We consider the link between parents’ influence over the preferences of children, parental investments in children’s human capital, and children’s support of elderly parents. It may pay for parents to spend resources to “manipulate” children’s preferences in order to induce them to support their parents in old age. Since parents invest more in children when they expect greater support, manipulation of child preferences may end up helping children and parents. A new result, which we call the “Rotten Parent Theorem,” demonstrates that if children are altruistic, then even selfish parents will make the optimal investment in their children’s human capital.

Using a large dataset of hand-collected information on activist interventions from 2008 to 2014, we examine why certain hedge funds succeed in the face of competition. We document that the top hedge funds succeed, not merely because of how they select targets, but because they acquire a reputation for what we label “clout and expertise.” These hedge funds do not intervene more frequently; to the contrary, activists with more interventions are associated with lower returns. Instead, top activists have a demonstrated ability to succeed in difficult interventions by targeting large firms, launching successful proxy fights, filing and winning lawsuits, pressuring target boards through the media, overcoming anti-takeover defenses, and replacing board members. These activists' successes appear to result more from board representation, improved performance, and monitoring management than from capital structure or dividend policy changes.

This paper is a brief for the introduction of a subsidy to any qualified firm for its use of low-wage employees as a means to reduce the unemployment and raise the pay of disadvantaged workers. There would be a case for such a wage subsidy in all the advanced market economies, and certainly the American one, regardless of recent trends. The case has grown stronger, however, with the worsening of the relative wages and especially the unemployment rates of low-age workers. The globalization of investment and the bias of technical progress are the causes most often suggested. I would add the growth of the system-the public entitlements to hospitalization, to retirement and disability insurance, and to the benefits labeled welfare in the narrow sense. Since this factor tends to be overlooked, I devote Section I to it. Section II proceeds to the case for a low-wage employment subsidy. It will be clear that the beneficial effects of the subsidy on disadvantaged workers are the mirror opposite of the harmful side effects of the system, side effects that the subsidy would counteract. I. Side Effects of the Welfare System

With emphasis on the adjective and the normative verb should, my answer to the question of this session is a resounding yes. Indeed, I spent a good deal of time between January 1993 and January 1996 acting on the belief that there is such a macro model; so I certainly hope it exists.' This believable falls well short of perfection, leaves many questions unanswered, and is subject to substantial stochastic errors. Nonetheless, it is both useful and extensively used in policy analysis, where contact with reality is a necessity, and you cannot beat something with nothing. It also closely resembles, but does not quite match, the way macroeconomics is taught to beginning and intermediate (but not to graduate) students. In this short presentation, I will describe briefly the main practical elements that I think we should agree on, without worrying too much about their theoretical underpinnings. Then I will turn to two critical failings of the standard macro which cry out for theoretical and empirical repair. My organizing principle is the textbook exposition that has been standard, though not universal, in teaching intermediate macroeconomics for years. The question is: how does it differ from the core model used in policy analysis?

In one of those marvelous coincidences of intellectual history, Robert Lucas was born the year after the publication of Keynes' General Theory. For the first thirty-five years of their mutual lives, the two apparently coexisted in harmony. But their relationship has been tumultuous ever since. Lucas has frequently criticized Keynesian economics as poor science; and it is precisely in that spirit that I want to address the debate today. We all know the old joke about the professor who uses the same exam questions year after year, but changes the answers. That joke encapsulates all too well what has happened to macroeconomics these last fifteen years and seems to reflect poorly on economics as a science. Or does it? On second thought, the best answers to scientific questions do change as new observations are made, as new experiments are run, and as better theories are developed. The issue is whether the answers to important questions in macroeconomics have changed for good scientific reasons or for other reasons. The joke provides the framework for my talk. I will pose eight exam questions; and for each one I will summarize the answers given by Keynes, by Lucas and his followers, and by modern Keynesians. I pick only questions that are answered differently by Keynesians and Lucasians and that are central to contemporary macroeconomic debates. The focus is on whether the Keynesian or new classical answers have greater claim to being scientific. Each student must answer every question. I. Are Expectations Rational?

It has been said that in a world of perfect knowledge regarding the structure of the economic system and the values of all exogenous variables, policy making becomes a trivial problem.1 This is true in the sense that it is always possible, with full knowledge and perfect foresight, to choose the appropriate policy for the following period, but it ignores the fact that the correct policy on a period to period basis may turn out to be impractical or even impossible in the longer run. Current policy decisions do not ordinarily have their impact solely in the current period, but rather over a number of periods in the future. Thus, in addition to offsetting the undesired effects of changes in exogenous variables, current policy decisions must offset the current impact of past policy

In quantitative genetics, the heritability of a continuous trait denotes the proportion of its variance which is attributable to genetic differences. A classical method for assessing heritability contrasts the correlation of the trait observed across pairs of identical twins (= monozygotic twins = MZs) with that observed across pairs of fraternal twins (= dizygotic twins = DZs). In its simplest version, the twin method attributes the greater correlation of MZs entirely to the perfect correlation of their genotypes. Since the genotypes of DZs, like those of ordinary siblings, correlate only about 1/2, the very simplest twin method just doubles the difference between the two observed correlations to estimate heritability. Economists may have become aware of the heritability concept, and of the twin method, via the great IQ debate, in particular via the books of Arthur Jensen (1972, 1973), Richard J. Herrnstein, and Christopher Jencks. A series of articles by Paul Taubman (1976a,b), and Jere Behrman and Taubman, has now brought heritability and twin methods into economics itself. Twin data on schooling, initial occupation, later occupation, and earnings lead to such inferences as Genetics by itself accounts for roughly 30 to 40 of everything except initial occupation, where it accounts for 8 percent (Behrman and Taubman,

In reforming the system of pegged exchange rates, one matter of concern is the distribution of the burden of adjustment between revaluatioins anid devaluations. The same amount of adjustment cain be accomplished wvith various revaluationidevaluat ioni combinations, but changing the combination has several effects. One imp)ortant elfect was noted in a report by the Internlational Monetary Fund: