We examine banking competition when deposit or loan contracts contingent on macroeconomic shocks become feasible. We show that the risk allocation is efficient, provided that banks are not bailed out. In this case, banks may shift part of the risk to depositors. The private sector insures the...

We introduce a democratic procedure with voting-based proposals called "Pendular Voting". It works as follows: An agenda-setter chooses a proposal meant to replace a given status quo. In the first stage, a random sample of the population votes on the proposal. The result is made public, which...