cssi/SciSciGPT-SciSciNet huggingface dataset:
Do corporate executives have accurate predictions for the economy? A directional analysis

Abstract Although many studies on the directional accuracy of forecasts by international organizations and professional forecasters have been scrutinized, little attention has been paid to forecasts by business leaders. In order to address this gap, we use directional tests to investigate whether forecasts of Gross Domestic Product by corporate executives are valuable to their users. Our findings indicate that all the forecasts with forecast horizons from 1 to 14 months are valuable, whereas established literature indicates that longer-term forecasts tend not to be valuable. This suggests that corporate executives are concerned with and focus on longer-term economic environments and can therefore serve as an important resource for policymakers. However, some of the useful forecasts with real-time data, in particular those in the Tankan survey, are not useful with historical data.
Reflections on the End of the Federal Law Clerk Hiring Plan

The D.C. Circuit recently announced it will no longer follow the Federal Judges Law Clerk Hiring Plan. With that announcement, the Plan effectively died — as countless clerkship applicants can now attest. As a postmortem, this essay argues that the Plan’s demise illustrates transcendent lessons about regulatory design. By reminding us of these lessons, the Plan’s legacy need not be one of failure, but of avoiding even greater failures in the future.
Does Option Compensation Increase Managerial Risk Appetite

This paper solves the dynamic investment problem of a risk averse manager compensated with a call option on the assets he controls. Under the manager’s optimal policy, the option ends up either deep in or deep out of the money. As the asset value goes to zero, volatility goes to infinity. However, the option compensation does not strictly lead to greater risk seeking. Sometimes, the manager’s optimal volatility is less with the option than it would be if he were trading his own account. Furthermore, giving the manager more options causes him to reduce volatility. MANAGERS WITH CONVEX COMPENSATION SCHEMES play an important role in financial markets. This paper solves for the optimal dynamic investment policy for a risk averse manager paid with a call option on the assets he controls. The paper focuses on how the option compensation impacts the manager’s appetite for risk when he cannot hedge the option position. On one hand, the convexity of the option makes the manager shun payoffs that are likely to be near the money. Under the optimal policy, the manager either significantly outperforms his benchmark or else incurs severe losses. Furthermore, in examples of optimal trading strategies, asset volatility goes to infinity as asset value goes to zero. Yet option compensation does not strictly lead to greater risk seeking. As asset value grows large, or if the evaluation date is far away, the manager moderates asset risk. For example, if the manager has constant relative risk aversion ~CRRA!, asset volatility converges to the Merton constant as asset value goes to infinity. In some situations, the manager actually chooses a lower asset volatility than he would if he were investing on his own, because the leverage inherent in his option magnifies his exposure to the asset volatility. In addition, with all constant or decreasing absolute risk averse utility functions from the hyperbolic absolute risk averse ~HARA! class, giving the manager more options causes him to reduce asset volatility. In the CRRA case, for example, the manager targets a fixed volatility for his personal
Paulson's gift ☆

Abstract We calculate the costs and benefits of the largest ever US government intervention in the financial sector announced during the 2008 Columbus-day weekend. We estimate that this intervention increased the value of banks’ financial claims by $130 billion (bn) at a taxpayers’ cost of $21–$44 billion with a net benefit between $86 and $109 bn. By looking at the limited cross section, we infer that this net benefit arises from a reduction in the probability of bankruptcy, which we estimate would destroy 22% of the enterprise value. The big winners of the plan were the bondholders of the three former investment banks and Citigroup, while the losers were JP Morgan shareholders and the US taxpayers.
Global rigidity for totally nonsymplectic Anosov Z k actions

We consider a totally nonsymplectic Anosov action of Z^k which is either uniformly quasiconformal or pinched on each coarse Lyapunov distribution. We show that such an action on a torus is C^\infty--conjugate to an action by affine automorphisms. We also obtain similar global rigidity results for actions on an arbitrary compact manifold assuming that the coarse Lyapunov foliations are jointly integrable.
Optimal Taxation in a Federal System of Governments

This paper demonstrates that the optimal structure of taxation in a federal system of governments is one in which only lower level governments are allowed to tax, and the higher level of government receives its revenues as contributions from the lower level governments. The central inefficiency created when multiple levels are allowed to tax is a revenue externality between governments that is analogous to a common pool problem. A federal system with multiple levels of taxing authority results in combined tax rates higher than would be optimal, a higher excess burden of taxation, and an inefficiency bias in government spending. Within a federal system of governments there are several ways to allocate the power of taxation to provide revenues for all levels of government. The current structure in the United States (U.S.) gives federal, state, and local governments the power to tax individual citizens. Commonly there are more than three levels of taxing authority if special districts are included. The current literature on optimal taxation contains little consideration of how the power of taxation should be allocated in a federal system, and instead concentrates on the best way for a single government to raise revenue across its tax instruments. This issue is also directly relevant to whether international organizations, such as the United Nations (U.N.) or European Union should have the power of taxation. This paper demonstrates that allowing multiple levels of government the power of taxation creates a common pool problem, with the result being that the combined tax rates of all governments are higher than would be optimal. The central idea is that a change in the tax rate of one level of government affects the revenues of other levels of government, resulting in an intergovernmental revenue externality. The adverse effects of allowing multiple levels of government the power of taxation are an increase in the deadweight loss of taxation, an inefficiency bias in government spending, and possibly lower total tax revenue. After showing these results, I discuss alternative taxing institutions to internalize the externality. In this paper I argue that the system where only states have the power of taxation, and the federal government is financed through a system of contributions from the state governments, is the strictly preferred system of taxation in a federal system of governments. The feasibility of this solution is discussed within the context of the fiscal system that was present
Taking Back What’s Theirs: The Recess Appointments Clause, Pro Forma Sessions, and a Political Tug-of-War

This Note surveys the current landscape of the Recess Appointments Clause. With the recent recess appointments of Richard Cordray to direct the Consumer Financial Protection Bureau (CFPB) and three other individuals to join the National Labor Relations Board (NLRB), came an influx of old—and new—controversy over the President's recess appointment authority. This Note explores interpretational issues that have surrounded the Clause since its inception, as well as novel issues that have arisen with the Congress’s use of pro forma sessions in an attempt to block recess appointments and derail the executive’s agenda. The conflict over control of the appointments process is at its peak, as exemplified by the current litigation seeking to invalidate President Obama's most recent recess appointments. This Note examines the varied interpretations of the Clause, the current litigation and potential dispositions, the increasing congressional trend of using the appointments process as an obstructionist device, and the possible state of both the CFPB and the Recess Appointments Clause after litigation. Ultimately, this piece proposes a modified functionalist standard by which the validity of recess appointments should be judged. That is, if the Senate is in a truly functional recess for a period of longer than three days, then the President should be able to make a valid recess appointment. Additionally, this three-day rule can be broken in the event of an emergency that renders the Senate unable to advise and consent to a nominee at a time when a recess appointment is necessary for the uninterrupted functioning of the government.
Information, Knowledge and Belief

The paper models information as possibilities consistent with signals received from the environment. Knowledge is obtained by reasoning about the signals received as well as those that might have been received but were not. The term ‘knowledge’ is used to refer to those beliefs that are obtained by reasoning about the available information, and nothing else. That is, one ought to be able to fully justify what one knows by means of the information that is available. The term ‘belief’ is used to refer to those beliefs that are based on information but not necessarily only on information. The author investigates the relationship between information, knowledge and belief, as well as the issue of updating knowledge and belief in response to changes in information.
Modeling returns to owner-occupied single-family residences

This paper expands previous models of the returns to owner-occupied single-family residences by modelling returns to a specific property of an individual homeowner instead of determining an average market return based on appraised values. Included in the model are transaction costs, degree of leverage, level of price appreciation, the implied rental cost in ownership, tax bracket, and duration of home ownership. Simulation results suggests that the level and timing of transaction costs are important to homeowners and rates of return to owner-occupied single-family residences increase to a point in time and thereafter decline.
Reasonable accommodations for individuals regarded as having disabilities under the Americans with Disabilities Act? Why "No" should not be the answer.

When President George H. Bush signed the Americans with Disabilities Act (ADA) into law, he hailed it as a landmark piece of legislation that would open many “once-closed” doors for individuals with disabilities. One of the ADA’s most noticeable features is that in addition to prohibiting employers from firing and failing to hire individuals with disabilities, it places an affirmative obligation on employers to accommodate an employee’s or a candidate’s disability; however, because the ADA defines “disability” in three ways, a question arose
The Concept of White Collar Crime in Law and Legal Theory

