For more than a decade, an MIT-trained economist has meticulously recorded the results of nearly 75,000 deliveries of bagels and donuts to corporate offices. These bagels and donuts are left in workplaces in the morning, along with a list of prices and a lockbox. Office workers purchase the products on the honor system. Later that day, the uneaten goods and the lock box are collected and the relevant data for each office are recorded in a spreadsheet. These data provide a unique opportunity for understanding the extent to which individuals behave honestly in this setting and the factors that influence the level of honesty. An analysis of the discrepancy between the prices of the goods consumed and the actual payments deposited in the lock box yields a number of insights. First, the base payment rate is quite high. On average, payments represent almost 90 percent of the posted price. In a model of pure self-interest, one would expect very low payment rates, because there would seem to be many opportunities for individuals to take the products with almost no chance of their nonpayment being detected. Moderating the tendency to take the products without paying is the fact that low payment rates will increase the probability the delivery company stops serving the company. Paying for one’s bagels and donuts, viewed in this light, is a public good for other office workers. Thus, one might expect a strong negative relationship between office size and payment rates, which is not present in the data. Rather, the data appear more consistent with a model in which there are internal, nonpecuniary costs associated with stealing the bagels and donuts, i.e., people overwhelmingly pay for the products because it would be wrong not to do so. The observed payment rates are systematically related to a variety of observable factors. For instance, payment rates fall in response to increases in the posted price. This is consistent with the increase in financial costs pushing some marginal consumers to be willing to sustain the moral cost associated with not stealing the goods or paying less than full price. Payment rates are higher when many of the bagels and donuts go uneaten, suggesting that the marginal consumer pays a lower share of the posted price than the inframarginal consumer. Purchasers of donuts appear to be more likely to pay less than the full price. There is a sharp and persistent increase in the payment rate following the September 11 terrorist attacks.

After more than a decade of negotiations and planning under the Framework Convention on Climate Change (FCCC), the first binding international agreement to control the emissions of greenhouse gases has come into effect in the Kyoto Protocol. The first budget period of 2008–2012 is at hand. Moreover, the scientific evidence on greenhouse warming strengthens steadily as observational evidence of warming accumulates. The institutional framework of the Protocol has taken hold solidly in the European Union’s Emissions Trading Scheme (ETS), which covers almost half of Europe’s carbon dioxide emissions. Notwithstanding this apparent success, the Kyoto Protocol is widely seen as somewhere between troubled and terminal. Early troubles came with the failure to include the major developing countries along with lack of an agreedupon mechanism to include new countries and extend the agreement to new periods. The major blow came when the United States withdrew from the treaty in 2001. By 2002, the Protocol covered only 30 percent of global emissions, while the hard enforcement mechanism in the ETS accounts for about 8 percent of global emissions. Even if the current Protocol is extended, models indicate that it will have little impact on global temperature change. Unless there is a dramatic breakthrough or a new design, the Protocol threatens to be seen as a monument to institutional overreach. Nations are now beginning to consider the structure of climate-change policies for the period after 2008 to 2012. Some countries, states, cities, companies, and even universities are adopting their own climate-change policies. Are there, in fact, alternatives to the scheme of tradable emissions permits embodied in the Protocol? The fact is that alternative approaches have not had a serious hearing among natural scientists or among policymakers. What are some alternatives? For global public goods, there are three potential approaches: command-and-control regulation, quantity-oriented market approaches, and taxor price-based regimes. Of these, only the tradable-quantity and the price-like regimes have any hope of being reasonably efficient. Under a tradable-quantity approach, an agreement proceeds by setting limits on emissions by different countries. The limits are partially or wholly transferable among countries. This is the approach taken under the Kyoto Protocol. This approach has very limited international experience under existing protocols such as the CFC (chlorofluorocarbon) mechanisms and somewhat broader experience under national trading regimes, such as the U.S. sulfur dioxide regime. A radically different approach is to use harmonized prices, fees, or taxes as a method of coordinating policies among countries. This approach has no international experience in the environmental area, although it has modest experience nationally in such areas as the U.S. tax on ozone-depleting chemicals. On the other hand, the use of harmonized, price-type measures has extensive international experience in fiscal and trade policies, such as with the harmonization of taxes in the European Union and harmonized tariffs in international trade. These thoughts on the structure of international agreements to control global warming should not be regarded as negotiating strategies

This paper uses a dynamic general equilibrium model to analyze and quantify the aggregate effects of the timing of tax rate changes enacted in 2001 (which called for successive rate reductions through 2006) and 2003 (which made immediate tax rate cuts scheduled for 2004 and 2006). The phased-in nature contributed to the slow recovery from the 2001 recession, while the elimination of the phase-in helped explain the increase in economic activity in 2003. The simulations suggest while the tax policy was a drag on the economy in 2001 and 2002, it increased economic growth in 2003, once phase-ins were eliminated.

We use earnings forecasts from securities analysts to construct a new measure of the neoclassical fundamentals that drive investment spending. We find that investment responds significantly to our new measure of fundamentals but is insensitive to cash flow, even for firms typically thought to be liquidity constrained. These results have two key implications. First, fundamentals may be more important for investment spending than would be suggested by the results to date from investment-q models. Second, the positive cash-flow effects obtained in such models may reflect a failure to control properly for fundamentals rather than the presence of financial constraints.