Knowledge that Transforms

Alberto Bisin of New York University reviews “Modeling Social Behavior: Mathematical and Agent-Based Models of Social Dynamics and Cultural Evolution” by Paul E. Smaldino. The Econlit abstract of this book begins: “Explores ways of thinking about and studying complex social systems using mathematical and computational models, focusing on relatively simple dynamic models to aid in the study of social organisms and what they do together.”

Satyajit Chatterjee of Federal Reserve Bank of Philadelphia reviews “When Nations Can't Default: A History of War Reparations and Sovereign Debt” by Simon Hinrichson. The Econlit abstract of this book begins: “Promotes the argument that war reparations are unlike other sovereign debt because the repayment is enforced by military and political force, exploring how debtor countries end up in suboptimal economic situations that do not occur during normal sovereign debt management.”

Kevin Hjortshoj O'Rourke of NYU Abu Dhabi reviews “Against the World: Anti-Globalism and Mass Politics between the World Wars” by Tara Zahra. The Econlit abstract of this book begins: “Explores the development of nationalism in the twentieth century after World War I, discussing significant events that contributed to the rise of anti-globalization policies and social movements.”

Doug Elmendorf of Harvard University reviews “The Crisis of Democratic Capitalism” by Martin Wolf. The EconLit abstract of this book begins: “Promotes the argument that economic disappointment is one of the chief explanations for the rise of left- and right-wing populism in high-income democracies, focusing on what can be done to restore the relationship between capitalism and democracy.”

We review the literature on models that try to explain human behavior in social interactions described by normal-form games with monetary payoffs. We start by covering social and moral preferences. We then focus on the growing body of research showing that people react to the language with which actions are described, especially when it activates moral concerns. We conclude by arguing that behavioral economics is in the midst of a paradigm shift toward language-based preferences, which will require an exploration of new models and experimental setups.

In this essay on Elster’s (2020) book, I expose my concerns about the ability of behavioral tools to correctly address the transition phase between the absolutist regime and the democratic institutions inherited from the French Revolution. Rehabilitating the forgotten analyses of contemporary political philosophers Quinet, de Sade, and Leroux, I defend the view that a correct understanding of the French Revolution’s essence lies in its political philosophical dimension, not in the supposed psychological traits of its actors. I suggest a renewed way to apprehend and model revolutions, combining three levels of analysis: political philosophy, macroeconomic dynamics, and complexity economics.

What is the most efficient way of designing incentives in an organization? Over the past five decades, agency theory has provided various answers to this crucial question. This line of research suggests that, depending on the organizational context, the optimal approach to providing incentives may involve either relying on collective compensations or, conversely, employing relative performance evaluations. In the first scenario, cooperation among agents is the key aspect of the organization. In the second, competition prevails. This paper provides a comprehensive overview of this extensive literature with the aim of understanding the conditions under which one or the other type of incentive schemes is more desirable for the principal of the organization. To this end, we use a flexible and versatile model capable of addressing a wide range of scenarios characterized by different technologies, information constraints, and behavioral norms.

Wars impose tremendous costs on societies and the question of how to end them is of foremost importance. Several hundred books and scientific articles have been written on peace agreements and third-party interventions. In this article I provide a critical literature survey on what policies foreign countries have at their disposal if they wish to foster peace abroad. Ranging from pure (nonmilitarized) mediation, over a range of military options to economic policies, the promises and pitfalls of these types of interventions are critically assessed in the light of cutting-edge theoretical and empirical literature. A series of take-home messages emerge: (i) establishing a causal effect of mediation has proven difficult; (ii) military peacekeeping operations can play a key role, to the extent that security guarantees, the sharing of political and military power, and trust-building measures are well coordinated; and (iii) money matters—fostering human capital and economic opportunities contributes to fertile ground for lasting peace.

Central banks are increasingly reaching out to the general public to motivate and explain their monetary policy actions. One major aim of this outreach is to ensure accountability and create trust; another is to guide inflation expectations. This article surveys a rapidly growing literature on central bank communication with the public, rather than with the financial markets. We first discuss why such communication matters and is more challenging than communicating with expert audiences. Then we turn to methods: How do central banks try to reach the public, and do they succeed? Next, and importantly, we survey the empirical evidence on the extent to which this new outreach affects inflation expectations. On balance, we see some promise in the potential to inform the public better, but many challenges along the way.

This book offers a radical thesis: Technological innovation often benefits elites while worsening conditions for workers, challenging the common view that technology always improves living standards. Through historical transitions like the Industrial Revolution, the authors illustrate how innovations have frequently led to worker exploitation. They argue that governance, rather than competition, determines whether technological advances benefit society. In the digital age, platforms exploit user data without fair compensation, causing harm through addictive services and poor regulation. The book calls for stronger regulations to protect consumers and ensure that innovation aligns with societal well-being, especially as artificial intelligence spreads.