Charles F. Walker, Allan H. Meltzer, Edgar Peske, Bion B. Howard, John P. Shelton, Ragnar D. Naess, Developments in the Curriculum and Teaching of Finance: Discussion, The Journal of Finance, Vol. 21, No. 2, Papers and Proceedings of the Twenty-Fourth Annual Meeting of the American Finance Association, New York, New York, December 28-30, 1965 (May, 1966), pp. 423-434

Taxation affects the allocation of talented individuals across professions by blunting material incentives and thus magnifying nonpecuniary incentives of pursuing a “calling.” Estimates from the literature suggest that high-paying professions have negative externalities, whereas low-paying professions have positive externalities. A calibrated model therefore prescribes negative marginal tax rates on middle-class incomes and positive rates on the rich. The welfare gains from implementing such a policy are small and are dwarfed by the gains from profession-specific taxes and subsidies. These results depend crucially on externality estimates and labor substitution patterns across professions, both of which are very uncertain given existing empirical evidence.

We hypothesize that firms' 10-K market risk disclosures, recently mandated by SEC Financial Reporting Release No. 48 (FRR No. 48), reduce investors' uncertainty and diversity of opinion about the implications, for firm value, of changes in interest rates, foreign currency exchange rates, and commodity prices. We argue that this reduced uncertainty and diversity of opinion should dampen trading volume sensitivity to changes in these underlying market rates or prices. Consistent with this hypothesis, we find that after firms disclose FRR No. 48-mandated information about their exposures to interest rates, foreign currency exchange rates, and energy prices, trading volume sensitivity to changes in these underlying market rates and prices declines, even after controlling for other factors associated with trading volume. The observed declines in trading volume sensitivity are consistent with FRR No. 48 market risk disclosures providing useful information to investors.

We model legislative decision-making with an agenda setter who can propose policies sequentially, tailoring each proposal to the status quo that prevails after prior votes. Voters are sophisticated, and the agenda setter cannot commit to future proposals. Nevertheless, the agenda setter obtains her favorite outcome in every equilibrium regardless of the initial default policy. Central to our results is a new condition on preferences, manipulability, that holds in rich policy spaces, including spatial settings and distribution problems. Our findings therefore establish that, despite the sophistication of voters and the absence of commitment power, the agenda setter is effectively a dictator.

We analyze the effect of search frictions in the market for commercial health insurance. Frictions increase insurance premiums (enough to transfer 13.2 percent of consumer surplus from fully insured employer groups to insurers—approximately $34.4 billion in 1997); and increase insurance turnover (by 64 percent for the average policy). This rent transfer harms consumers and—when combined with heightened turnover—reduces incentives to invest in future health. We also find that a publicly financed insurance option can improve the efficiency of private insurance markets by reducing search friction induced distortions in pricing and marketing efforts.

Information Aggregation and Strategic Abstention in Large Laboratory Elections by Marco Battaglini, Rebecca B. Morton and Thomas R. Palfrey. Published in volume 98, issue 2, pages 194-200 of American Economic Review, May 2008

We present a method for decomposing wholesale electricity payments into production costs, inframarginal competitive rents, and payments resulting from the exercise of market power. Using data from June 1998 to October 2000 in California, we find significant departures from competitive pricing during the high-demand summer months and near-competitive pricing during the lower-demand months of the first two years. In summer 2000, wholesale electricity expenditures were $8.98 billion up from $2.04 billion in summer 1999. We find that 21 percent of this increase was due to production costs, 20 percent to competitive rents, and 59 percent to market power.

Do preoffer target stock price runups increase bidder takeover costs? We present model‐based tests of this issue assuming runups are caused by signals that inform investors about potential takeover synergies. Rational deal anticipation implies a relation between target runups and markups (offer value minus runup) that is greater than minus one‐for‐one and inherently nonlinear. If merger negotiations force bidders to raise the offer with the runup—a costly feedback loop where bidders pay twice for anticipated target synergies—markups become strictly increasing in runups. Large‐sample tests support rational deal anticipation in runups while rejecting the costly feedback loop.