Use of the term “white collar crime” to refer to some category of illegal, or at least deviant, conduct is now a common feature of our linguistic landscape. Sociologists and criminologists, though disagreeing among themselves about exactly what the term means, have been talking about white collar crime for more than sixty years. The majority of American law schools have a course in the subject. Journalists and politicians refer to it regularly. Law enforcement agencies, prosecutors, and defense attorneys all claim expertise in the area. And the term is increasingly being used outside the United States, both in English and in translation. Yet, despite its currency in the academic, professional, and popular culture, the term “white collar crime” occurs only rarely in substantive criminal law. The term appears in only a handful of relatively obscure criminal statutes, and the question whether an offense should be considered a white collar crime is one that has arisen in even fewer cases. Or at least that was the case until recently. For it is striking that, in the recently-enacted Sarbanes-Oxley Act— one of the most important pieces of federal criminal law legislation in many years, and the subject of this symposium—the term makes a prominent appearance. The aim of this article is to inquire into the many meanings of white collar crime. I begin by identifying three fault lines upon which disagreement over use of the term has developed, particularly among social scientists. Here, we find a remarkably wide range of both proposed definitions and terminological alternatives. I then turn to the various ways in which the term has been used by law
The quality of the legal system, firm ownership, and firm size

Employment in developing countries is disproportionately concentrated in very small firms. The authors examine the extent to which the distribution of firm size is related to the quality of the legal system using data from Mexico. They combine Lucas' (1978) model of firm size with Himmelberg, Hubbard, and Love's (2001) consideration of idiosyncratic risk in a framework in which the distribution of entrepreneurial talent and aversion to idiosyncratic risk combine to determine the optimal size of firms. Their data allows them to focus on the differential impact of the legal system on proprietorships and corporations. Moreover, by focusing on firms in a single country, the data draw attention to the importance of variation in the administration of justice and the enforcement of legal verdicts. The authors find that Mexican states with more effective legal systems have larger firms. A one-standard deviation improvement in the quality of the legal system increases the average firm size by about 10-15 percent. The impact of the legal system is greatest in sectors in which proprietorships dominate. This pattern is consistent with better legal systems increasing the investment of firm owners by reducing the idiosyncratic risk they face. All of these findings are upheld when the authors instrument for institutional variables using the log of indigenous population in 1900 and the active presence of the drug trade in the state.
Investment, Financing Constraints, and Internal Capital Markets: Evidence from the Advertising Expenditures of Multinational Firms

We find a significant positive relation between a firm's advertising spending in the United States and its contemporaneous foreign cash flow. This relation holds even after controlling for factors that should be related to the optimal level of domestic advertising, and it is stronger for subsets of firms that we expect to be relatively more financially constrained. Our evidence supports the hypothesis that there is a causal and economically substantial link between cash flow and investment spending, even for intangible investments such as advertising. Our evidence also suggests that firms have active internal capital markets in which capital is moved across geographic regions. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org., Oxford University Press.
Targeting Ultra-Poor Households in Honduras and Peru

For policy purposes, it is important to understand the relative efficacy of various methods to target the poor. Recently, participatory methods have received particular attention. We examine the ef...
Two-step estimation of network-formation models with incomplete information ☆

Abstract We model network formation as a simultaneous game of incomplete information, allowing linking decisions to depend on the structure of the network as well as the attributes of agents. When the data is rationalized by a symmetric equilibrium, meaning observationally equivalent agents choose the same ex-ante strategies, the model can be estimated using a computationally simple two-step estimator. We derive its asymptotic properties under a sequence of models sending the number of agents to infinity, which enables inference with only a single network observation. Our procedure generalizes dyadic regression, allowing the latent index to be a function of endogenous regressors that depend on the network. We apply the estimator to study trust networks in rural Indian villages.
Strategic leadership for the 21st century

We are on the precipice of an epoch–—a distinctive, exciting, and challenging time for organizations. My focus is on twenty-first century organizations and the characteristics required for survival and long-term success. To begin, consider that you are a member of the board of directors of a major corporation in the year 2010–—thirteen years in the future. What do you believe will be the characteristics of business organizations in this year? What strategies will they employ? How will they be structured? How will they manage their human capital? (Hitt, 1998, p. 218)
The Rebirth of Austrian Economics: 1974–99

Twenty five years ago, Austrian economics appeared to be a ‘closed chapter in the history of economics.’ Today Austrian ideas are flourishing as never before. That is partly due to the compelling nature of Austrian ideas. But there is a good case for arguing that the ‘official rebirth’ of Austrian economics dates back to a meeting in South Royalton, Vermont in June 1974.
Political competition between differentiated candidates

