Regulation consists of rulemaking and enforcement. Economic theory offers two complementary rationales for regulating financial institutions. Altruistic public-benefits theories treat rules as governmental instruments for increas- ing fairness and efficiency across society as a whole....

We study the emergence of urban self-governance during the Commercial Revolution in the 12th- 13th century and show that municipal autonomy shaped national institutions over the subsequent centuries. We focus on England after the Norman Conquest of 1066 and build a novel comprehensive dataset of...

Calculating the welfare implications of changes to economic policy or shocks requires economists to decide on a normative criterion. One approach is to elicit the relevant moral criteria from real-world policy choices, converting a normative decision into a positive inference, as in the recent...

This essay shows that government credit-allocation schemes generate incentive conflicts that undermine the quality of bank supervision and eventually produce banking crisis. For political reasons, most countries establish a regulatory culture that embraces three economically contradictory...

We compare the trading performance of independent directors and other officers of the firm. We find that independent directors earn positive and substantial abnormal returns when they purchase their company stock, and that the difference with the same firm's officers is relatively small at most...

Insiders can artificially deflect the market prices of financial instruments from their full-information or inside value' by issuing deceptive accounting reports. Incentive support for disinformational activity comes through forms of compensation that allow corporate insiders to profit...

Economics and ethics both offer important perspectives on our society, but they do so from two different viewpoints – the central focus of economics is how the price system in our economy values resources; the central focus of ethics is the moral evaluation of actions in our society. The rise...

Societies prohibit many transactions considered morally repugnant, although potentially efficiency-enhancing. We conducted an online choice experiment to characterize preferences for the morality and efficiency of payments to kidney donors. Preferences were heterogeneous, ranging from...

This paper investigates whether judge political affiliation contributes to racial and gender disparities in sentencing using data on over 500,000 federal defendants linked to sentencing judge. Exploiting random case assignment, we find that Republican-appointed judges sentence black defendants...

Explanations of unethical behavior often neglect the role of competition, as opposed to greed, in assuring its spread. Using the examples of child labor, corruption, excessive' executive pay, corporate earnings manipulation, and commercial activities by universities, this paper clarifies the...