Given the choice between €500 and a chance to win either €0 or €1000 with equal probabilities, most people opt for the sure prize of €500, even if the expected amount of money is the same in both cases. In both Economics and Decision Theory, this risk-aversion is usually modeled by considering, not the amount […]
I n a recent article in the Journal of Economic Perspectives, three economists from the British Macroprudential Strategy and Support Division and one member of the Financial Policy committee of the Bank of England analyze whether macroprudential regulation could prevent a rerun of the last crisis (Aikman et al ., 2019 ). To address this […]
During the second half of the 80s, when no one knew those years would become the Soviet Union’s last, Mikhail Gorbachev attempted some economic reforms without much success. Less than one decade earlier, in 1978, Deng Xiaoping started a series of reforms that secured not only economic growth, but also the rule of Chinese communist […]
It is generally considered that equality of opportunities means equal access to education and health. When the society considers that some goods like school and vaccines must be consumed by everyone, economists define them as “merit goods”, which deserve a special treatment, as in the case of public goods or goods that cause consumption externalities […]
T here are two major impossibility theorems in social choice: Arrow’s theorem (1951) : the only system to aggregate individual preferences into social preferences (e.g., a voting mechanism) that satisfies the properties of transitivity, monotonicity and independence of irrelevant alternatives for all possible individual preferences is the dictatorial system. Gibbard–Satterthwaite’ theorem (1973) : any voting […]
The share of the world’s population living below the global extreme poverty line has dropped from 42% in 1981 to 11% in 2013. This dramatic change has encouraged the UN to set the goal of ending it by 2030. Can it happen? In a recent article published in the Journal of Economic Perspectives, Page and […]
A tax on carbon emissions is an efficient way to make firms and consumers internalize the environmental costs due to climate change. However, there are many other aspects to consider in a transition from a fossil-fueled economy to a cleaner one. In a past article we presented the case for subsidies on research to develop […]
Very frequently, economic analysis must compare future and present magnitudes. Say that under policy A, the stream of payoffs for today and next year is (10, 10), while under policy B it is (13, 6). The total of payoff is higher under A, but policy B results in higher payoffs sooner. If later payoffs are […]
In this article I summarize the recently published paper by José Alcalde . In this article, the author discusses the current matching mechanism that is used in Spain to assign medical graduates who pass the MIR exam to residency positions. The system works as follows. Students are ranked according to their marks in the MIR […]
Ravallion (2018) questions the thesis that globalization has been a major driving force of inequality. While this is the conclusion of two recently published books (Bourguignon, 2016 and Milanovic, 2016 ), Ravallion argues that their interpretation of the data is not well supported and that is even contradicted by the economic research. Here is a […]