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Bullard, James; Evans, George W.; Honkapohja, Seppo - 2005

We study how the use of judgement or “add-factors” in macroeconomic forecasting may disturb the set of equilibrium outcomes when agents learn using recursive methods. We isolate conditions under which new phenomena, which we call exuberance equilibria, can exist in standard macroeconomic...

Persistent link: https://www.econbiz.de/10011604601

Optimal Cleanup and Liability after Environmentally Harmful Discharges

Polinsky, A. Mitchell - 2011

This article studies how liability for environmentally harmful discharges affects the incentives of firms to engage in cleanup and invest in precautions, as well as the incentives of consumers to purchase the goods whose production leads to discharges. Our main conclusion is that making firms...

Persistent link: https://www.econbiz.de/10013124354

Costly Litigation and Optimal Damages

Polinsky, A. Mitchell - 2012

A basic principle of law is that damages paid by a liable party should equal the harm caused by that party. However, this principle is not correct when account is taken of litigation costs, because they too are part of the social costs associated with an injury. In this article we examine the...

Persistent link: https://www.econbiz.de/10013096854

Liquidity Traps and Expectation Dynamics : Fiscal Stimulus or Fiscal Austerity?

Benhabib, Jess - 2012

We examine global dynamics under infinite-horizon learning in New Keynesian models where the interest-rate rule is subject to the zero lower bound. As in Evans, Guse and Honkapohja (2008), the intended steady state is locally but not globally stable. Unstable deflationary paths emerge after...

Persistent link: https://www.econbiz.de/10013106020

Mandatory Versus Voluntary Disclosure of Product Risks

Polinsky, A. Mitchell - 2007

We analyze a model in which firms are able to acquire information about product risks and may or may not be required to … disclose this information. We initially study the effect of disclosure rules assuming that firms are not liable for the harm … caused by their products. Although mandatory disclosure obviously is superior to voluntary disclosure given the information …

Persistent link: https://www.econbiz.de/10012778097

Deterrence and the Optimal Use of Prison, Parole, and Probation

Polinsky, A. Mitchell - 2017

In this article we derive the mix of criminal sanctions—choosing among prison, parole, and probation—that achieves any target level of deterrence at least cost. We assume that prison has higher disutility and higher cost per unit time than parole and probation and that potential offenders...

Persistent link: https://www.econbiz.de/10012955941

A Stochastic Approach to Disequilibrium Macroeconomics

Honkapohja, Seppo - 2010

In this paper, our aim is to develop an alternative approach to analyzing a macroeconomic model where markets do not clear. Earlier approaches have had difficulties in interpreting effective demand, a key concept in disequilibrium macroeconomics. We propose a new definition of effective demand...

Persistent link: https://www.econbiz.de/10012760075

The Economic Theory of Public Enforcement of Law

Polinsky, A. Mitchell; Shavell, Steven - 2021

This article surveys the theory of the public enforcement of law -- the use of public agents (inspectors, tax auditors, police, prosecutors) to detect and to sanction violators of legal rules. We first present the basic elements of the theory, focusing on the probability of imposition of...

Persistent link: https://www.econbiz.de/10013216494

The Optimal Use of Fines and Imprisonment

Polinsky, A. Mitchell; Shavell, Steven - 2021

This paper examines the use of fines and imprisonment to deter individuals from engaging in harmful activities. These sanctions are analyzed separately as well as together, first for identical risk-neutral individuals and then for two groups of risk-neutral individuals who differ by wealth. When...

Persistent link: https://www.econbiz.de/10013218978

Pigouvian Taxation with Administrative Costs

Polinsky, A. Mitchell; Shavell, Steven - 2021

This paper examines how the optimal Pigouvian tax should be adjusted to reflect administrative costs. Several cases are examined, depending on whether the administrative costs are fixed per firm taxed or are a function of the amount of tax collected, and on whether such costs are borne by the...

Persistent link: https://www.econbiz.de/10013219720