Abstract We introduce a framework of electoral competition in which voters have general preferences over candidatesʼ immutable characteristics (such as gender, race or previously committed policy positions) as well as their policy positions, which are flexible. Candidates are uncertain about the distribution of voter preferences and choose policy positions to maximize their winning probability. We characterize a property of voter utility functions (“uniform candidate ranking”, UCR) that captures a form of separability between fixed characteristics and policy. When voters have UCR preferences, candidatesʼ equilibrium policies converge in any strict equilibrium. In contrast, notions like competence or complementarity lead to non-UCR preferences and policy divergence. In particular, we introduce a new class of models that contains the probabilistic voting model as a special case and in which there is a unique equilibrium that generically features policy divergence.
SIX CHALLENGES IN DESIGNING EQUITY‐BASED PAY

The past two decades have seen a dramatic increase in the equitybased pay of U.S. corporate executives, an increase that has been driven almost entirely by the explosion of stock option grants. When properly designed, equity-based pay can raise corporate productivity and shareholder value by helping companies attract, motivate, and retain talented managers. But there are good reasons to question whether the current forms of U.S. equity pay are optimal. In many cases, substantial stock and option payoffs to top executives–particularly those who cashed out much of their holdings near the top of the market–appear to have come at the expense of their shareholders, generating considerable skepticism about not just executive pay practices, but the overall quality of U.S. corporate governance. At the same time, many companies that have experienced sharp stock price declines are now struggling with the problem of retaining employees holding lots of deep-underwater options. This article discusses the design of equity-based pay plans that aim to motivate sustainable, or long-run, value creation. As a first step, the author recommends the use of longer vesting periods and other requirements on executive stock and option holdings, both to limit managers' ability to “time” the market and to reduce their incentives to take shortsighted actions that increase near-term earnings at the expense of longer-term cash flow. Besides requiring “more permanent” holdings, the author also proposes a change in how stock options are issued. In place of popular “fixed value” plans that adjust the number of options awarded each year to reflect changes in the share price (and that effectively reward management for poor performance by granting more options when the price falls, and fewer when it rises), the author recommends the use of “fixed number” plans that avoid this unintended distortion of incentives. As the author also notes, there is considerable confusion about the real economic cost of options relative to stock. Part of the confusion stems, of course, from current GAAP accounting, which allows companies to report the issuance of at-the-money options as costless and so creates a bias against stock and other forms of compensation. But, coming on top of the “opportunity cost” of executive stock options to the company's shareholders, there is another, potentially significant cost of options (and, to a lesser extent, stock) that arises from the propensity of executives and employees to place a lower value on company stock and options than well-diversified outside investors. The author's conclusion is that grants of (slow-vesting) stock are likely to have at least three significant advantages over employee stock options: ▪ they are more highly valued by executives and employees (per dollar of cost to shareholders); ▪ they continue to provide reasonably strong ownership incentives and retention power, regardless of whether the stock price rises or falls, because they don't go underwater; and ▪ the value of such grants is much more transparent to stockholders, employees, and the press.
Range has it: decoding the information content of forecast ranges

Range forecasts have emerged as the predominant form of management forecasts, but prior research has overlooked the information conveyed by forecast ranges. This study fills this void by examining the information content of the extent to which managers’ forecast ranges overlap with the range of individual analysts’ pre-existing estimates (i.e., overlap). We expect managers to signal their superior private information by issuing low-overlap forecasts. We predict and find that, compared with high-overlap forecasts, low-overlap forecasts are associated with stronger market reactions and higher accuracy of management forecasts relative to analyst estimates. Moreover, when responding to low-overlap management forecasts, analysts with prior estimates out of management forecast ranges are more likely to revise into the management forecast range, less likely to revise toward the consensus, and more likely to improve in revised forecast accuracy. Our findings suggest that investors and analysts view low-overlap management forecasts as signals of superior private information.
Probability, policy and the problem of reference class

This short paper focuses on the problem of reference class in evidentiary assessment as it relates to probability and weight of evidence. The reluctance to inject mathematical formalism into the factfinding function is justified. Objective probability requires a reference class from which a proportion is derived. Probability assessments change with the reference class. If a proposition is subject to proportional comparison against two or more different references, their selection is often an inductive process. The advantage of objectivity and methodological rigor is illusory. A legal dispute is the search for a plausible understanding of the truth, and an overtly mathematized process runs the risk of substantially substituting particularized inquiry with aggregate assessment, a notion inimical to transactional causation between conduct and injury. In special circumstances, however, when such inquiry cannot advance the goal of error minimization, a rule of law consistent with a class proposition may advance the notion of statistical justice. But as a general matter the juridical process should not confuse aggregate assessment with individual justice.
I/B/E/S Reported Actual EPS and Analysts' Inferred Actual EPS

