We study processing and acquisition of objective information regarding qualities that people
care about, intelligence and beauty. Subjects receiving negative feedback did not respect …

Calls for benefit-cost analysis in rule-making, based on the Dodd-Frank Wall Street Reform
Act, have revealed a paucity of work on allocative efficiency in financial markets. We …

We show that the stock market may fail to aggregate information even if it appears to be
efficient, and that the resulting decrease in the information content of prices may drastically …

An asset bubble relaxes collateral constraints and increases borrowing by credit-
constrained agents. At the same time, as the bubble deflates when constraints start binding …

When no agent has substantial influence on a public good outcome, he or she can demand
the full surplus. Thus, in rich environments, private (voluntary and self-financing) provision of …

In this paper, we provide the first empirical evidence on whether or not asset price bubbles
predict economic welfare. Using a time-series model, we show that asset price bubbles both …

Balanced budget requirements lead to substantial pro-cyclicality in state government
spending outside of safety-net programs. At the beginnings of recessions, states tend to …

This paper uses Eurobarometer survey data from 26 EU countries to evaluate whether the
general public cares about financial stability and imbalances over and above their effects on …

In this paper, we revisit the question of what the welfare costs of business cycles are with
new insights. The seminal paper by Lucas (1987) found welfare costs to be negligible at …

This paper tests for the predictive ability of bubbles in housing markets on several proxies of
macroeconomic performance using a panel of eighteen advanced countries. We use robust …