Bartosz Maćkowiak, Filip Matějka, Mirko Wiederholt
We review the recent literature on rational inattention, identify the main theoretical mechanisms, and explain how it helps us understand a variety of phenomena across fields of economics. The theory of rational inattention assumes that agents cannot process all available information, but they can choose which exact pieces of information to attend to. Several important results in economics have been built around imperfect information. Nowadays, many more forms of information than ever before are available due to new technologies, and yet we are able to digest little of it. Which form of imperfect information we possess and act upon is thus largely determined by which information we choose to pay attention to. These choices are driven by current economic conditions and imply behavior that features numerous empirically supported departures from standard models. Combining these insights about human limitations with the optimizing approach of neoclassical economics yields a new, generally applicable model. (JEL D83, D91, E71)
{"title":"Rational Inattention: A Review","authors":"Bartosz Maćkowiak, Filip Matějka, Mirko Wiederholt","doi":"10.1257/jel.20211524","DOIUrl":"https://doi.org/10.1257/jel.20211524","url":null,"abstract":"We review the recent literature on rational inattention, identify the main theoretical mechanisms, and explain how it helps us understand a variety of phenomena across fields of economics. The theory of rational inattention assumes that agents cannot process all available information, but they can choose which exact pieces of information to attend to. Several important results in economics have been built around imperfect information. Nowadays, many more forms of information than ever before are available due to new technologies, and yet we are able to digest little of it. Which form of imperfect information we possess and act upon is thus largely determined by which information we choose to pay attention to. These choices are driven by current economic conditions and imply behavior that features numerous empirically supported departures from standard models. Combining these insights about human limitations with the optimizing approach of neoclassical economics yields a new, generally applicable model. (JEL D83, D91, E71)","PeriodicalId":48416,"journal":{"name":"Journal of Economic Literature","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135479572","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study the mental health of graduate students at eight top-ranked economics PhD programs in the United States using clinically validated surveys. We find that 24.8 percent experience moderate or severe symptoms of depression or anxiety—more than two times the population average. Though our response rate was 45.1 percent and sample selection concerns exist, conservative lower bounds nonetheless suggest higher prevalence rates of such symptoms than in the general population. Mental health issues are especially prevalent at the end of the PhD program: 36.7 percent of students in years 6+ of their program experience moderate or severe symptoms of depression or anxiety, versus 21.2 percent of first-year students. Of economics students with these symptoms, 25.2 percent are in treatment, compared to 41.4 percent of graduate students in other programs. A similar percentage of economics students (40–50 percent) say they cannot honestly discuss mental health with advisers as say they cannot easily discuss nonacademic career options with them. Only 26 percent find their work to be useful always or most of the time, compared to 70 percent of economics faculty and 63 percent of the working age population. We provide recommendations for students, faculty, and administrators on ways to improve graduate student mental health. (JEL A23, I12, I18, I23)
{"title":"Graduate Student Mental Health: Lessons from American Economics Departments","authors":"Valentin Bolotnyy, M. Basilico, Paul Barreira","doi":"10.1257/jel.20201555","DOIUrl":"https://doi.org/10.1257/jel.20201555","url":null,"abstract":"We study the mental health of graduate students at eight top-ranked economics PhD programs in the United States using clinically validated surveys. We find that 24.8 percent experience moderate or severe symptoms of depression or anxiety—more than two times the population average. Though our response rate was 45.1 percent and sample selection concerns exist, conservative lower bounds nonetheless suggest higher prevalence rates of such symptoms than in the general population. Mental health issues are especially prevalent at the end of the PhD program: 36.7 percent of students in years 6+ of their program experience moderate or severe symptoms of depression or anxiety, versus 21.2 percent of first-year students. Of economics