ABSTRACT: Users of I/B/E/S data generally act as if I/B/E/S reported actual earnings represent the earnings analysts were forecasting when they issued their earnings estimates. For example, when assessing analyst forecast accuracy, users of I/B/E/S data compare analysts' forecasts of EPS with I/B/E/S reported actual EPS. I/B/E/S states that it calculates actuals using a “majority rule,” indicating that its actuals often do not represent the earnings that all individual analysts were forecasting. We introduce a method for measuring analyst inferred actuals, and we assess how often I/B/E/S actuals do not represent analyst inferred actuals. We find that I/B/E/S reported Q1 actual EPS differs from analyst inferred actual Q1 EPS by at least one penny 39 percent of the time during our sample period, 36.5 percent of the time when only one analyst follows the firm (hence, this consensus forecast is based on the “majority rule”), and 50 percent of the time during the last three years of our sample period. We docum...
Theft and Deterrence

We report results from economic experiments of decisions that are best described as petty larceny, with high school and college students who can anonymously steal real money from each other. Our design allows exogenous variation in the rewards of crime, and the penalty and probability of detection. We find that the probability of stealing is increasing in the amount of money that can be stolen, and that it is decreasing in the probability of getting caught and in the penalty for getting caught. Furthermore, the impact of the certainty of getting caught is larger when the penalty is bigger, and the impact of the penalty is bigger when the probability of getting caught is larger.
Financial Crises and Risk Premia

I analyze the behavior of risk premia in financial crises, wars, and recessions in an international panel spanning over 140 years and 14 countries. I document that expected returns, or risk premia, increase substantially in financial crises, but not in the other episodes. Asset prices decline in all episodes, but the decline in financial crises is substantially larger than the decline in fundamentals so that expected returns going forward are large. However, drops in consumption and consumption volatility are fairly similar across financial crises and recessions and are largest during wars, so asset pricing models based on aggregate consumption have trouble matching these facts. Comparing crises to “deep” recessions strengthens these findings further. By disentangling financial crises from other bad macroeconomic times, the results suggest that financial crises are particularly important to understanding why risk premia vary. I discuss implications for theory more broadly and discuss both rational and behavioral models that are consistent with the facts. Theories where asset prices are related to the health of the financial sector appear particularly promising.
Global observables at PHENIX

We present PHENIX recent results on charged particle and transverse energy densities measured at mid-rapidity in Au−Au collisions at \(\sqrt {s_{NN} } = 130\) GeV and 200 GeV over a broad range of centralities. The mean transverse energy per charged particle is derived. The first PHENIX measurements at \(\sqrt {s_{NN} } = 19.6\) GeV are also presented. A comparison with calculations from various theoretical models is performed.
The Equal Protection of Free Exercise: Two Approaches and their History

Contrary to critics of the Supreme Court's current equal protection approach to religious liberty, this Article contends that, from the very first federal free exercise cases, the Equal Protection and Free Exercise Clauses have been mutually intertwined. The seeds of an equal protection analysis of free exercise were, indeed, planted before the Fourteenth Amendment within the constitutional jurisprudence of several states. Furthermore, this Article argues, equal protection approaches should not be uniformly disparaged. Rather, the drawbacks that commentators have observed result largely from the Supreme Court's application of an inadequate version of equal protection. By ignoring the lessons that the Fourteenth Amendment taught about the nature of group classification and instead emphasizing the individual, the current approach downplays free exercise claims. Considering this tendency within the context of contemporary theories of group rights and antidiscrimination law, the Article concludes that the nowneglected, alternative strand of an equal protection approach to free exercise should be revived.
Environmental Law at the Turn of the Century: A Reportorial Fragment of Contemporary History

Introduction ... 2377 I. The Strategy for Preserving the Endangered Species Act 2380 II. Key Legal Issues Encountered in Enforcing the Endangered Species Act 2382 III. Case Studies 2386 A. The Snake River ......... 2386 B. The Rio Grande and the Silvery Minnow ..... 2390 C. The Platte River 2394 Conclusion ........ 2401
Spatial Price Discrimination with Heterogeneous Firms

