A popular theory of business cycles is that they are driven by animal spirits: shifts in expectations brought on by sunspots. Two prominent examples are Diamond (JPE, 1982) and Howitt and McAfee (AER, 1992). We show that these models have unique equilibria if there are payoff shocks of any size....

In dynamic models with multiple equilibria, a central question is how agents coordinate their expectations on a particular outcome. Many dynamic models feature endogenous flexibility: at some cost, agents can adjust their behavior more quickly (e.g., in response to changing market conditions)....

A panel study reveals that an increase in pretax income equality leads to sudstantially lower retail prices. Prices also fall if the income tax on high income families is raised. One explanation is that equality makes consumer demand more elastic. This would imply that progressive taxation helps...