How the mind works

Enclosed is a copy of the Board of Governors’ Semiannual Agenda of Regulations for the period August 1, 1980 through February 1, 1981. The Semiannual Agenda provides you with information on those regulatory matters that the Board now has under consideration or anticipates considering over the next six months, and is divided into three parts: (1) regulatory matters that the Board had considered during the previous six months on which final action has been taken; (2) regulatory matters that have been proposed for public comment and that require further Board consideration; and (3) regulatory matters that the Board may consider over the next six months.

Federal Reserve Bank of New Yorkの制定せる財務諸表様式について

(1975). The Limits of Organization. Journal of Economic Issues: Vol. 9, No. 3, pp. 543-544.

The Limits of Organization

This paper empirically examines how capital affects a bank’s performance (survival and market share), and how this effect varies across banking crises, market crises, and normal times that occurred in the U.S. over the past quarter century. We have two main results. First, capital helps small banks to increase their probability of survival and market share at all times (during banking crises, market crises, and normal times). Second, capital enhances the performance of medium and large banks primarily during banking crises. Additional tests explore channels through which capital generates the documented effects. Numerous robustness checks and additional tests are performed.

How Does Capital Affect Bank Performance During Financial Crises

The article reviews the book “Information Rules: A Strategic Guide to the Network Economy,” by Carl Shapiro and Hal R. Varian.

Information Rules: A Strategic Guide to the Network Economy

For many goods (such as experience goods or addictive goods), consumers' preferences may change over time. In this paper, we examine a monopolist's optimal pricing schedule when current consumption can affect a consumer's valuation in the future and valuations are unobservable. We assume that consumers are anonymous, i.e. the monopolist can't observe a consumer's past consumption history. For myopic consumers, the optimal consumption schedule is distorted upwards, involving substantial discounts for low valuation types. This pushes low types into higher valuations, from which rents can be extracted. For forward looking consumers, there may be a further upward distortion of consumption due to a reversal of the adverse selection effect; low valuation consumers now have a strong interest in consumption in order to increase their valuations. Firms will find it profitable to educate consumers and encourage forward looking behavior.

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Selling to Consumers with Endogenous Types

This paper examines properties of optimal poverty assistance programs under different informational environments using an income maintenance framework. To that end, we make both the income generating ability and the disutility of labor of individuals unobservable, and compare the resulting benefit schedules with those of programs found in the United States since Welfare Reform (1996). We find that optimal programs closely resemble a Negative Income Tax with a Benefit Reduction rate that depends on the distribution of population characteristics. A policy of workfare (unpaid public sector work) is inefficient when disutility of labor is unobservable, but minimum work requirements (for paid work) may be used in that same environment. The distortions to work incentives and the presence of minimum work requirements depend on the observability and relative importance of the population's characteristics.

Income maintenance programs and multidimensional screening

Since World War II, the United States government has made improved access to higher education a priority. This effort has substantially increased the number of people who complete college - generally thought to be a good thing. We show, however, that such policies can actually increase income inequality. The mechanism that drives our results is the "signaling" role of education first explored by Spence (1973). We focus on government policies that reduce the effective interest rate on borrowing for education. When borrowing for education is difficult, lack of a college education could mean that one is either of low ability or high ability but has low financial resources. Wages and income reflect the presence of high ability individuals in the uneducated pool. When government programs make borrowing easier, high ability types get educated and leave the uneducated pool. We demonstrate our argument by solving for the relationship between the effective interest rate and income inequality in the steady state of a dynamic asymmetric information model.

Educational Opportunity and Income Inequality

How does market information affect credit ratings? How do credit ratings affect market information? We analyze a model in which a credit rating agency's (CRA's) rating is followed by a market for credit risk that provides a public signal - the price. A more accurate rating decreases market informativeness, as it diminishes mispricing and, hence, incentives for investor information acquisition. On the other hand, more-informative trading increases CRA accuracy incentives by making rating inflation more transparent. If the first effect is strong, policies that increase reputational sanctions on CRAs decrease rating inflation, but also decrease the total amount of information.

Joel Shapiro

Papers

Selling to Consumers with Endogenous Types

Income maintenance programs and multidimensional screening

Educational Opportunity and Income Inequality

Credit Ratings and Market Information

Wage and effort dispersion