In this paper we aim to explain intuitively heterogeneous firms’ optimal location decisions in a simple spatial market. To do so, we present and solve a four-stage game of entry, location, pricing and consumption in a spatial price discrimination framework with arbitrarily many heterogeneous firms. We provide a unique equilibrium outcome without imposing restrictions on the distribution of marginal costs across firms.
The impact of foreign interest rates on the economy: The role of the exchange rate regime

Abstract It is often argued that many economies are affected by conditions in foreign countries. This paper explores the connection between interest rates in major industrial countries and annual real output growth in other countries. The results show that high foreign interest rates have a contractionary effect on annual real GDP growth in the domestic economy, but that this effect is centered on countries with fixed exchange rates. The paper then examines the potential channels through which major-country interest rates affect other economies. The effect of foreign interest rates on domestic interest rates is the most likely channel when compared with other possibilities, such as a trade effect.
Do state owned banks promote growth? Cross-country evidence for manufacturing industries

Abstract This paper tests the efficiency of different structures of bank ownership in terms of its ability to target manufacturing sectors in need of credit. We find that state owned banks do not play a significant role in the development of industries that rely more on external finance and/or that have less tangible assets to pledge as Collateral.
Asset-pricing anomalies at the firm level

Abstract We introduce a hierarchical Bayes approach to model conditional firm-level alphas as a function of firm characteristics. Our empirical framework is motivated by growing concerns in the literature regarding the reliability of inferences from portfolio-based methods. In our initial tests, we confirm the existence of several CAPM anomalies at the firm level. Prominent multifactor models deliver only a modest improvement, however, as they often resolve only those anomalies which are directly linked to their additional factors. Further results suggest that the economic importance of CAPM anomalies is overstated. We find that anomalies are primarily confined to small stocks, few characteristics are associated with CAPM alphas out of sample, and many firm characteristics do not contain unique information about abnormal returns.
Inflation and Nominal Financial Reporting: Implications for Performance and Stock Prices

ABSTRACT: The monetary unit assumption of financial accounting assumes a stable currency (i.e., constant purchasing power over time). Yet, even during periods of low inflation or deflation, nominal financial statements violate this assumption. I posit that, while the effects of inflation are not recognized in nominal statements, such effects may have economic consequences. I find that unrecognized inflation gains and losses help predict future cash flows as these gains and losses turn into cash flows over time. I also find significant abnormal returns to inflation-based trading strategies, suggesting that stock prices do not fully reflect the implications of the inflation effects for future cash flows. Additional analysis reveals that stock prices act as if investors do not fully distinguish monetary and nonmonetary assets, which is fundamental to determining the effects of inflation. Overall, this study is the first to show that, although inflation effects are not recognized in nominal financial statemen...
Forecasting by Extrapolation: Conclusions from 25 Years of Research

Sophisticated extrapolation techniques have had a negligible payoff for accuracy in forecasting. As a result, major changes are proposed for the allocation of the funds for future research on extrapolation. Meanwhile, simple methods and the combination of forecasts are recommended.
Capital Flows and Financial Stability: Monetary Policy and Macroprudential Responses

The resumption of capital ‡ows to emerging market economies since mid 2009 has posed two sets of interrelated challenges for policymakers: (i) to prevent capital ‡ows from exacerbating overheating pressures and consequent in‡ation, and (ii) to minimize the risk that prolonged periods of easy …nancing conditions will undermine …nancial stability. While conventional monetary policy maintains its role in counteracting the former, there are doubts that it is su¢ cient to guard against the risks of …nancial instability. Against this background, this paper analyses the interplay between monetary and macroprudential policies in an open economy DSGE model with nominal and real frictions. There are four key results of the paper. First, macroprudential measures can usefully complement monetary policy. Even under the “optimal policy,”introducing macroprudential measures is welfare improving. Second, broad-based macroprudential
Internalizing Private Prison Externalities: Let's Start With The GED

