Knowledge that Transforms

Alzheimer's disease (AD) affects one in ten people aged 65 or older and is the most expensive disease in the United States. We describe the central economic questions raised by AD. Although there is overlap with the economics of aging and health, the defining feature of the "economics of Alzheimer's disease" is an emphasis on choice by cognitively impaired patients that affects health and financial well-being, and situations in which dynamic contracts between patients and caregivers are useful but difficult to enforce. A focus on innovation in AD prevention, treatment, and care is also critical given the enormous social cost of AD and present lack of understanding of its causes, which raises questions of optimal resource allocation and alignment of private and social incentives. The enormous scope for economists to contribute to our understanding of AD-related issues including drug development, efficient care delivery, dynamic contracting, long-term care risk, financial decision-making, and the design of public programs for AD suggests a rich research program for many areas of economics.

This paper summarizes what is known about the impact of public–private partnerships (PPPs) in the three sectors where they have been used intensively: infrastructure (energy, transport, water and sanitation, and telecommunications), education, and health. It lays out the main elements of economic theory relevant to analyzing the trade-off between PPPs and the public provision of complex projects. It places PPPs within a historical perspective. It reviews empirical evaluations of the effectiveness of PPPs and, whenever possible, the implications for social outcomes. Finally, it draws conclusions on cross-cutting issues that influence the efficiency of PPPs, from contract design and regulation to renegotiations and institutional issues. The paper straightens out and qualifies the record of existing evidence and signals some of the main areas and topics for future fruitful research.

Books by Scott Wolford and Roger Ransom show how economic theories of games and decisions can be fruitfully applied to problems in World War I. This vital application offers fundamental insights into the analytical methods of game theory. Public random variables may be essential factors in war-of-attrition games. An assumption that nations can coordinate on Pareto-superior equilibria may become less tenable when nations are at war. Interpreting a surprising mistake as evidence of an unlikely type can have serious consequences. The ability of leaders to foster consistent beliefs within a cohesive society can create inconsistency of beliefs between nations at war.

The literature on intergenerational income mobility uses a diverse set of measures and there is limited knowledge about whether these measures provide similar information and yield similar conclusions. We provide a framework to highlight the key concepts and properties of the different estimators. We then show how these measures relate to one another empirically. Our main analysis uses income tax data from Australia to produce a comprehensive set of empirical estimates for each of 19 different mobility measures at both the national and regional levels. We supplement this analysis with other data that uses either within- or between-country variation in mobility measures. A key finding is that there is a clear distinction between relative and absolute measures both conceptually and empirically. A region may be high with respect to absolute mobility but could be low with respect to relative mobility. However, within broad categories, the different mobility measures tend to be highly correlated. For rank-based estimators, we highlight the importance of how the choice of the distribution used for calculating ranks can play a critical role in determining its properties as well as affect empirical findings. These patterns of results are important for policymakers whose local economy might fare well according to some mobility indicators but not others.

Research shows that opposition to policies that redistribute across racial divides has affected the development of the American welfare state. Are similar dynamics at play in Western Europe? For many scholars, the answer is yes. In contrast, we argue that researchers’ understanding of the political economy of redistribution in diversifying European countries is too incomplete to reach a conclusion on this issue. First, existing evidence is inconsistent with the assumption—ubiquitous in this line of research—of a universal distaste for sharing resources with people who are culturally, ethnically, and racially different. Second, important historical and institutional differences between the United States and Europe preclude any straightforward transposition of the American experience to the European case. We discuss what we see as the most promising lines of inquiry going forward.

The leadership structure of the American Economic Association is documented using a biographical database covering every officer and losing candidate for AEA offices from 1950 to 2019. The analysis focuses on institutional affiliations by education and employment. The structure is strongly hierarchical. A few institutions dominate the leadership, and their dominance has become markedly stronger over time. Broadly two types of explanations are explored: that institutional dominance is based on academic merit or that it is based on self-perpetuating privilege. Network effects that might explain the dynamic of increasing concentration are also investigated.

There is a long-standing debate about the extent to which economic theory should inform econometric modeling and estimation. This debate is particularly evident in the program/policy evaluation literature, where reduced-form (experimental or quasi-experimental) and structural modeling approaches are often viewed as rival methodologies. Reduced-form proponents criticize the assumptions invoked in structural applications. Structural modeling advocates point to the limitations of reduced-form approaches in not being able to inform about program impacts prior to implementation or about the costs and benefits of program designs that deviate from the one that was implemented. In this paper, we argue that there is a new emerging view of a natural synergy between these two approaches, that they can be melded to exploit the advantages and ameliorate the disadvantages of each. We provide examples of how data from randomized controlled trials (RCTs), the exemplar of reduced form practitioners, can be used to enhance the credibility of structural estimation. We also illustrate how the structural approach complements experimental analyses by enabling evaluation of counterfactual policies/programs. Lastly, we survey many recent studies that combine these methodologies in various ways across different subfields within economics.

Research on holding and use of cash involves many aspects, such as reasons for holding and hoarding cash, transactional demand for cash, cash management, type of spending paid with cash, type of consumer who pays cash, merchant acceptance, how consumers get cash, currency denominations, legal aspects, cash substitutes, and cost of cash. The purpose of this article is to introduce the reader to some of the research economists do on consumer holding and use of cash.

We present the first quantitative analysis of the impact of ending de jure segregation of Mexican American schoolchildren in the United States by examining the effects of the 1947 Mendez v. Westminster court decision on long-run educational attainment for Hispanics and non-Hispanic Whites in California. Our identification strategy relies on comparing individuals across California counties that vary in their likelihood of segregating and across birth cohorts that vary in their exposure to the Mendez court ruling based on school start age. Results point to a significant increase in educational attainment for Hispanics who were fully exposed to school desegregation.

This paper provides a critical review of the literature on choosing social discount rates (SDRs) for public cost-benefit analysis. We discuss two dominant approaches, the first based on market prices and the second based on intertemporal ethics. While both methods have attractive features, neither is immune to criticism. The market-based approach is not entirely persuasive even if markets are perfect, and faces further headwinds once the implications of market imperfections are recognised. By contrast, the ‘ethical’ approach—which relates SDRs to marginal rates of substitution implicit in a single planner’s intertemporal welfare function—does not rely exclusively on markets, but raises difficult questions about what that welfare function should be. There is considerable disagreement on this matter, which translates into enormous variation in the evaluation of long-run payoffs. We discuss the origins of these disagreements, and suggest that they are difficult to resolve unequivocally. This leads us to propose a third approach that recognises the immutable nature of some normative disagreements, and proposes methods for aggregating diverse theories of intertemporal social welfare. We illustrate the application of these methods to social discounting, and suggest that they may help us to move beyond long-standing debates that have bedevilled this field.