debates, fully workable models have not yet been devised, and he offers reasons for the lack of conceptual and practical advances. All chapters of the second edition have been revised or expandedNew sections include, inter alia, material on learning, the rationality of reported expectations, alternative recent developments that explicitly or implicitly use rational expectations, new tests of the Lucas critique, and models of noise tradin
How Does Voice Matter? Evidence from the Ultimatum Game
No full textPrior research in economics and psychology has shown that process can matter in determining outcomes in many social situations. In particular, the opportunity to express ones opinion-voice-has been found to be highly influential. However, little is known about the channels through which voice may operate. In this paper, we develop a simple economic model of voice to explore these channels. We show that individuals value voice for: 1) its effect on outcomes, 2) its inherent value, or 3) its role in signaling one's social standing. Through the introduction of a hypothetical round in the standard ultimatum game, we were able to test the channels of voice directly by observing recipients' responses to offers which are lower than what they asked for. Our experimental results suggest that voice works primarily through its inherent value which appears to exceed its contribution to the perception of procedural fairness. Further, unlike voice which softens the impact of an unfair outcome, the possibility for voice may have dichotomous effects.voice, ultimatum game
Government Equity-Bonds and Stabilization: A Proposal
No full textÖffentliche Beteiligungs-Anleihen und Stabilisierung: Ein Vorschlag Die geläufige Geldpolitik wird durch Offenmarktoperationen geprägt, mit deren Hilfe Geld in Anleihen umgewandelt wird. Dieses Verfahren ist nicht geeignet, das Verhältnis des Marktwertes des Nominalkapitals zu seinem Wiederverkaufswert (oder "q" in James Tobin's System) zu beurteilen. Es wird ein Vorschlag gemacht, zur Deckung eines Teiles der Staatsverschuldung eine Anleihe zu begeben, die mit dem Wert von Beteiligungskapital oder mit dem Aktienmarkt indiziert ist. Wenn Offenmarktoperationen mit diesem Wertpapier getätigt werden, wäre die Regierung in der Lage, die "Beteiligungspreise" der Anleihen und damit auch q ziemlich genau zu bestimmen. Es wird dargelegt, welche Rolle die Beteiligungspreise für die Bestimmung des Volkseinkommens spielen, und angenommen, daß ein Verfahren zur genaueren Bestimmung der Beteiligungspreise nötig ist. Die Praktikabilität der Öffentlichen Beteiligungs-Anleihe wird im Detail erläutert. Das Ergebnis ist, daß ein solcher Anleihetyp durchaus marktfähig wäre, sein Preis ziemlich leicht von den Anlegern festgestellt werden könnte, und daß er eine wichtige Diversifikation für viele Anleger eröffnen würde, Stabilisierungspolitik mit solchen Anleihen würde grundsätzlich Offenmarktoperationen sowohl mit regulären als auch mit Beteiligungstiteln einschließen. Die politischen Antriebskräfte für die Geldpolitik, die sich aus der Einführung derartiger Anleihen ergeben, dürften sich von den derzeitigen beträchtlich unterscheidenGovernment Equity-Bonds and Stabilization: A Proposal Current monetary policy is conducted by open market operations which swap money for bonds. This may be an ineffective means of controlling the ratio of market value of the capital stock to its replacement value or "q'" in James Tobin's notation. A proposal is made to issue some of the government debt in a bond which is indexed to equity or the stock market. By conducting open market operations in this security, the government would be able to control equity prices rather precisely and, hence, control q. Evidence is summarized which illustrates the role of equity prices in the determination of national income and suggests that some mechanism is needed to control equity prices more precisely. The feasibility of the government equity-bond is discussed in some detail. It is concluded that the bond should be readily marketable, can be priced rather easily by investors and would provide efficient diversification for many investors. Stabilization policy with these bonds would generally involve open market operations in regular debt and equity-debt. The political dynamics of monetary policy following the introduction of this bond may differ considerably from the presen
Behavioral Law and Economics Is Not Just a Refinement of Law and Economics
No full textA number of prominent advocates of applying behavioral economics to the law make the claim that behavioral law and economics is simply a refinement of traditional law and economics. The key difference is that behavioral law and economics uses more realistic descriptions of human behavior as its foundation. This paper takes issue with that claim. We first demonstrate through a series of examples that the strongest adherents of behavioral law and economics take positions that can be seen as subversive of the fundamentals of the core rationality principles underlying traditional law and economics. Second, the assessment of welfare within behavioral economics differs sharply from the traditional economic paradigm used in law and economics
UNANTICIPATED MONEY GROWTH AND OUTPUT FLUCTUATIONS
No full textAlmost all tests of rational expectation models have been conducted under the hypothesis of complete price flexibility. In these models, it is unanticipated inflation that causes business fluctuations. William Poole (1976] recently reviewed empirical studies of rational expectation models and concluded that they fail to explain the persistence of business cycles. 1 However, rational expectation models because of their striking theoretical implications do deserve more extensive testing. In this paper, it is shown that even without instantaneous price adjustment it is possible to have cyclical fluctuations in output arising solely from informational inadequacies. A test of this hypothesis is developed which involves looking directly at unanticipated money growth and fiscal policy. Series for unanticipated money growth and fiscal variables are calculated from time-series analysis; economic actors are taken to use all currently available time-series information for forecasting. A minor econometric innovation is a procedure for preventing future values of a stochastic process from affecting current estimates of the process that the agents use
EVALUATING RATIONAL PARTISAN BUSINESS CYCLE THEORY
No full textThis paper provides new tests of the recently developed theory of rational partisan business cycles. According to the theory, resolution of uncertainty about electoral consequences and partisan differences in economic behavior produce downturns following victories of conservative parties and booms following victories of liberal parties. The first tests utilize the behavior of financial markets to reassess the evidence for the United States. We provide evidence that the stock market does have predictive power for output and estimate an econometric relationship which is then used to gauge the extent to which the recessions are anticipated after elections. The second test uses an international sample of democracies in the postwar era to examine the theory outside the United States using time series models and political variables. The results of the tests provide little support for a strict interpretation of the theory. Copyright 1989 Blackwell Publishers Ltd..
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