Prison education is a remarkably good investment for society, yet an increasing proportion of inmates have no access to it because the operators of the prisons in which they are held have a powerful incentive not to provide it: they make more money that way. Critics and analysts of private prison operators have suggested various incentive structures to improve their performance, but most jurisdictions focus on the operator’s cost to the contracting entity. The social costs imposed by foregoing prison education are not part of the arrangement between a private prison operator and a jurisdiction with which it contracts. Although these costs are real and substantial to the inmates who bear them, because the inmates are not parties to the contract, these costs are externalities. Imposing these social costs on prison operators could improve the conditions for inmates in their custody and is very likely to improve these inmates’ success after release. Unlike more complex strategies for imposing incentives on correctional programs to reduce recidivism, prison education is a known, straightforward rehabilitative strategy whose provision can be measured quite easily at the point of release. There is even a well-accepted metric for prison education administered by an independent third party: the General Educational Development Test (“GED”). This article proposes using the GED to internalize the cost of reduced or poor inmate education by imposing financial penalties on private prison operators whose inmates do not obtain, or make progress toward, a GED during their incarceration. This would provide the social benefits of inmate education, alter private prison operators’ behavior at minimal administrative cost, and most importantly, benefit inmates being released.
What Makes Negotiators Happy? The Differential Effects of Internal and External Social Comparisons on Negotiator Satisfaction

This paper examines the role of internal and external social comparisons in negotiator satisfaction. Internal comparisons involve another party to the negotiation (e.g., buyer compared to seller), while external comparisons focus on someone outside of the negotiation (e.g., buyer compared to other buyers). Negotiator satisfaction can influence a range of post-negotiation behavior, but relatively little is known about what makes negotiators more or less satisfied. In many contexts negotiators receive little objective feedback and lack benchmarks against which to judge their outcome. Prior work has modeled negotiator satisfaction as a function of utility maximization, expectancy disconfirmation, and internal social comparisons (social utility). In this paper we identify another particularly important driver of negotiator satisfaction, external social comparisons. Across five studies we demonstrate that external social comparisons affect satisfaction and that the effects of external social comparisons are qualitatively different from those of internal social comparisons. In particular, we find that downward external social comparisons increase satisfaction, while downward internal social comparisons decrease satisfaction. These results inform important prescriptions, and we discuss implications of these results for managing negotiator satisfaction.
"Revenue Accounting" in the Age of E-Commerce: A Framework for Conceptual, Analytical, and Exchange Rate Considerations

This paper explores “revenue accounting” in contrast to traditional “cost accounting”. Revenue accounting serves the information needs of managers and investors in planning and controlling a firm’s sales activities and their financial consequences, especially in the age of e-commerce. Weaknesses of traditional accounting have become particularly evident recently, for example, the lack of 1) revenue mileposts, 2) revenue sustainability measurements, and 3) intangibles capitalization. The paper emphasizes the need to develop a conceptual framework of revenue accounting and, as a tentative measure, proposes five basic postulates and five operational postulates of revenue accounting. On the side of analytical frameworks, the paper explores some tentative remedies for the weaknesses. Several revenue mileposts are explored to gauge progress in earning revenues and a Markov process is applied to an example involving mileposts. Revenue momentum, measured by the exponential smoothing method, is examined as a way of getting feedback on revenue sustainability; and the use of the sustainabi lity concept in the analysis of “fixed and variable revenues” is illustrated. A project-oriented approach in a manner similar to capital budgeting and to Reserve Recognition Accounting is proposed by treating each customer as a project. Standardization of forecasts are also considered as an important way of bypassing the capitalization issue. Finally, while e-commerce is inherently global, issues specific to global operations are highlighted, namely, exchange rate issues when venture capitalists and the start-up company use different currencies producing different rates of return on the same project. 1. Need for Revenue Accounting Cost accounting was developed in the Industrial Age in which measurement, analysis, and control of product cost became an indispensable part of doing business. Cost accounting has contributed significantly to business operations throughout the world by making various phases of production processes measurable, analyzable, and controllable in monetary terms. The E-Commerce Age, started near the turn of the century with a big blast, was created by the Internet and related breakthroughs in science and
A New Prescription to Balance Secrecy and Disclosure in Drug-Approval Processes

To obtain approval to market a drug, a manufacturer must disclose significant amounts of research data to the government agency that oversees the approval process. The data often include information that could help advance scientific progress, and are therefore of great value. But current laws in both the United States and Europe give secrecy great weight. This Article proposes an obligatory sealed-bid auction of the sensitive information based on the experience with similar auctions in mergers and acquisitions, to balance manufacturers’ interest in secrecy and the public interest in disclosure.
Continuous recognition: A latent variable approach to measuring international sovereignty of self-determination movements:

How do self-determination groups move toward diplomatic recognition? Although recognition is the dominant activity used to understand international sovereignty, it is perhaps the most costly decisi...
Incorporating Litigation Perspectives to Enhance the Business Associations Course

