This lecture, delivered by Jean Tirole at the 2008 afse Congress and based on joint work with Roland Bénabou, revisits the old debate on the effectiveness of incentives, focusing on how the latter impact the perception and meaning of acts. It explains how a principal?s organizational choices...

The recent crisis was characterized by massive illiquidity. This paper reviews what we know and don't know about illiquidity and all its friends: market freezes, fire sales, contagion, and ultimately insolvencies and bailouts. It first explains why liquidity cannot easily be apprehended through...