students with these symptoms, 25.2 percent are in treatment, compared to 41.4 percent of graduate students in other programs. A similar percentage of economics students (40–50 percent) say they cannot honestly discuss mental health with advisers as say they cannot easily discuss nonacademic career options with them. Only 26 percent find their work to be useful always or most of the time, compared to 70 percent of economics faculty and 63 percent of the working age population. We provide recommendations for students, faculty, and administrators on ways to improve graduate student mental health. (JEL A23, I12, I18, I23)","PeriodicalId":48416,"journal":{"name":"Journal of Economic Literature","volume":null,"pages":null},"PeriodicalIF":12.6,"publicationDate":"2022-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47279374","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Laurence Ball argues that the Federal Reserve (the Fed) could—and should—have bailed out Lehman Brothers so that it did not have to declare bankruptcy. He presents compelling evidence that it could have. I argue that the view that the Fed should not bail out Lehman is reasonable under the circumstances the Fed was in at the time. The Lehman bankruptcy is a case study in bailouts and the attendant moral hazard problem that expectations of bailouts create. The lessons learned imply a clear case for appropriate regulatory intervention to solve the problems created when governments cannot commit themselves to not undertake bailouts. (JEL D72, E32, E58, E63, G01, G24, G33)
{"title":"Larry Ball’s The Fed and Lehman Brothers: A Review Essay","authors":"V. Chari","doi":"10.1257/jel.20221515","DOIUrl":"https://doi.org/10.1257/jel.20221515","url":null,"abstract":"Laurence Ball argues that the Federal Reserve (the Fed) could—and should—have bailed out Lehman Brothers so that it did not have to declare bankruptcy. He presents compelling evidence that it could have. I argue that the view that the Fed should not bail out Lehman is reasonable under the circumstances the Fed was in at the time. The Lehman bankruptcy is a case study in bailouts and the attendant moral hazard problem that expectations of bailouts create. The lessons learned imply a clear case for appropriate regulatory intervention to solve the problems created when governments cannot commit themselves to not undertake bailouts. (JEL D72, E32, E58, E63, G01, G24, G33)","PeriodicalId":48416,"journal":{"name":"Journal of Economic Literature","volume":null,"pages":null},"PeriodicalIF":12.6,"publicationDate":"2022-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42182733","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The existence of an effective legal system is assumed throughout economic analysis, and yet there has been little study of the economics of legal markets themselves. Research to date has focused narrowly on the economics of markets for lawyers. In this review, I distinguish legal markets from the market for lawyers and show how excessive regulation of our legal markets—by lawyers themselves—distorts economic activity and growth. It does so primarily by inhibiting investment in the legal and regulatory technologies needed to respond to the transformation of the economy wrought by globalization, digitization, aspirations for inclusion, and the coming of artificial intelligence. (JEL J44, K00, K40, L84)
{"title":"Legal Markets","authors":"Gillian K. Hadfield","doi":"10.1257/jel.20201330","DOIUrl":"https://doi.org/10.1257/jel.20201330","url":null,"abstract":"The existence of an effective legal system is assumed throughout economic analysis, and yet there has been little study of the economics of legal markets themselves. Research to date has focused narrowly on the economics of markets for lawyers. In this review, I distinguish legal markets from the market for lawyers and show how excessive regulation of our legal markets—by lawyers themselves—distorts economic activity and growth. It does so primarily by inhibiting investment in the legal and regulatory technologies needed to respond to the transformation of the economy wrought by globalization, digitization, aspirations for inclusion, and the coming of artificial intelligence. (JEL J44, K00, K40, L84)","PeriodicalId":48416,"journal":{"name":"Journal of Economic Literature","volume":null,"pages":null},"PeriodicalIF":12.6,"publicationDate":"2022-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45730313","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Economic models often depend on quantities that are unobservable, either for privacy reasons or because they are difficult to measure. Examples of such variables include human capital (or ability), personal income, unobserved heterogeneity (such as consumer “types”), et cetera. This situation has historically been handled