This Article discusses having students in a Business Associations course think about the potential risks of a business decision, including consideration of the multiple perspectives that might produce litigation, as a method for enhancing students understanding of the new legal norms for businesses and the process for advising businesses.
THE IMPLICATIONS OF LIFESTYLE PREFERENCE ON A PUBLIC ACCOUNTING CAREER: AN EXPLORATORY STUDY

Abstract This article examines the Lifestyle Preferences, initial attitudes towards the work environment, and the effects of lifestyle preference on thoughts concerning a career in public accounting for a group of 253 newly-hired juniors (133 males and 120 females). Forty percent of the newly-hired females preferred a lifestyle that meant they would leave public accounting and not return until their youngest child was in school (i.e. at least 7–8 years for a 2–3-child family). Nearly all of the females who intend to have both a family and a long-term career preferred to start their family by age 30 (i.e. before being promoted to senior manager). The data show that about 64% of the females, who intended to leave public accounting and not return until their youngest child was in school, would depart at or before the promotion point for manager.
Stochastic flow diagrams

We introduce Stochastic Flow Diagrams (SFDs), a new mathematical approach to represent complex dynamic systems into a single weighted digraph. This topological representation provides a way to visualize what otherwise would be a morass of equations in differences. SFDs model the propagation and reverberation that follows a shock. For example, reverberation explains how a shock to a financial system can initiate a sequence of events that lead to a crash long after the occurrence of the shock. SFDs can simulate systems in stable, steady or explosive state. SFDs add Topology to the Statistical and Econometric toolkit. We believe that SFDs will help policy makers, investors and researchers communicate and discuss better the complexity of dynamic systems.
The Equity Risk Premium Amid a Global Financial Crisis

We analyze the history of the equity risk premium from surveys of U.S. Chief Financial Officers (CFOs) conducted every quarter from June 2000 to March 2009. The risk premium is the expected 10-year S&P 500 return relative to a 10year U.S. Treasury bond yield. The last two surveys were conducted during the darkest parts of a global financial crisis and our results show that the equity premium sharply increased during the crisis. The survey also provides measures of cross-sectional disagreement about the risk premium, skewness, and a measure of individual uncertainty. The level of disagreement in late 2008 and early 2009 is 64% higher than 2007 levels. We also present evidence on the determinants of the long-run risk premium. Our analysis suggests the level of the risk premium closely tracks both market volatility (reflected in the VIX index) as well as credit spreads. JEL Classification: G11, G31, G12, G14
Legal Information, the Consumer Law Market, and the First Amendment

If “law is basically information,”3 does it follow that legal information is “speech within the meaning of the First Amendment”?4 If so, to what extent may government constitutionally regulate the creation and dissemination of legal information, particularly by lawyers? The answers to these questions hold significant implications for lawyer regulation, the consumer law market, and First Amendment jurisprudence. The consumer law market—i.e., those individuals who do not qualify for legal aid and are unwilling or unable to pay for an attorney who charges three figures per hour for multiple hours—has long been denied affordable, accessible, widely adopted legal services. According to some estimates, this is as much as 80 percent or more of the American population.5 Every
Mean field equilibrium in dynamic games with complementarities

We study stochastic dynamic games with a large number of players, where players are coupled via their payoff functions. We consider mean field equilibrium for such games: in such an equilibrium, each player reacts to only the long run average state of other players. In this paper we focus on a special class of stochastic games, where a player experiences strategic complementarities from other players; formally the payoff of a player has increasing differences between her own state and the aggregate empirical distribution of the states of other players. We find necessary conditions for the existence of a mean field equilibrium in such games. Furthermore, as a simple consequence of this existence theorem, we obtain several natural monotonicity properties. We show that there exist a “largest” and “smallest” equilibrium among all those where the equilibrium strategy used by a player is nondecreasing. We also show that natural best response dynamics converge to each of these equilibria.
Default and aggregate income

Abstract This paper studies how default varies with aggregate income. We analyze a model in which optimal contracts enable risk sharing of privately observed, idiosyncratic income by allowing for default. Default provisions allow agents with low idiosyncratic income realizations to repay less and thus provide insurance. Default penalties ensure that only these agents default. We show that default can occur under the optimal contract and that default provisions vary with aggregate income. We provide conditions such that both the amount of default and default penalties vary countercyclically with aggregate income and show that the default rate can be discontinuous.