cssi/SciSciGPT-SciSciNet huggingface dataset:
A Historical Review of Title IX Litigation

This paper provides a historical analysis of litigation involving Title IX from its enactment in 1972 until its thirty five year anniversary in 2007.
On the conceptual foundations of financial reporting

Standard setters advocate a balance sheet approach to financial reporting, which views assets and liabilities as primary, and income as just the derivative change in net assets. This paper argues that income is conceptually and practically better described as ‘adjusted net cash flows,’ where the adjustments are the accounting accruals. One proof of that is seen in the existence of whole accounting systems like tax accounting and national income accounting, which emphasize the determination of income but have no balance sheets. The paper also argues that an income-based approach to financial reporting is by nature better suited to reflect the success of advancing cash to earn more cash, which defines what for-profit entities do. There are two main features of the income-based approach. One is attention on the cash flows as the natural foundation for financial reporting because they are precisely determined, and provide a clear link to firm valuation. The other is attention on the accounting accruals, which...
Does being your bank’s neighbor matter?

Abstract This paper provides new evidence on the role of distance between banks and borrowers in bank lending. We argue that delegated monitors face higher costs of collecting information about nonlocal borrowers due to the difficulty of obtaining and verifying soft information over distances. Further, the higher information collection and monitoring costs associated with distance should be reflected in loan terms. Empirically, loan spreads are increasing in the distance between borrowers and lenders. Finally, banks are more likely to include covenant provisions or require collateral when lending to borrowers located far away.
Measuring Business Cycles: Approximate Band-Pass Filters for Economic Time Series

Band-pass filters are useful in a wide range of economic contexts. This paper develops a set of approximate band-pass filters and illustrates their application to measuring the business-cycle component of macroeconomic activity. Detailed comparisons are made with several alternative filters commonly used for extracting business-cycle components.
The Complexity of Exchange

The computational complexity of two classes of market mechanisms is compared. First the Walrasian interpretation in which prices are centrally computed by an auctioneer. Recent results on the computational complexity are reviewed. The non-polynomial complexity of these algorithms makes Walrasian general equilibrium an implausible conception. Second, a decentralised picture of market processes is described, involving concurrent exchange within transient coalitions of agents. These processes feature price dispersion, yield allocations that are not in the core, modify the distribution of wealth, are always stable, but path-dependent. Replacing the Walrasian framing of markets requires substantial revision of conventional wisdom concerning markets.
Risk Shifting versus Risk Management: Investment Policy in Corporate Pension Plans

Firms financed with debt face conflicting incentives with respect to the management of cash flow risks. Risk reduction can benefit liquidity constrained firms, but increased risk taking can increase the value of shareholders’ equity through asset substitution when firms are close to default. In this paper I examine these conflicting motivations in a setting where risk shifting incentives should be particularly strong: the investment of defined benefit pension plans sponsored by U.S. companies. Empirically, firms with poorly funded pension plans allocate a greater share of pension fund assets to safer securities such as government debt and cash, whereas well-funded plans invest more heavily in volatile asset classes such as equity. Among large public firms, those with better credit ratings allocate greater shares of pension fund assets to equity and smaller shares to government debt and cash. These relations hold both in the crosssection and within firms and plans over time. The higher the probability of bankruptcy, the safer the observed pension fund asset allocation. Furthermore, the realized investment return volatility of plans that eventually terminate in financial distress is no greater than that of plans that do not terminate. I conclude that the incentive to limit the cash flow risk from pensions plays a considerably larger role than risk shifting in explaining pension fund investment policy among U.S. firms.
A Tale of Two Yield Curves: Modeling the Joint Term Structure of Dollar and Euro Interest Rates

Modeling the joint term structure of interest rates in the United States and the European Union, the two largest economies in the world, is extremely important in international finance. In this article, we provide both theoretical and empirical analysis of multi-factor joint affine term structure models (ATSM) for dollar and euro interest rates. In particular, we provide a systematic classification of multi-factor joint ATSM similar to that of Dai and Singleton (2000). A principal component analysis of daily dollar and euro interest rates reveals four factors in the data. We estimate four-factor joint ATSM using the approximate maximum likelihood method of Ait-Sahalia (2002, forthcoming) and compare the in-sample and out-of-sample performances of these models using some of the latest nonparametric methods. We find that a new four-factor model with two common and two local factors captures the joint term structure dynamics in the US and the EU reasonably well.
Core Measures of Inflation as Predictors of Total Inflation

Two rationales offered for policymakers’ focus on core measures of inflation as a guide to underlying inflation are that core inflation omits food and energy prices, which are thought to be more volatile than other components, and that core inflation is thought to be a better predictor of total inflation over time horizons of import to policymakers. Our investigation finds little support for either rationale. We find that food and energy prices are not the most volatile components of inflation and that depending on which inflation measure is used, core inflation is not necessarily the best predictor of total inflation. However, we do find that combining CPI and PCE inflation measures can lead to statistically significant more accurate forecasts of each inflation measure, suggesting that each measure includes independent information that can be exploited to yield better forecasts.
Investor Competition over Information and the Pricing of Information Asymmetry

ABSTRACT: Whether the information environment affects the cost of capital is a fundamental question in accounting and finance research. Relying on theories about competition between informed investors as well as the pricing of information asymmetry, we hypothesize a cross-sectional variation in the pricing of information asymmetry that is conditional on competition. We develop and validate empirical proxies for competition using the number and concentration of institutional investor ownership. Using these proxies, we find a lower pricing of information asymmetry when there is more competition. Overall, our results suggest that competition between informed investors has an important effect on how the information environment affects the cost of capital. JEL Classifications: G12; G14.
The Politics of International Judicial Appointments: Evidence from the European Court of Human Rights

Theories of government-international court relations assume that judges share an interest in expanding the reach of their court+ Yet, casual observation sug- gests that international judges vary in their activist orientations and that govern- ments selectively appoint judges+ This article explores a new data set of dissents in the European Court of Human Rights ~ECHR! to estimate the ideal points of judges+ The results show that activism-restraint is indeed the main dimension of contestation among judges+ Variation in judicial activism cannot be accounted for by different legal cultures of judges or by levels of domestic human rights observance in the judges' countries of origins+ Instead, aspiring European Union ~EU! members and governments more favorably disposed toward European integration appoint more activ- ist judges+ These results imply that politics matters in the appointment of inter- national judges and that EU expansion was an important driving force behind the ECHR's increased activism+ More generally, the analysis suggests that agent selec- tion is an important and understudied tool for influencing international organizations+
Capital Financing of Schools: A Comparison of Lease Purchase Revenue Bonds and General Obligation Bonds

School building construction is on the rise nationwide and Texas has led the nation in outlays on school construction. We consider key factors that distinguish lease purchase revenue (LPR) bonds and general obligation (GO) bonds as debt instruments for financing school facilities in Texas. Our research shows that LPR bonds typically have a higher interest cost than GO bonds and they do not have any advantages over GO bonds in circumventing state restrictions on school district tax and debt authority. Voter approval requirements implicit in the state aid formulae supporting school bond repayments and the bond election requirements are however both less stringent in the case of LPR bonds than GO bonds.
Happiness inequality in the United States

Abstract This paper examines how the level and dispersion of self‐reported happiness has evolved over the period 1972–2006. While there has been no increase in aggregate happiness, inequality in happiness has fallen substantially since the 1970s. There have been large changes in the level of happiness across groups: two‐thirds of the black‐white happiness gap has been eroded, and the gender happiness gap has disappeared entirely. Paralleling changes in the income distribution, differences in happiness by education have widened substantially. We develop an integrated approach to measuring inequality and decomposing changes in the distribution of happiness, finding a pervasive decline in within‐group inequality during the 1970s and 1980s that was experienced by even narrowly defined demographic groups. Around one‐third of this decline has subsequently been unwound. Juxtaposing these changes with large increases in income inequality suggests an important role for nonpecuniary factors in shaping the well‐bein...
A Tale of Two Theories: Monopolies and Craft Guilds in Medieval England and Modern Imagination

Popular texts typically assert that guilds of craftsmen “monopolized” markets in medieval England. Norman Cantor's Medieval Reader declares “craft guilds' … main purpose and activity was narrow regulation of industrial productivity in order to restrain competition” (Cantor 1994, p. 278). Douglass North's Structure and Change in Economic History asserts “… guilds organized to protect local artisans … [and their strength] in preserving local monopolies against encroachment from outside competition was frequently reinforced by the coercive power of kings and great lords” (North 1981, p. 134). Henry Pirenne's Economic and Social History of Medieval Europe proclaims:craft guilds, under a diversity of names, officium or ministerium in Latin, metier or jurande in French, arte in Italian, ambacht or neering in the Netherlands, amt, innung, aunft, or handwerk, in German, craft-gild or mistery in English, … fulfilled the need of economic protection. The pressing necessity to stand by one another, so as to resist competition from newcomers (Pirenne 1937, pp. 177–79).
England and the Superior Orders Defence—Choosing the Middle Path

