Balance Sheet Recession

What is a balance sheet recession and is the US in one?
Richard Koo: How the West is Repeating Japan's Mistakes.

The Economics of Dueling

The Deadliest of Games: The Institution of Dueling.

Recent historical research indicates that ritualistic dueling had a rational basis. Basically, under certain social and economic conditions, individuals must ght in order to maintain their personal credit and social standing. We use a repeated two-player sequential game with random matching to show how the institution of dueling could have functioned as a costly but incentive-compatible means by which individuals could demonstrate their good faith dealings by defending their "honor".

Fairness Behaviour Across Societies

Fairness in Modern Society in Science.

Experiments in psychology and economics have demonstrated that in industrialized societies all over the world, a substantial fraction of individuals will be fair in anonymous interactions and will punish unfairness (1, 2). However, it has not been clear whether this benevolent, prosocial behavior depends on innate human psychology or norms peculiar to industrialized societies. Henrich et al. explored the motivation for fairness in anonymous interactions across dramatically diverse societies and on page 1480 of this issue (3), they report that this behavior increases with the level of the society's market integration, measured as households' average percentage of calories that are purchased.

Economics Rap

Value at Risk

Simon Johnson discusses the Value at Risk (VAR) financial analysis technique and other issues in financial modelling in The Economics of Models

The Economics of Piracy

Aaaargh-onomics a blog post in the New York Times by Edward L. Glaeser of Harvard, reviews Peter Leeson’s book “The Invisible Hook: The Hidden Economics of Pirates.”

Mr. Leeson’s book represents a serious attempt to use the tools of economics to make sense of the institutions of piracy. The book is another example of economic imperialism, the use of economics to make sense of real world phenomena that are outside the standard realm of economic science. It addresses an important force that did, and does, impact world trade. But as the skull and crossbones on its spine suggests, the book is also just fun.

"Irrational Exuberance: Second Ediiton" by Robert J. Shiller

The first edition predicted the collapse of the dot com bubble, the new second edition bodes ill for the current real estate boom. Schiller is skeptical about the "efficient markets" hypothesis, skepticism which has proved well-founded. Pity, I liked that theory! His professor at MIT was the late Charles Kindleberger. I sat in on Kindleberger's International Economics class when I was at MIT, it was great. Schiller doesn't really offer much to replace the "efficient markets" concept, he mentions feedback several times, but doesn't really develop that much in the book - perhaps he does in his more scholarly work, which I haven't really dipped into. But the book is entertaining, lots of data and graphs, but not overwhelmingly quantitative.
The classic on this topic dates from 1841, Extraordinary Popular Delusions And The Madness Of Crowds by Charles MacKay. It discusses the Dutch Tulip mania, the South Sea Bubble and various financial scams and frauds of those days. Still worth reading today.


Links:
Princeton Press
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