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In this paper, we investigate the implications of providing loan officers with a compensation structure that rewards loan volume and penalizes poor performance. We study detailed transactional information of more than 45,000 loans issued by 240 loan officers of a large commercial bank in Europe. We find that when the performance of their portfolio deteriorates, loan officers shift their efforts towards monitoring poorly-performing borrowers and issue fewer loans. However, these new loans are of above-average quality, which suggests that loan officers have a pecking order and process loans only for the very best clients when they are under time constraints.
Is wider access to stockholding opportunities related to reduced wealth inequality, given that it creates challenges for small and less sophisticated investors? Counterfactual analysis is used to study the influence of changes in the US stockholder pool and economic environment, on the distribution of stock and net household wealth during a period of dramatic increase in stock market participation. We uncover substantial shifts in stockholder pool composition, favoring smaller holdings during the 1990s upswing but larger holdings around the burst of the Internet bubble. We find no evidence that widening access to stocks was associated with reduced net wealth inequality.
This paper analyzes the inherent dangers of paternalist economic policies associated with the newly established economic sub-disciplines of behavioral economics, economic happiness research and economic psychology. While the authors in general welcome these sub-disciplines for enriching and critically evaluating mainstream economics – especially their criticism of the Homo oeconomicus-heuristic is of great value contributing to a more realistic idea of man –, the political-economic implications as well as inherent risks of paternalist economic policies should be received with concern and thus be subject to a critical review. The paper is structured as follows: In the first step, we recapitulate Kahneman’s, Thaler/Sunstein’s, and Layard’s versions of paternalism pointing at similarities and differences alike. We contrast libertarian or soft paternalism of behavioral economics (Thaler/Sunstein) and economic psychology (Kahneman) with (Layard’s) happiness economics and its hard paternalism. In the second step, we analyze the political and economic implications and consequences of paternalism. We give an overview of the main points of criticism of paternalism from a constitutional economics perspective. The Ordnungs- vs. Prozesspolitik argument is discussed as well as epistemological, political-economic or idea of man arguments. The paper ends with some concluding remarks.
As police with tear gas and water cannons fuel unrest across Turkey, it seems that many eyes are wearily cast over Europe’s favourite neighbour, soon to join the list of potentially unstable Middle-East nations. Yet even as Erdogan’s messy power play brings Turkey’s democratic survivability into question, the nation’s solar energy industry is breaking new ground and massive nuclear power capacity is quietly being prepared to relieve the nation’s energy import dependency. In Brazil, riots breaking out over a transport price hike reflect the pressures of inflation and widespread corruption: an outburst fuelled by a long history of mismanagement and ineffective policy at state and federal levels. Nevertheless, big plans are underway for the expanding of Brazil’s power grid, set to underwrite national economic growth into 2030 and beyond. Behind these gruelling scenes of democratic upheaval, lie two distinct cases of energy policy in the making, in spite of overt political turmoil. This post highlights two instances of critical energy policy, unfolding behind the scenes.
Paging is one of the prominent problems in the field of on-line algorithms. While in the deterministic setting there exist simple and efficient strongly competitive algorithms, in the randomized setting a tradeoff between competitiveness and memory is still not settled. Bein et al. [4] conjectured that there exist strongly competitive randomized paging algorithms, using o(k) bookmarks, i.e. pages not in cache that the algorithm keeps track of. Also in [4] the first algorithm using O(k) bookmarks (2k more precisely), Equitable2, was introduced, proving in the affirmative a conjecture in [7].
We prove tighter bounds for Equitable2, showing that it requires less than k bookmarks, more precisely ≈ 0.62k. We then give a lower bound for Equitable2 showing that it cannot both be strongly competitive and use o(k) bookmarks. Nonetheless, we show that it can trade competitiveness for space. More precisely, if its competitive ratio is allowed to be (Hk + t), then it requires k/(1 + t) bookmarks.
Our main result proves the conjecture that there exist strongly competitive paging algorithms using o(k) bookmarks. We propose an algorithm, denoted Partition2, which is a variant of the Partition algorithm byMcGeoch and Sleator [13]. While classical Partition is unbounded in its space requirements, Partition2 uses θ(k/ log k) bookmarks. Furthermore, we show that this result is asymptotically tight when the forgiveness steps are deterministic.
Our most recent podcast: We were able to talk to the Japanese culturalanthropologist Mihara Ryôtarô while he visited Frankfurt in July for a talkon the Coool Japan Initiative [link]. As we have written on K-Pop in the past,we were very interested to talk about this kind of export promotion ofcultural goods as a foreign policy strategy: Do export subsidies of J-Popartifacts really promote Japanese soft power in the region? What are thedangers of promoting certain images of Japanese-ness? And is fried sushireally cool?