(2012). England and the Superior Orders Defence—Choosing the Middle Path. Oxford University Commonwealth Law Journal: Vol. 12, No. 2, pp. 273-294.
From Socialist Showcase to Mezzogiorno? Lessons on the Role of Technical Change from East Germany's Post-World War II Growth Performance

Abstract We revisit East Germany's growth performance relative to West Germany since World War II. It is shown that before German reunification in 1991, East Germany's regions experienced much lower rates of technical progress than Western regions, while after German reunification, the opposite was the case: relatively high technical progress in the East explains almost half of the East's catch-up with West Germany between 1991–1996. We emphasize the level of domestic innovative activity as well as the extent of international technology diffusion as key reasons for this. These factors explain why East Germany was not the socialist showcase economy before reunification, and suggest that it will not be Germany's Mezzogiorno, staying persistently behind West Germany as does Italy's South relative to its North. The analysis points to the need to study the contribution of technical change as source of growth independently from the accumulation of rival factor inputs such as capital.
Magnetic exchange interaction in the spin‐polarized electron gas

The exchange interaction between two magnetic moments embedded in a host metal is fundamental to the description of the magnetic behavior of solids. In the standard spin-degenerate electron gas, it leads to the well known Ruderman–Kittel–Kasuya–Yoshida (RKKY) interaction, which is of the Heisenberg form JS1·S2. Here, we study the more general case of the spin-polarized electron gas both in two and three dimensions, by evaluating the interaction strength as an integration over the product of the host Green's functions. We find that an additional Ising-like term appears in the magnetic interaction, so that the net interaction for the spin-polarized gas is of the form J1S1·S2+J2S1zS2z. The anisotropic interaction is due to the broken rotational symmetry because of the spin polarization in the zˆ direction. Furthermore, the interaction shows a beating pattern as a function of distance, caused by the two different Fermi momenta for the two spins.
Determinants of Cross-Sectional Variation in Discount Rates, Growth Rates and Exit Cap Rates

This study investigates the determinants of key input variables in valuers' discounted cash flow models used for estimating market values for offices. Data from 599 valuations in 2000 from Stockholm, Gothenburg and Malmo are used to explain variation in discount rates, expected growth rates in net operating income and exit cap rates. Our ability to explain the relatively wide variation in appraisal assumptions with plausible covariates generates confidence in the appraisal process. This has important implications because most value and returns indices of commercial real estate worldwide are appraisal based.
Predicting exchange rate crises: Mexico revisited

Abstract This paper predicts ex ante probabilities of currency crises and sizes of expected devaluations month by month for Mexico between 1980 and 1986. The forces contributing to speculative attacks on the Mexican peso include domestic fiscal and monetary shocks, external credit shocks and relative price shocks. Reducing domestic credit growth, increasing the uncertainty surrounding this growth, and reducing the size and perhaps increasing the frequency of currency realignments might have greatly reduced the amount of currency speculation against the peso between 1980 and 1986. Anticipated external credit supply shocks played a relatively minor role during Mexico's balance-of-payments crises.
Public Service Employment: Full Employment without Inflation

In this article, I will briefly describe a program that would generate true, full employment, price stability, and currency stability. The basic idea is that the federal government provides the financing for an "employer of last resort program", as advocated by Hyman Minsky. In effect, this provides a perfectly elastic demand curve for labor. The wage and benefit package is fixed by the government, hence, the program cannot be inflationary. It allows truly full employment, but with "loose" labor markets because firms always have access to labor that can be hired out of the public service employment program at a small mark-up over the government's administered wage. It also provides a strong automatic stabilizer as government spending will move countercyclically. In a recession, labor flows into the pool, increasing government spending; in expansion the private sector hires labor out of the pool, reducing government spending. I will show that this program can be adopted in any nation that issues its own currency. In summary, I show how we might construct a public service program that guarantees true, full employment with price and currency stability.
A Tale of Three Families: Historical Households, Earned Belonging, and Natural Connections

Cases targeting family regulation in the 1970s turned, for the first time, on three contrasting and sometimes competing theories of the family: historical households, earned belonging, and natural connections. This Article introduces and defines these three theories and offers a descriptive account of how the theories were used by litigants and the Supreme Court alike to measure discrimination, evaluate the rights of individual family members, and, often, increase household equality. The theory of historical households, developed with great success by Ruth Bader Ginsburg, invoked a Blackstonian family defined by gender hierarchy and the law of coverture, and posited that this model was in need of legal reordering. Earned belonging, offered by Ginsburg as a replacement for historical households, presented a new and more democratic family theory centered on ideas of conduct-based outcomes. The earned belonging theory proposed that an individual could earn her full place in the family through positive conduct and performance. The theory of natural connections, on the contrary, promoted received wisdom about family ordering based on biologic “truths” about sex-based differences. Courts operating according to natural connections theory privileged maternal rights, rejected many paternal claims, and affirmed laws promoting the nuclear, or natural, family. The work of this Article is to present a new and synthetic reading of cases about wives, illegitimate children, and unwed fathers that follows these three logics, revealing how they weave together and why earned belonging provides the strongest support for Ginsburg’s original vision of an equalized household.
Advertising, Attention, and Stock Returns

