Estimates of the Taylor rule using historical data from the past decade or two suggest that monetary policy in the U.S. can be characterized as having reacted in a moderate fashion to output and inflation gaps. In contrast, the parameters of optimal Taylor rules derived using empirical models of the economy often recommend much more vigorous policy responses. This paper attempts to match the historical policy rule with an optimal policy rule by incorporating uncertainty into the derivation of the optimal rule and by examining plausible variations in the policymaker's model and preferences.

Because data are collected for only fatal crashes, it is difficult to accurately measure seat belt and air bag effectiveness. The use of safety devices influences survival rates which in turn determine whether a crash is included in the sample, leading to sample selection bias. We propose a simple solution to the selection problem: limiting the sample to crashes in which someone in a different vehicle dies. Empirically, we find seat belts more effective and air bags to be less effective than previously found. The cost per life saved through seat belts is approximately $30,000, compared to $1.8 million for air bags.

In this paper, we examine empirically whether risk pooling is more advantageous among altruistic compared to selfish agents in a framework where individuals cannot make binding commitments. In particular, we incorporate altuism into a model of risk sharing under imperfect commitment and use simulation methods to establish tests of the roles of both altruism and commitment problems in determining the extent of insurance and the intertemporal movements in interhousehold transfers. The tests are carried out using three panel data sets from two countries of rural South Asia that provide detailed information on transfers and enable the measurement of income shocks. The estimates provide strong support for the notion that imperfect commitment substantially constrains informal transfer arrangements, whether kin-based or not, but also provide evidence that altruism plays an important role in ameliorating commitment constraints and thus in increasing the gains from income pooling.

Reported expenditures for environmental protection are often cited as an assessment of the burden of current regulatory efforts. However, the potential for both incidental savings and uncounted costs means that the actual burden could be either higher or lower than these reported values.Using a production cost model that considers the possible interaction between environmental and non-environmental expenditures, we directly estimate the dollar-for-dollar incidental savings/uncounted costs arising from a one-dollar increase in reported environmental expenditures. Although recent literature supports the idea that reported expenditures probably understate the actual burden, we find no such evidence in the manufacturing sector based on a large panel of plant-level data. In one industry, we find statistically significant overstatement. In three others, we find no significant deviation in either direction.We conclude that, although cost estimates are not overstated on average, variation and uncertainty exist at the industry level, with some plants experiencing savings and others possibly facing uncounted burdens.