Since the world financial crisis of 2007 / 2008, it has become clear that financial crises and the major economic downturns they cause happen neither just in distant countries nor in the distant past. They are part of the economic realities of developed countries in the present. In the second Public Paper, the author presents the latest academic insights into the history of financial crises. What can we learn from the past when it comes to defining strategies and policies for dealing with financial crises? Why is the optimal number of financial crises not zero? You will receive the answers to these and related questions from Prof. Joachim Voth, a leading specialist in financial and economic history.
We study the impact of the integration of women in US policing between the late 1970s and early 1990s on violent crime reporting and domestic violence escalation. Along these two key dimensions, we find that female officers improved police quality. Using crime victimization data, we find that as female representation increases among officers in an area, violent crimes against women in that area, and especially domestic violence, are reported to the police at significantly higher rates. There are no such effects for violent crimes against men or from increases in the female share among civilian police employees. Furthermore, we find evidence that female officers help prevent the escalation of domestic violence. Increases in female officer representation are followed by significant declines in intimate partner homicide rates and in rates of repeated domestic abuse. These effects are all consistent between fixed effects models with controls for economic and policy variables and models that focus exclusively on increases in female police employment driven by externally imposed affirmative action plans resulting from employment discrimination cases.
In this paper we study the coevolutionary dynamics of knowledge creation, diffusion and the formation of R&D collaboration networks. Differently to previous works, knowledge is not treated as an abstract scalar variable but represented by a portfolio of ideas that changes over time through innovations and knowledge spillovers between collaborating firms. The collaborations between firms, in turn, are dynamically adjusted based on the firms' expectations of learning a new technology from their collaboration partners. We analyze the behavior of this dynamic process and its convergence to a stationary state, in relation to the rates at which innovations and costly R&D collaboration opportunities arrive, and the rate of creative destruction leading to the obsolescence of existing tech- nologies. We quantify the innovation gains from collaborations, and show that there exists a critical level for the technology learning success probability in collaborations below which an economy with weak in-house R&D capabilities does not innovate even in the presence of R&D collaborations. More- over, we show that the interplay between knowledge diffusion and network formation can give rise to a cyclical pattern in the collaboration intensity, which can be described as a damped oscillation. We confirm this novel observation using an empirical sample of a large R&D collaboration network over the years 1985 to 2011. We then study the efficient network structure, compare it to the decentralized equilibrium structures generated, and design an optimal network policy to maximize welfare in the economy. Our efficiency analysis further allows us to study the effect of competition on innovation in R&D intensive industries where R&D collaborations between firms are commonly observed.
During industrialization, Protestants were more literate than Catholics. This paper investigates whether this fact may be led back to the intrinsic motivation of Protestants to read the bible and to what extent other education motives might have been involved as well. We employ a historical data set from Switzerland which allows us to differentiate between different cognitive skills: reading, numeracy, essay writing, and Swiss history. We develop an estimation strategy to examine whether the impact of religious denomination was particularly large with respect to reading capabilities. We find support for this hypothesis. However, we also find evidence which is consistent with the view that Protestants' education motives went beyond acquiring reading skills.
Surprise drives learning. Various neural “prediction error” signals are believed to underpin surprise-based reinforcement learning. Here, we report a surprise signal that reflects reinforcement learning but is neither un/signed reward prediction error (RPE) nor un/signed state prediction error (SPE). To exclude these alternatives, we measured surprise responses in the absence of RPE and accounted for a host of potential SPE confounds. This new surprise signal was evident in ventral striatum, primary sensory cortex, frontal poles, and amygdala. We interpret these findings via a normative model of surprise.
The data in Fehr and Tyran (FT, 2001) and Luba Petersen and Abel Winn (PW,2013) show that money illusion plays an important role in nominal price adjustment after a fully anticipated negative monetary shock. Money Illusion affects subjects' expectations, and causes pronounced nominal inertia after a negative shock but much less inertia after a positive shock. Thus PW provide a misleading interpretation both of our and their own data.
Humans will incur costs to punish others who violate social norms. Theories of justice highlight 2 motives for punishment: a forward-looking deterrence of future norm violations and a backward-looking retributive desire to harm. Previous studies of costly punishment have not isolated how much people are willing to pay for retribution alone, because typically punishment both inflicts damage (satisfying the retributive motive) and communicates a norm violation (satisfying the deterrence motive). Here, we isolated retributive motives by examining how much people will invest in punishment when the punished individual will never learn about the punishment. Such "hidden" punishment cannot deter future norm violations but was nevertheless frequently used by both 2nd-party victims and 3rd-party observers of norm violations, indicating that retributive motives drive punishment decisions independently from deterrence goals. While self-reports of deterrence motives correlated with deterrence-related punishment behavior, self-reports of retributive motives did not correlate with retributive punishment behavior. Our findings reveal a preference for pure retribution that can lead to punishment without any social benefits. (PsycINFO Database Record (c) 2014 APA, all rights reserved).
In an ever-changing world, the brain must continually formulate, monitor, and adapt patterns of behavior to achieve the best outcome. Often, strategies that we have employed in the past to solve a problem or reach a specific result will work again when we are confronted with a similar situation. When this is the case, we can exploit such strategies for maximal gain. However, if important aspects of the environment or context have changed, we need to modify our behavior and explore new action strategies. How does the brain monitor and adapt our behavior or create altogether new strategies? On page 1481 of this issue, Donoso et al. (1) provide key algorithmic and neurobiological insights into how the human brain accomplishes such feats.
Are monetary and non-monetary incentives used as substitutes in motivating effort? I address this question in a laboratory experiment in which the choice of the job charac- teristics (i.e., the mission) is part of the compensation package that principals can use to influence agents' effort. Principals offer contracts that specify a piece rate and a charity - which can be either the preferred charity of the agent, or the one of the principal. The agents then exert a level of effort that generates a profit to the principal and a dona- tion to the specified charity. My results show that the agents exert more effort than the level that maximizes their own pecuniary payoff in order to benefit the charity, especially their preferred one. The principals take advantage of this intrinsic motivation by offering lower piece rates and by using the choice of the charity as a substitute to motivate effort. However, I also find that because of fairness considerations, the majority of principals are reluctant to lower the piece rate below a fair threshold, making the substitution between monetary and non-monetary incentives imperfect. These findings have implications for the design of incentives in mission-oriented organizations and contribute to our understanding of job satisfaction and wage differentials across organizations and sectors.