This paper studies the effect of advertising on stock returns both in the short and in the long run. We find that a greater amount of advertising is associated with a larger stock return in the adv...
A dynamic model of member participation in interest groups

We know a great deal about how and why interest groups form, including why individuals choose to give their time and resources to political organizations, but we know very little about their participation in these organizations after they join. There is some evidence in the literature that member participation rates decline over time, when they participate at all, but it has not been carefully studied or explained. In this article, I use prospect theory, a type of bounded rationality theory, to argue that the experiences members gain in their group from participation give them a sense of their importance to the organization’s survival, and that most members come to believe that they are not as important as they may have once thought, or been led to believe, when they joined. They become more interested in using their time and energy in pursuits other than working with their interest group, and thus their participation declines over time. External threats to the interest group, such as attacks from other interest groups or government elites, may boost member participation, but only temporarily. In addition, members who joined more for private material benefits that they cannot get outside of the group, rather than to pursue their political passions, are not likely to participate much at all, not even at the beginning. Finally, as an interest group grows and matures, sub-groups with somewhat different interests form in the membership. This lack of interest homogeneity means the group’s leaders may start prioritizing some member interests over others or be perceived as not serving any sub-group interest, either of which might cause a decline in participation. Indeed, as a group grows, its leaders have to develop more institutionalized, top-down means of communication and member management practices just to keep the organization functioning; however, consistent with Robert Michel’s iron law of oligarchy, this has the side-effect of alienating members and, consequently, contributing to a fall-off in participation. Even the group’s founding members, who are presumably most invested in it, become disillusioned over time. Hypotheses developed from these propositions are tested with data on a single interest group, Friends of Choice in Urban Schools, which lobbies for charter schooling in the District of Columbia. I attended 5 years of biweekly meetings and gathered additional data on every member charter school. I then use this data to test a dynamic model of changes in rates of member participation in the organization over a period of several years. The results largely confirm my expectations of a general decline in member participation over time and how that can be reversed or exacerbated by factors such as external threats and the division of the membership into sub-groups. I conclude with some thoughts on future research and what these findings mean for interest group representation.
Institutional Drivers of Reporting Decisions in Nonprofit Hospitals

We examine the influence of normative and regulative institutional factors on cost shifting by nonprofit hospitals in their publicly reported statements. We explore whether normative constraints imposed by stakeholders, who prefer that nonprofit hospitals allocate their resources toward patient-related program services, influence the extent to which nonprofit hospitals shift costs toward program services and away from administrative and fundraising categories, thereby appearing more efficient. We also explore whether regulative factors, such as oversight, influence cost shifting behaviors. Results indicate that nonprofit hospitals facing higher normative pressures to demonstrate efficiency shift costs to a greater extent, and hospitals facing higher regulatory oversight shift costs to a lesser extent. Consistent with prior research, we also find that hospitals that obtain higher donations revenue shift costs to a greater extent. Our results show that, in addition to economic factors documented by prior literature, institutional factors also influence nonprofit hospitals’ cost shifting behaviors.
Entrepreneurial tweaking: An empirical study of technology diffusion through secondary inventions and design modifications by start‐ups

Purpose – Existing theories of innovation posit a split between incremental innovations produced by large incumbents and radical innovations produced by entrepreneurial start‐ups. The purpose of this paper is to present empirical evidence challenging this foundational assumption by demonstrating that entrepreneurs play a leading role, not a subordinate role, in sourcing incremental innovations through secondary inventions and design modifications. Design/methodology/approach – Applying the methods of historical econometrics, this study draws parallels between two dramatically different contexts: the mechanized reaper (1803‐1884) and cloud computing services (1961‐2011). Data for the reaper were drawn from 517 historical sources involving 348 modifications. Data for cloud computing services were drawn from 3,882 US patent filings and firm‐level data drawn from the Dun & Bradstreet database. Findings – Entrepreneurial tweaking plays a central role in commercializing dominant designs. Among the highest‐ranked incremental innovations leading to the commercialization of the reaper and cloud computing, nearly 90 percent were attributable to entrepreneurs. And yet, an entrepreneur had only a one in fourteen chance of garnering returns from a reaper innovation and a one in nine chance of gains from a cloud computing improvement. Practical implications – Incremental innovations by entrepreneurs are indispensable to the widespread commercial acceptance of new technologies. Yet, entrepreneurial tweakers rarely benefit from the significant value they have created. Originality/value – This paper constitutes the first significant attempt to empirically address the central role of entrepreneurs in producing incremental innovations that result in the commercialization of radical breakthroughs.
Wage‐related labour standards and FDI in China: some survey findings from Guangdong province

. The paper presents findings from a survey of foreign invested enterprises (FIEs) in Guangdong, China, on the relationship between foreign direct investment (FDI) and wage-related labour standards (regular wages, and compliance with official overtime and minimum wages), which show that wage-related standards are statistically higher in FIEs whose home countries’ standards are higher, after controlling for other influences. However, a cost-reduction FIE is more likely to be associated with inferior standards. The results call for a finer examination of the relationship between FDI and labour standards beyond the simple ‘race to the bottom’ thesis.
Resolving the IP Disconnect for Small Businesses

Small businesses are an important component of the American economy. In fact, the jobs created by small businesses could assist the United States in overcoming its most recent economic downturn. Paradoxically, though, the failure rate of small businesses is quite high. Although various factors contribute to this high failure rate, one of the factors the U.S. government has focused on has been the disproportionate impact that intellectual property laws, policies, and their enforcement may have on small businesses. While the U.S. government has paid attention to the impact of domestic intellectual property laws on small businesses, the government has paid little attention to the impact that the implementation of international intellectual property obligations may have on small businesses. This disconnect threatens to undo the efforts of the U.S. government, as implementation of these obligations in the United States pose similar hurdles to success for small businesses. One recent example of this disconnect and potential for serious harm to small businesses is the Anti-Counterfeiting Trade Agreement (ACTA), where the U.S. government has seemingly all but ignored small businesses. This Article uses ACTA as an example of how the U.S. government should be analyzing and negotiating international intellectual property agreements with an eye toward the impact on small businesses, which would thereby resolve the disconnect and create a coherent policy approach.
The Last Days of Erastianism—Forms in the American Church-State Nexus

In the long history of Christendom, an "Erastian" view of the relation between Church and State has existed in tension with a "High Church" view. This paper explores the current state of our current shopworn Erastian-like church-state nexus and considers what forces may bring a more relevant and effective institutional High Church witness into being. The fact that the United States has an Erastian-like church-state relation is borne out in a line of cases involving the judicial resolution of intra-church disputes and the effect to be given the mandates of ecclesiastical authority. It is also borne out in legislative and judicial treatment of tax exemption and state support for church-connected activities. This current Erastian church-state view works insofar as it guarantees a number of essential philanthropic services for the public, but a shift to a High Church method of critiquing society would be a more effective witness insofar as it would draw more attention to the largest societal problems and the most needed services.
Robust implementation in general mechanisms

A social choice function is robustly implemented if every equilibrium on every type space achieves outcomes consistent with it. We identify a robust monotonicity condition that is necessary and (with mild extra assumptions) su¢ cient for robust implementation. Robust monotonicity is strictly stronger than both Maskin monotonicity (necessary and almost su¢ cient for complete information implementation) and ex post monotonicity (necessary and almost su¢ cient for ex post implementation). It is equivalent to Bayesian monotonicity on all type spaces.
The Missing Piece of the Puzzle: Perspectives on the Wage Priority in Bankruptcy

Debate about priorities among creditors has extended for over twenty years and, while slowing, hasn't ended in a consensus. Most of the focus of this debate has been on secured credit. Notwithstanding various academic objections, the recent revisions of Article 9 of the UCC strengthened the political commitment to the place of secured credit. The battleground over priority thus shifts to the world of unsecured credit in bankruptcy. Are some of the remaining unsecured creditors more equal than others? The answer is of course yes. Beginning with Section 5 of the Bankruptcy Act of 1841 Congress determined that one sort of unsecured creditors, employees, have statutory priority over other unsecured creditors. Is the wage priority efficient? Or is this priority justified or at least explained by principles outside the sphere of the market? Part I of this working paper summarizes the legal history of the wage priority in bankruptcy beginning with the Bankruptcy Act of 1841. Even though bankruptcy was a Whig political gambit in the election of 1840, I contend that by 1841 the rise of politically active evangelicals also played a role in America's first modern bankruptcy law. I next turn to the Supreme Court's most recent foray into statutory priories, Howard Delivery Service, Inc. v. Zurich Am. Ins. Co. The Court in Howard Delivery concluded that the statutory priority afforded employee benefits did not extend to unpaid premiums for workers compensation insurance. During the course of its analysis the majority passed over without mention the one normative vision that stretched back to 1841: protection of wage earners and their families. Thus in Part III I consider three perspectives on the justification of the wage priority. Market failure contrasting with rational autonomy (the situational and the existential perspectives) are the first two. The third perspective, the normative, considers the justice of a wage priority. This Part examines the religious, cultural, and political matrix of the 1841 Act, focusing on ante-bellum American evangelicals and the Whigs. I argue that religious and political confluences on public morality played a significant role in the creation of the wage priority.
Looking at the Initial Client Meeting through an Interdisciplinary Lens: Applying Lessons from the Medical Profession to Law Teaching and Practice

