Current forecasts suggest that the vast majority of growth in energy demand will come from the developing world, and that China will play a major part in that growth. This paper presents evidence suggesting that the shape of the income distribution, which is typically omitted from forecasting models, plays a major role in driving household acquisition of energy-using durable goods in rural China. We use province-level data for rural households to show that the share of the population living above the poverty line is an important determinant of household appliance holdings even controlling for average household income.

We investigate whether physicians' financial incentives influence health care supply, technology diffusion, and resulting patient outcomes. In 1997, Medicare consolidated the geographic regions across which it adjusts physician payments, generating area-specific price shocks. Areas with higher payment shocks experience significant increases in health care supply. On average, a 2 percent increase in payment rates leads to a 3 percent increase in care provision. Elective procedures such as cataract surgery respond much more strongly than less discretionary services. Non-radiologists expand their provision of MRIs, suggesting effects on technology adoption. We estimate economically small health impacts, albeit with limited precision.

Milton Friedman and Anna J. Schwartz published A Monetary History of the United States: 1867 to 1960 with Princeton University Press in 1963, to critical acclaim. Since then the book's reputation has grown and it clearly has become one of the most influential volumes in economics in the twentieth century. In this paper we document the extraordinary impact of A Monetary History and argue that the key to this success was the use of the "narrative approach" to the problem of identifying the effects of monetary policy on economic activity.

Although backward induction is a cornerstone of game theory, most laboratory experiments have found that agents are not able to successfully backward induct. We analyze the play of world-class chess players in the centipede game, which is ill-suited for testing backward induction, and in pure backward induction games—Race to 100 games. We find that chess players almost never play the backward induction equilibrium in the centipede game, but many properly backward induct in the Race to 100 games. We find no systematic within-subject relationship between choices in the centipede game and performance in pure backward induction games.

Speeding tickets are determined not only by the speed of the offender, but also by incentives faced by police officers and their vote-maximizing principals. We hypothesize that police officers issue fines more frequently when drivers have a higher opportunity cost of contesting a ticket, and when drivers are not residents of the local municipality. We also predict that local officers are more likely to issue a ticket to out-of-town drivers when fiscal conditions are tight and legal limits prevent increases in property taxes. Using data from traffic stops in Massachusetts, we find support for our hypotheses.

South Africa's Post-apartheid Two-Step: Social Demands versus Macro Stability by Brahima Coulibaly and Trevon D. Logan. Published in volume 99, issue 2, pages 275-81 of American Economic Review, May 2009

Based on recent neuroscience evidence, we model the brain as a dual-system organization subject to three conflicts: asymmetric information, temporal horizon, and incentive salience. Under the first and second conflicts, we show that the uninformed system imposes a positive link between consumption and labor at every period. Furthermore, decreasing impatience endogenously emerges as a consequence of these two conflicts. Under the first and third conflicts, it becomes optimal to set a consumption cap. Finally, we discuss the behavioral implications of these rules for choice bracketing and expense tracking, and for consumption over the life cycle.

Economics has traditionally relied on revealed preferences (and, occasionally, on verbal reports) to understand the desires of people. Another source of information has been developed in recent years: the direct observation of choice processes. This mechanism, possible thanks to the improvements in the designs and techniques to measure brain activity, is explored in the bur geoning field of experimental neuroeconom ics (see Paul W. Glimcher and Aldo Rustichini (2004) and Colin Camerer, George Loewenstein, and Drazen Prelec (2005) for recent surveys). In this article, we argue that the evidence on brain activity can also be used to build theo retical models that help us understand choices and predict behaviors. We label this research “Neuroeconomic Theory.” In Section I, we describe the procedure, discuss some advan tages over traditional methodologies, and estab lish some facts that motivate our approach. In Section II, we illustrate the methodology with two brain-based models of decision making. I. What is “Neuroeconomic Theory”? Neuroeconomic theory is an interdisciplin ary line of investigation that combines research from neuroscience, neurobiology, and econom ics. Experimental neuroscience and neurobiology provide detailed evidence of the functionality, interconnectivity, and physiological constraints of the brain systems involved in decision making. Microeconomic theory supplies the toolkit to build simple optimization models that incorporate these network interactions and well-defined con straints into the mechanisms of choice.

A long-run link between money and prices is evident for the United States since the Korean War if the M2 measure of money is used and the velocity of M2 (V2) is modeled as a mean-reverting series. This link between M2 and prices is the basis for a dynamic model of inflation that compares favorably in forecasting exercises with Phillips-curve and more typical monetarist approaches. The behavior of V2 is examined from 1870 to the present, providing a basis for reconsidering previous findings that V2 follows a random walk.