The authors define "consensus" as the degree of agreement among point predictions aimed at the same target by different individuals and " "uncertainty" as the diffuseness of the corresponding probability distributions. This distinction is made operational with the aid of the NBERAASA survey data on matched point and probabilistic forecasts of inflation and the rate of change in gross national product. The means of the two sets of forecasts agree closely. Standard deviations of point forecasts tend to understate uncertainty as measured by standard deviations of the predictive probability distributions. However, these measures of consensus and uncertainty are on the whole positively correlated.

Douglas W. Caves, Joseph A. Herriges, Kenneth E. Train, Robert J. Windle, A Bayesian Approach to Combining Conditional Demand and Engineering Models of Electricity Usage, The Review of Economics and Statistics, Vol. 69, No. 3 (Aug., 1987), pp. 438-448

[The purpose of this study is to test the feasibility of using a model derived from the judgments of a group of tax experts in controlled experimental conditions to predict actual compliance behavior. A judgment model, using amount of income, source of income, penalty for cheating, and rate structure as independent variables, was derived from CPA tax professionals. The model then was used successfully to predict actual taxpayer compliance using IRS Taxpayer Compliance Measurement Program data. The model also was used to infer the relative importance of the determinants of taxpayer compliance used in the study. Source of income was found to be about three times more important than the next most heavily weighted variable. These results demonstrate the potential for employing a derived judgment model as an efficient means of predicting the effect of proposed changes in tax policy on taxpayer compliance.]

[Current financial reporting practices have traditionally emphasized measures of accrual earnings. On the other hand, the link between future cash flows and firm value is well accepted by financial economists, and recently there has been increased interest in measures of cash flow. This paper provides evidence on the role of accrual (i.e., earnings and working capital from operations [WCFO]) and cash flow measures in an explanatory model of security prices. This issue is first examined by testing for an association between unexpected security returns and unexpected cash flows, after controlling for the relation between unexpected returns and unexpected earnings. We also examine the obverse issue by testing for an association between unexpected security returns and unexpected earnings, after controlling for the relation between unexpected returns and unexpected cash flows. We test these relations in two contexts: in results pooled over the entire ten-year time period studied and in year-by-year cross-sectional regressions. Results for our complete sample are generally consistent with: (1) cash flow data having incremental information content relative to that contained in earnings; (2) cash flow data having incremental information content in addition to that contained in earnings and WCFO; and (3) accrual data (i.e., earnings and WCFO) jointly and separately having incremental information content in addition to that contained in cash flow data. However, the results do not support the hypothesis that WCFO has incremental information content relative to that contained in earnings.]

The purpose of this study is to test the feasibility of using a model derived from the judgments of a group of tax experts in controlled experimental conditions to predict actual compliance behavior. A judgment model, using amount of income, source of income, penalty for cheating, and rate structure as independent variables, was derived from CPA tax professionals. The model then was used successfully to predict actual taxpayer compliance using IRS Taxpayer Compliance Measurement Program data. The model also was used to infer the relative importance of the determinants of taxpayer compliance used in the study. Source of income was found to be about three times more important than the next most heavily weighted variable. These results demonstrate the potential for employing a derived judgment model as an efficient means of predicting the effect of proposed changes in tax policy on taxpayer compliance.

Kenneth E. Train, Daniel L. McFadden, Andrew A. Goett, Consumer Attitudes and Voluntary Rate Schedules for Public Utilities, The Review of Economics and Statistics, Vol. 69, No. 3 (Aug., 1987), pp. 383-391

It is traditional in a discussion piece to organize the material in one of two ways. The writer can either take a historical perspective and attempt to explain how it is we got where we are today and where we are likely to go from here, or the writer can describe the current state of the art, dwelling on particular points of interest or promise in the prevailing research. Having quite recently done both, I thought I would take a somewhat different approach. I would like to try to briefly describe the main characteristics of a neoclassical theory of finance that captures the essential themes of modern finance and relate these characteristics to the general themes of economics. Finance uses the modeling framework constructed in economics but, within this scaffolding, finance has taken a different methodological perspective. It is wrong to characterize finance, or financial economics to be formal, as simply another of the specialty areas of economics-not unlike, for example, labor economics or development economics or public finance. While finance is specialized in its focus on the financial markets, the differences between economics and finance only begin there. The principal distinction is one of methodology rather than of focus. If labor markets behaved like financial markets, the theories of finance would be used to study them. Indeed, the line where financial theoretic analysis leaves off and more conventional patterns of economic reasoning begin is an active research issue.