In this essay a clinical law professor observes similarities in the way that physicians and lawyers interact with patients and clients during the initial consult/interview, based upon her experiences teaching in a medical legal partnership clinic.
Deliberative Democracy and Constitutional Review

This paper re-examines the traditional democratic objection to judicial review as an instance of anti-democratic paternalism, within the context of newer ‘deliberative’ theories of constitutional democracy. Using a framework of two cross-cutting distinctions between aggregative versus deliberative democratic processes and between substantive versus procedural legitimacy, it argues that Habermas’s account of the function of constitutional review of legislation is superior to those offered by Ely, Perry, and Dworkin. However, Habermas’s proposal for a judicial institutionalization of review with a broad set of duties needs to be modified in the light of theoretical commitments to participatory deliberative processes and procedural legitimacy.
Gains from Others’ Losses: Technology Trajectories and the Global Division of Firms

Abstract This paper offers new insights into the role of firms versus individuals in driving technology directions, and the extent to which human capital may be lost during industrial shifts. We explore in particular whether (1) firms who move manufacturing offshore slow U.S.-based R&D activities in an emerging technology and (2) the inventors originally within these offshoring firms, leave, and continue innovating in the emerging technology at different institutions. We focus on the 28 leading U.S. optoelectronic component manufactures for telecommunications and the inventors who patent at these firms. In the case of U.S. optoelectronic component manufacturers for telecommunications, offshoring is associated with a decrease in innovation in the emerging technology, but an increase in all other types of patenting. The majority of inventors depart to firms outside the industry and stop work in the emerging technology. However, an important minority of emerging technology inventors at the offshoring firms go to a single onshore firm in the same industry (which gains from others’ losses and subsequently dominates this space). Our results suggest a strong role for firms and firm strategy in driving innovation directions, and the corresponding opportunities faced by individuals.
Rationality and reflective equilibrium

Cohen (1981) and others have made an interesting argument for the thesis that humans are rational: normative principles of reasoning and actual human reasoning ability cannot diverge because both are determined by the same process involving our intuitions about what constitutes good reasoning as a starting point. Perhaps the most sophisticated version of this argument sees reflective equilibrium as the process that determines both what the norms of reasoning are and what actual cognitive competence is. In this essay, I will evaluate both the general argument that humans are rational and the reflective equilibrium argument for the same thesis. While I find both accounts initially appealing, I will argue that neither successfully establishes that humans are rational.
Regulating Banking Bonuses in the European Union: a Case Study in Unintended Consequences

Beginning in 2014, the European Union (EU) will limit the amount of bankers' bonuses to the amount of fixed remuneration; the cap could be increased to 2:1 with the backing of a supermajority of shareholders. I demonstrate that the pending EU regulations restrictions will: (1) increase rather than decrease incentives for excessive risk taking; (2) result in significant increase in fixed remuneration; (3) reduce incentives to create value; (4) reduce the competitiveness of the EU banking sector; and (5) result in a general degradation in the quality of EU investment bankers, thereby decreasing access to capital and increasing the cost of capital.
Isostatic equilibrium in spherical coordinates and implications for crustal thickness on the Moon, Mars, Enceladus, and elsewhere

Miller Institute for Basic Research in Science at the University of California Berkeley; NASA Gravity Recovery and Interior Laboratory Guest Scientist Program
Liberty and Leviathan

Hobbes made a distinctive contribution to the discussion of freedom on two fronts. He persuaded later, if not immediate, successors that it is only the exercise of a power of interference that reduces people’s freedom, not its (unexercised) existence - not even its existence in an arbitrary, unchecked form. Equally, he persuaded them that the exercise of a power of interference always reduces freedom in the same way, whether it occurs in a republican democracy, purportedly on a ‘non-arbitrary’ basis, or under a dictatorial, arbitrary regime. But the basis on which Hobbes maintained those two propositions was very different from any that successors would have found plausible. This article explores the idiosyncratic principles that led Hobbes to develop his influential point of view.
Explanation is a genus: An essay on the varieties of scientific explanation

I shall endeavor to show that every physical theory since Newton explains without drawing attention to causes-that, in other words, physical theories as physical theories aspire to explain under an ideal quite distinct from that of causal explanation. If I am right, then even if sometimes the explanations achieved by a physical theory are not in violation of the standard of causal explanation, this is purely an accident. For physical theories, as I will show, do not, as such, aim at accommodating the goals or aspirations of causal explanation. This will serve as the founding insight for a new theory of explanation, which will itself serve as the cornerstone of a new theory of scientific method.
Who Gets Wall Street’s Attention? How Alliance Announcements and Alliance Density Affect Analyst Coverage

This study integrates research on strategic alliances and security analysts by focusing on the extent to which alliance announcements affect the amount of coverage firms obtain from security analys...
Price setting under uncertainty about inflation

Abstract We analyze the manipulation of inflation statistics that occurred in Argentina starting in 2007 to test the relevance of informational frictions in price setting. We estimate that the manipulation of statistics was associated with a higher degree of price dispersion. This effect is analyzed in the context of a quantitative general equilibrium model in which firms use information about the inflation rate to set prices. Reporting inaccurate measures of the CPI entails significant welfare losses, especially in economies with volatile monetary policy.
Proving Prejudice for Ineffective Assistance Claims After Frye

The Supreme Court’s recent decision in Missouri v. Frye has been widely described as benefiting criminal defendants. While Frye expanded the pool of defendants who are eligible to bring ineffective assistance claims to those who were deprived of a favorable plea bargain, it may have made it more difficult for those defendants to prevail on those claims by increasing the necessary showing of prejudice. In particular, the Frye Court indicated that a defendant must demonstrate not only that she would have accepted the plea deal, but also that 'the plea would have been entered without the prosecution canceling it or the trial court refusing to accept it.' This language may encourage lower courts to raise the bar for defendants claiming ineffective assistance. As this short commentary demonstrates, a number of federal courts have imposed heightened prejudice standards on defendants claiming ineffective assistance at sentencing. The prejudice language in Frye may help to solidify what appears to be a broader trend of defendants being asked to prove too much to establish prejudice.
From the Great Depression to the Great Recession: On the Failure of Regulation in the Mortgage Market

People tend to attribute the outbreak of the 2008 financial crisis to deregulation. This article challenges this view and presents a unique perspective of the crisis as in fact rooted in the way the residential mortgage market is regulated. Focusing on non-recourse mortgage legislation, which is a unique feature of the US mortgage market dating back to the period following the Great Depression, the article analyzes the contribution of this legislation to the onset of the Great Recession. The discussion shows how regulation that was enacted in response to a major economic crisis not only failed to prevent a large-scale future crisis but also created the conditions for its eventual emergence.Non-recourse laws prevent lenders from seeking a deficiency judgment after foreclosure and impose no personal liability on borrowers in the event of default. They distort risk allocation in the mortgage market as they allow borrowers to externalize the risk of default to third parties. These laws thus create incentives for excessive borrowing, which ultimately resulted in the housing boom and bust of the 2000s. The analysis in this article has important implications for current reforms in leading foreclosure states, such as California and Nevada, where regulators recently expanded the scope of the existing mandatory non-recourse legislation. The insights from the article regarding non-recourse mortgages should serve as a warning to regulators against adopting such legislation.
On the decision to go public with dual class stock

Abstract Why do firms deviate from a one share-one vote regime when going public? This question raises considerations that are at the core of many corporate governance issues. We consider three arguments for this choice. Examining data on IPOs from 1980 through 2008, we do not find that firms go public with dual class stock so managers have more incentive to invest in hard to monitor projects nor to gain more when selling control of the firm. Rather, managers appear to take their firms public with dual class stock in order to retain control of their firms while reducing their lack of diversification costs.
Cognitive Theory and the Delivery of Welfare Benefits

When it comes to the topic of wealth and income inequality, Americans seemingly agree on nothing other than its existence.1 They even differ as to whether the inequality is bad.2 Those who agree it is bad disagree about what, if anything, should be done about it. Those who agree something should be done disagree about whether the government should do it. Those who agree the government should do something disagree about what should be done, and how. Should the government act through the tax code, direct expenditures, or a combination of the two? These are important questions; they involve not just economic issues but social, moral, and critical political questions about the meaning of American democracy. Many people have pondered these issues and written about them. Yet no matter how cogent the arguments either for or against equality, they have changed few people’s minds. This failure
Cognitive Comparative Advantage and the Organization of Work: Lessons from Herbert Simon's Vision of the Future