either by simply using observable imperfect proxies for each of the unobservables, or by assuming that such unobservables satisfy convenient conditional mean or independence assumptions that enable their elimination from the estimation problem. However, thanks to tremendous increases in both the amount of data available and computing power, it has become possible to take full advantage of recent formal methods to infer the statistical properties of unobservable variables from multiple imperfect measurements of them. The general framework used is the concept of measurement systems in which a vector of observed variables is expressed as a (possibly nonlinear or nonparametric) function of a vector of all unobserved variables (including unobserved error terms or “disturbances” that may have nonadditively separable affects). The framework emphasizes important connections with related fields, such as nonlinear panel data, limited dependent variables, game theoretic models, dynamic models, and set identification. This review reports the progress made toward the central question of whether there exist plausible assumptions under which one can identify the joint distribution of the unobservables from the knowledge of the joint distribution of the observables. It also overviews empirical efforts aimed at exploiting such identification results to deliver novel findings that formally account for the unavoidable presence of unobservables. (JEL C30, C55, C57, D12, E21, E23, J24)
{"title":"Measurement Systems","authors":"Susanne M. Schennach","doi":"10.1257/jel.20211355","DOIUrl":"https://doi.org/10.1257/jel.20211355","url":null,"abstract":"Economic models often depend on quantities that are unobservable, either for privacy reasons or because they are difficult to measure. Examples of such variables include human capital (or ability), personal income, unobserved heterogeneity (such as consumer “types”), et cetera. This situation has historically been handled either by simply using observable imperfect proxies for each of the unobservables, or by assuming that such unobservables satisfy convenient conditional mean or independence assumptions that enable their elimination from the estimation problem. However, thanks to tremendous increases in both the amount of data available and computing power, it has become possible to take full advantage of recent formal methods to infer the statistical properties of unobservable variables from multiple imperfect measurements of them. The general framework used is the concept of measurement systems in which a vector of observed variables is expressed as a (possibly nonlinear or nonparametric) function of a vector of all unobserved variables (including unobserved error terms or “disturbances” that may have nonadditively separable affects). The framework emphasizes important connections with related fields, such as nonlinear panel data, limited dependent variables, game theoretic models, dynamic models, and set identification. This review reports the progress made toward the central question of whether there exist plausible assumptions under which one can identify the joint distribution of the unobservables from the knowledge of the joint distribution of the observables. It also overviews empirical efforts aimed at exploiting such identification results to deliver novel findings that formally account for the unavoidable presence of unobservables. (JEL C30, C55, C57, D12, E21, E23, J24)","PeriodicalId":48416,"journal":{"name":"Journal of Economic Literature","volume":null,"pages":null},"PeriodicalIF":12.6,"publicationDate":"2022-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45656629","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
There is a growing interest in using carbon taxes to reduce greenhouse gas emissions, not only in industrialized economies but also in developing economies. Many countries have considered carbon pricing, including carbon taxes, as policy instruments to meet their emission reduction targets set under the Paris Climate Agreement. However, policy makers, particularly from developing countries, are seeking clarity on several issues—particularly the impacts of carbon taxes on the economy, the distribution of these impacts across households, carbon tax design architectures, the effects of carbon taxes on the competitiveness of carbon-intensive industries, and comparison of carbon taxes with other policy instruments for climate change mitigation. This paper aims to offer insights on these issues by synthesizing the literature available since the 1970s, when the concept of carbon tax was first introduced. This paper also identifies the areas where further investigations are needed. (JEL H23, Q35, Q38, Q54, Q58)
