Knowledge that Transforms

An independent central bank can manage its balance sheet and its capital so as to commit itself to a depreciation of its currency and an exchange-rate peg.This way, the central bank can implement the optimal escape from a liquidity trap, which involves a commitment to higher future inflation.This commitment mechanism works even though, realistically, the central bank cannot commit itself to a particular future money supply.It supports the feasibility of Svensson's Foolproof Way to escape from a liquidity trap.

In this paper I analyze the e¤ect of the transparency of the decision making process in committees on the decisions that are eventually taken.I focus on committees whose members are motivated by career concerns, so that each member tries to enhance his own reputation.When the decision making process is secretive, the individual votes of the committee members are not exposed to the public but only the …nal decision.Thus, individuals are evaluated according to the group's decision.I …nd that in such a case, group members are induced to comply with preexisting biases.For example, if the voting rule demands a supermajority to accept a reform, individuals vote more often against reforms and exacerbate the conservatism of the voting rule.When the decision making process becomes transparent and individual votes are observed, this e¤ect disappears and such committees are then more likely to accept reforms.I also …nd that coupled with the right voting rule, a secretive procedure may induce better decisions than a transparent one.

In contrast to the believed similarity in their health outcomes, workers in different Western countries report very different rates of work disability. Using new data from the United States and the Netherlands, we offer a partial resolution to this paradox. We find that observed differences in reported work disability largely stem from the fact that Dutch respondents have a lower threshold in reporting whether they have a work disability than American respondents. For those who do not suffer from pain, work disability is similar in both countries once thresholds are the same. For respondents with pain, however, a significant difference remains.