Abstract In a marvelous but somewhat neglected paper, “The Corporation: Will It Be Managed by Machines?” Herbert Simon articulated from the perspective of 1960 his vision of what we now call the New Economy – the machine-aided system of production and management of the late 20th century. Simon’s analysis sprang from what I term the principle of cognitive comparative advantage: one has to understand the quite different cognitive structures of humans and machines (including computers) in order to explain and predict the tasks to which each will be most suited. Perhaps unlike Simon’s better-known predictions about progress in artificial intelligence research, the predictions of this 1960 article hold up remarkably well and continue to offer important insights. In what follows I attempt to tell a coherent story about the evolution of machines and the division of labor between humans and machines. Although inspired by Simon’s 1960 paper, I weave many other strands into the tapestry, from classical discussions of the division of labor to present-day evolutionary psychology. The basic conclusion is that, with growth in the extent of the market, we should see humans “crowded into” tasks that call for the kinds of cognition for which humans have been equipped by biological evolution. These human cognitive abilities range from the exercise of judgment in situations of ambiguity and surprise to more mundane abilities in spatio-temporal perception and locomotion. Conversely, we should see machines “crowded into” tasks with a well-defined structure. This conclusion is not based (merely) on a claim that machines, including computers, are specialized idiots-savants today because of the limits (whether temporary or permanent) of artificial intelligence; rather, it rests on a claim that, for what are broadly “economic” reasons, it will continue to make economic sense to create machines that are idiots-savants.
Performance voting and knowledge of cabinet composition

Nearly every empirical study of outcome oriented retrospective voting assumes, though almost always implicitly, that a) every voter knows the composition of the incumbent government, or b) that voters who may not know who is in government do not cast retrospective votes. In this short essay we provide evidence that these assumptions are quite unlikely to hold and discuss how not taking this possibility into account has influenced our understanding of the retrospective voting mechanism and the conditioning effect of political sophistication on the economic vote. In so doing, we advocate for the inclusion of questions regarding cabinet composition in electoral surveys.
Evidence of Manager Intervention to Avoid Working Capital Deficits

We study managers’ interventions in financial reporting by examining working capital deficits, measured as current ratios less than 1.0. Current ratios represent important balance sheet liquidity indicators to lenders and creditors, and have an identifiable and naturally occurring reference point at 1.0, analogous to the profit/loss income statement reference point. We find that distributions of reported current ratios of both U.S. and non-U.S. firms exhibit a discontinuity at 1.0. For U.S. firms, we find that the discontinuity increases with exogenous increases in the cost of credit in the economy, and that determinants of the likelihood to achieve a given current ratio are diagnostic precisely at the 1.0 discontinuity location but not at other nearby locations in the current ratio distribution. U.S. firms that avoid working capital deficits report lower proportions of inventory and higher proportions of accounts receivable in current assets and, when credit is tight, higher proportions of cash, consistent with managers increasing sales volume so as to capitalize profit margins and thereby increase current assets. For non-U.S. firms, the discontinuity is more pronounced for observations from common law countries, a proxy for jurisdictions where financial reports are more intended to provide decision-useful information. The evidence suggests that managers intervene to achieve a balance sheet reporting objective that stems from stakeholder use of reference points.
Specific knowledge and performance measurement

I examine optimal incentives, performance measurement and delegation in a model where an agent has specific knowledge (in the sense of Jensen and Meckling) about the consequences of his actions for the principal. Incentive contracts can be based both on measures closely related to the agent's actions ("inputs"), and a measure closely related to the principal's payoff ("output"). While input-based pay minimizes the agent's income risk, only output-based pay encourages the agent to use his knowledge in choosing his actions. To balance these objectives, it is in general optimal to use both performance measures. The results of the analysis provide a common explanation for why central predictions of agency theory, notably predictions implied by the Informativeness Principle, are often not supported by evidence. Moreover, they lead to many novel and testable predictions about properties of incentive contracts and optimal delegation decisions.
Recent Developments in Copyright Law: Selected U.S. Supreme Court, Court of Appeals, and District Court Opinions Between February 1, 2005 and May 1, 2006

This article highlights nine U.S. copyright law decisions handed down between February 1, 2005 and May 1, 2006. This review was originally delivered as a speech at The 50th Annual Conference of Developments in Intellectual Property Law held by The John Marshall Law School Center for Intellectual Property Law on May 26, 2006. Discussing a wide range of cases from peer-to-peer file sharing to standing, the analysis focuses on the most recent developments in copyright.