Should Governments Invest More in Nudging? John Beshears, Cass Sunstein, August 2017, Paper, “Governments are increasingly adopting behavioral science techniques for changing individual behavior in pursuit of policy objectives. The types of “nudge” interventions that governments are now adopting alter people’s decisions without coercion or significant changes to economic incentives. We calculated ratios of impact to cost for nudge interventions and for traditional policy tools, such as tax incentives and other financial inducements, and we found that nudge interventions often compare favorably with traditional interventions. We conclude that nudging is a valuable approach that should be used more often in conjunction with traditional policies, but more calculations are needed to determine the relative effectiveness of nudging.Link

Tags: , , , , ,

Incentives Versus Reciprocity: Insights from a Field Experiment. Doug Chung, Das Narayandas, August 2017, Paper, “The authors conduct a field experiment in which they vary the sales force compensation scheme at an Asian enterprise that sells consumer durable goods. With variation generated by the experimental treatments, the authors model sales force performance to identify the effectiveness of various forms of conditional and unconditional compensation.Link

Tags: , , , , , , , , ,

Strengthening and Streamlining Bank Capital Regulation. Robin Greenwood, Samuel Hanson, Jeremy Stein, Adi Sunderam, August 2017, Paper, “We propose three core principles that should inform the design of bank capital regulation. First, wherever possible, multiple constraints on the minimum level of equity capital should be consolidated into a single constraint. This helps to avoid a distortionary situation where different constraints bind for different banks performing the same activity. Second, while a regulatory framework that relies primarily on minimum capital ratios is appropriate for normal times, such a framework is inadequate in the wake of a large negative shock to the system. Following an adverse shock, it becomes critical to emphasize dynamic resilience, which involves forcing banks to actively recapitalize—i.e. regulation needs to focus on getting banks to raise new dollars of equity capital, rather than just maintaining their capital ratios.Link

Tags: , , , , , ,

Odiousness Ratings for Public Debt. Ricardo Hausmann, August 30, 2017, Opinion, “Well-functioning markets should have shut down the Venezuelan regime’s access to finance long before US President Donald Trump did. The fact that they didn’t not only shocked the moral sentiments of many, but also revealed a fundamental defect in sovereign debt markets’ institutional architecture.Link

Tags: , , , , , ,

Tax Reform and Budget Deficits in America. Martin Feldstein, August 29, 2017, Opinion, “Republican leaders in the US House of Representatives have been at work for more than a year designing a major reform of personal and corporate taxes. Although the changes may widen the budget deficit in the short term, the incentive effects of lower rates will boost economic growth, implying lower long-term deficits.Link

Tags: , , , ,

Trump’s trade policy on China won’t win its help on North Korea. Jeffrey Frankel, August 25, 2017, Opinion, “For years, Americans have misunderstood the nuclear threat from North Korea, misjudging how to address it. They have also misunderstood the bilateral trade deficits with China, overestimating their importance. Today, as President Donald Trump threatens new trade barriers against China, on which the United States must depend to help rein in an increasingly dangerous North Korea, these two issues have become closely connected. Yet US officials seem no closer to figuring them out.Link

Tags: , , ,

The Fed’s Next Big Set of Challenges. Lawrence Summers, August 25, 2017, Opinion, “I will not be attending Jackson Hole this year but I will be thinking about some of the issues under discussion. As I have written recently, I think the period going forward will be more challenging for central banks than the preceding few years. I will sleep best at night if Janet Yellen is reappointed.Link

Tags: , , , , ,

Blurring the Boundaries: The Interplay of Gender and Local Communities in the Commercialization of Social Ventures. Lakshmi Ramarajan, Julie Battilana, August 23, 2017, Paper, “This paper examines the critical role of gender in the commercialization of social ventures. We argue that cultural beliefs about what is perceived to be appropriate work for each gender influence how founders of social ventures incorporate commercial activity into their ventures. Specifically, we argue and show that although cultural beliefs that disassociate women from commercial activity may result in female social venture founders being less likely to use commercial activity than their male counterparts, these effects are moderated by cultural beliefs about gender and commercial activity within founders’ local communities. The presence of female business owners in the same community mitigates the role of founders’ gender on the use of commercial activity.Link

Tags: , , , , , , ,

More Frequent Sales Quotas Help Volume but Hurt Profits. Das Narayandas, August 20, 2017, Opinion, “Firms often struggle with finding the best way to motivate their sales force. How much of a sales rep’s compensation should consist of a fixed salary and how much should be based on commission? What’s the effectiveness of bonuses and other incentives? In a recent study, we focused on sales quotas. More specifically, what should be the appropriate frequency of quotas—daily or monthly?Link

Tags: , , , ,

Trump’s CEOs Resigned. His Cabinet Should do the Same. Lawrence Summers, August 17, 2017, Opinion, “President Trump, recognizing the inevitable, has disbanded his business advisory councils to preempt the tidal wave of resignations that was in the offing. Given my long-standing views about chief executives lending legitimacy to the Trump administration, I was delighted that a group of CEOs forced this step.Link

Tags: , , , ,