This paper reports the results of a statistical summary of estimates of the marginal willingness to pay (MWTP) for reducing particulate matter from hedonic property value models developed between 1967 and 1988. Results using both ordinary least squares and minimum absolute deviation estimators suggest that market conditions and the procedures used to implement the hedonic models were important to the resulting MWTP estimates. The interquartile range for these estimated marginal values (measured as a change in asset prices) lies between zero and $98.52 (in 1982-84 dollars) for a one-unit reduction in total suspended particulates (in micrograms per cubic meter). The mean MWTP is nearly five times the median ($109.90 vs. $22.40), suggesting that outliers are important influences to any summary statistics for these estimates.

We develop a theory of optimal bank leverage in which the benefit of debt in inducing loan monitoring is balanced against the benefit of equity in attenuating risk shifting. However, faced with socially costly correlated bank failures, regulators bail out creditors. Anticipation of this generates multiple equilibria, including one with systemic risk in which banks use excessive leverage to fund correlated, inefficiently risky loans. Limiting leverage and resolving both moral hazards—insufficient loan monitoring and asset substitution—requires a novel two-tiered capital requirement, including a “special capital account” that is unavailable to creditors upon failure. Received April 23, 2015; accepted September 16, 2015 by Editor Paolo Fulghieri.

I present a theory of organizational higher purpose in which, in addition to profits, the firms’ owners and employees care about a purpose that guides decisions but transcends business goals. This purpose sacrifices profits but serves a greater good that generates positive utility for the owners and employees. Some purpose-driven firms insure employees against layoffs and may pay employees more or less than firms not offering such insurance. Whether purpose-driven firms offering layoff insurance pay employees more or less than purpose-driven firms not offering this insurance depends on the owner’s purpose-linked utility relative to the employee’s. (JEL D01, D21, D24, G03, G32)

Nonbank financial intermediaries (NBFIs) have grown significantly relative to banks. We argue that this growth reflects a transformation of the activities and risks of banks and NBFIs, driven at least in part by changes in bank regulation. We document through new regulatory data, case studies, and empirical analyses that banks remain special as providers of both routine and emergency liquidity to NBFIs and that the sectors have become increasingly interdependent. We discuss some potential regulatory responses, including considering the two sectors holistically and exploring new ways to internalize the costs of systemic risk arising from bank-NBFI interconnectedness. (JEL: G01, G21, G23, G28)

This review of the literature on the 2007-2009 crisis discusses the precrisis conditions, the crisis triggers, the crisis events, the real effects, and the policy responses to the crisis. The precrisis conditions contributed to the housing price bubble and the subsequent price decline that led to a counterparty-risk crisis in which liquidity shrank due to insolvency concerns. The policy responses were influenced both by the initial belief that it was a market-wide liquidity crunch and the subsequent learning that insolvency risk was a major driver. I suggest directions for future research and possible regulatory changes. (JEL G20, G21, E58, G28)

Laurence Ball argues that the Federal Reserve (the Fed) could—and should—have bailed out Lehman Brothers so that it did not have to declare bankruptcy. He presents compelling evidence that it could have. I argue that the view that the Fed should not bail out Lehman is reasonable under the circumstances the Fed was in at the time. The Lehman bankruptcy is a case study in bailouts and the attendant moral hazard problem that expectations of bailouts create. The lessons learned imply a clear case for appropriate regulatory intervention to solve the problems created when governments cannot commit themselves to not undertake bailouts. (JEL D72, E32, E58, E63, G01, G24, G33)

This paper provides an explanation of involuntary umemployment arising as a consequence of asymmetric information between firms and workers. Involuntary unemployment is defined as a situation where ex post gains to trade exist. A model of labor contracts is developed where the allocations are not ex post optimal. It is shown that inferiority of leisure is a necessary and sufficient condition for the existence of involuntary unemployment.

Recent developments in rationing theory are used to examine the differences between the effects of in-kind and cash transfers on labor supply. It is not possible to tell a priori which type of transfer will cause the greater reduction in hours of work; the answer depends on the extent to which in-kind transfers distort consumption choices and on the relationship between the transferred commodities and leisure. Hicks-Allen complements can cause greater reductions in labor supply than equally generous cash transfers, while strong Hicks-Allen substitutes can induce increases in market work.

I examine the effects of venture capital backing on the corporate governance of the entrepreneurial firm at the time of transition from private to public ownership. Using a selection model framework that instruments for venture backing with variations in the supply of venture capital, I conduct three sets of tests comparing corporate governance in venture- and non–venture-backed initial public offering (IPO) firms. Venture-backed firms have lower levels of earnings management, more positive reactions to the adoption of shareholder rights agreements, and more independent board structures than similar non–venture-backed firms, consistent with better governance. These effects are not common to all pre-IPO large shareholders.