{"title":"Carbon Taxes","authors":"G. Timilsina","doi":"10.1257/jel.20211560","DOIUrl":"https://doi.org/10.1257/jel.20211560","url":null,"abstract":"There is a growing interest in using carbon taxes to reduce greenhouse gas emissions, not only in industrialized economies but also in developing economies. Many countries have considered carbon pricing, including carbon taxes, as policy instruments to meet their emission reduction targets set under the Paris Climate Agreement. However, policy makers, particularly from developing countries, are seeking clarity on several issues—particularly the impacts of carbon taxes on the economy, the distribution of these impacts across households, carbon tax design architectures, the effects of carbon taxes on the competitiveness of carbon-intensive industries, and comparison of carbon taxes with other policy instruments for climate change mitigation. This paper aims to offer insights on these issues by synthesizing the literature available since the 1970s, when the concept of carbon tax was first introduced. This paper also identifies the areas where further investigations are needed. (JEL H23, Q35, Q38, Q54, Q58)","PeriodicalId":48416,"journal":{"name":"Journal of Economic Literature","volume":null,"pages":null},"PeriodicalIF":12.6,"publicationDate":"2022-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41591219","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Agri-food value chains (AVCs) intermediate the flow of products between largely rural farmers, fisherfolk, or herders and increasingly urban consumers. The theoretical models that historically structured research on the economic development process assumed away AVC functions, however, and AVC firms and workers were necessarily omitted from the household data that generated most empirical findings in the agricultural and development economics literatures. As a result, the discipline has somewhat overlooked the rapid growth and structural change in AVCs over the past few decades that turned AVCs into major employers and sources of value addition, as well as key loci for technology transfer and foreign investment. This paper offers an integrated, structured, empirical narrative of how and why AVC revolutions occur in developing countries, the impacts of those changes, and the abundant economic research opportunities these structural changes afford economists. (JEL L14, L81, O13, O33, Q12, Q13, Q17)
{"title":"Agri-food Value Chain Revolutions in Low- and Middle-Income Countries","authors":"C. Barrett, T. Reardon, J. Swinnen, D. Zilberman","doi":"10.1257/jel.20201539","DOIUrl":"https://doi.org/10.1257/jel.20201539","url":null,"abstract":"Agri-food value chains (AVCs) intermediate the flow of products between largely rural farmers, fisherfolk, or herders and increasingly urban consumers. The theoretical models that historically structured research on the economic development process assumed away AVC functions, however, and AVC firms and workers were necessarily omitted from the household data that generated most empirical findings in the agricultural and development economics literatures. As a result, the discipline has somewhat overlooked the rapid growth and structural change in AVCs over the past few decades that turned AVCs into major employers and sources of value addition, as well as key loci for technology transfer and foreign investment. This paper offers an integrated, structured, empirical narrative of how and why AVC revolutions occur in developing countries, the impacts of those changes, and the abundant economic research opportunities these structural changes afford economists. (JEL L14, L81, O13, O33, Q12, Q13, Q17)","PeriodicalId":48416,"journal":{"name":"Journal of Economic Literature","volume":null,"pages":null},"PeriodicalIF":12.6,"publicationDate":"2022-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46123147","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Prediction Machines: The Simple Economics of Artificial Intelligence, by artificial intelligence (AI) experts, Ajay Agrawal, Joshua Gans, and Avi Goldfarb, pulls no punches. AI is all about prediction—machines learning precisely what to do for us and to us. The learning is occurring at warp speed, as AI uses big data to pick our brains for what we know and what we like. The authors are partly infatuated and partly terrified by AI’s parasitic potential. Readers should read this chilling and insightful book, but they should do so with a bottle of scotch, ideally from one of Scotland’s ancient distilleries that has recently been fully automated. (JEL C45, C55, E26, M10, M20, O30)
{"title":"Does Prediction Machines Predict Our AI Future? A Review","authors":"L. Kotlikoff","doi":"10.1257/jel.20191519","DOIUrl":"https://doi.org/10.1257/jel.20191519","url":null,"abstract":"Prediction Machines: The Simple Economics of Artificial Intelligence, by artificial intelligence (AI) experts, Ajay Agrawal, Joshua Gans, and Avi Goldfarb, pulls no punches. AI is all about prediction—machines learning precisely what to do for us and to us. The learning is occurring at warp speed, as AI uses big data to pick our brains for what we know and what we like. The authors are partly infatuated and partly terrified by AI’s parasitic potential. Readers should read this chilling and insightful book, but they should do so with a bottle of scotch, ideally from one of Scotland’s ancient distilleries that has recently been fully automated. (JEL C45, C55, E26, M10, M20, O30)","PeriodicalId":48416,"journal":{"name":"Journal of Economic Literature","volume":null,"pages":null},"PeriodicalIF":12.6,"publicationDate":"2022-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44028372","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Philip DeCicca, Donald Kenkel, Michael F Lovenheim
Tobacco regulation has been a major component of health policy in the developed world since the UK Royal College of Physicians' and the US Surgeon General's reports in the 1960s. Such regulation, which has intensified in the past two decades, includes cigarette taxation, place-based smoking bans in areas ranging from bars and restaurants to workplaces, and regulations designed to make tobacco products less desirable. More recently, the availability of alternative products, most notably e-cigarettes, has increased dramatically, and these products are just starting to be regulated. Despite an extensive body of research on tobacco regulations, there remains substantial debate regarding their effectiveness, and ultimately, their impact on economic welfare. We provide the first comprehensive review of the state of research in the economics of tobacco regulation in two decades.
{"title":"The Economics of Tobacco Regulation: A Comprehensive Review.","authors":"Philip DeCicca, Donald Kenkel, Michael F Lovenheim","doi":"10.1257/jel.20201482","DOIUrl":"https://doi.org/10.1257/jel.20201482","url":null,"abstract":"<p><p>Tobacco regulation has been a major component of health policy in the developed world since the UK Royal College of Physicians' and the US Surgeon General's reports in the 1960s. Such regulation, which has intensified in the past two decades, includes cigarette taxation, place-based smoking bans in areas ranging from bars and restaurants to workplaces, and regulations designed to make tobacco products less desirable. More recently, the availability of alternative products, most notably e-cigarettes, has increased dramatically, and these products are just starting to be regulated. Despite an extensive body of research on tobacco regulations, there remains substantial debate regarding their effectiveness, and ultimately, their impact on economic welfare. We provide the first comprehensive review of the state of research in the economics of tobacco regulation in two decades.</p>","PeriodicalId":48416,"journal":{"name":"Journal of Economic Literature","volume":null,"pages":null},"PeriodicalIF":12.6,"publicationDate":"2022-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10072869/pdf/nihms-1837877.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"9475176","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Entrenchment: Wealth, Power, and the Constitution of Democratic Societies, by Paul Starr, revisits the history of political economy through the lens of a novel concept: that of entrenchment. Policies that benefit some interest groups may become entrenched and persist in spite of subsequent evolutions. Such entrenchment in turn explains why crises occur, sometimes degenerating into violent conflicts: there is a tension between entrenched custom and the need for societal change, or more simply the fact that the balance of power has shifted. (JEL D02, D31, D72, N40)
{"title":"Book Review: Entrenchment by Paul Starr","authors":"G. Saint‐Paul","doi":"10.1257/jel.20201565","DOIUrl":"https://doi.org/10.1257/jel.20201565","url":null,"abstract":"Entrenchment: Wealth, Power, and the Constitution of Democratic Societies, by Paul Starr, revisits the history of political economy through the lens of a novel concept: that of entrenchment. Policies that benefit some interest groups may become entrenched and persist in spite of subsequent evolutions. Such entrenchment in turn explains why crises occur, sometimes degenerating into violent conflicts: there is a tension between entrenched custom and the need for societal change, or more simply the fact that the balance of power has shifted. (JEL D02, D31, D72, N40)","PeriodicalId":48416,"journal":{"name":"Journal of Economic Literature","volume":null,"pages":null},"PeriodicalIF":12.6,"publicationDate":"2022-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42718378","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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