Conflict and war are typically viewed as the outcome of misperceptions, incomplete information, or even irrationality. We show that it can otherwise. Despite the short-run incentives to settle disputes peacefully , there can be long-term, compounding rewards to going to war when doing better...

We examine three measures of governmental policy: state gasoline taxes, the federal discount rate, and the prime of interest rate (which though set by banks is subject to political influence). All three variables show evidence of irrationality: they are not scale invariant (and thus violate...

Recent years have seen a rapid development of model connecting growth and unemployment, but their empirical relevance is not fully known. This paper develops a simple framework for testing a prediction shared by many growth-theoretic models of unemployment, namely, economic fundamentals other...

A congestion toll may have two purposes. First, to reduce congestion the current period. Second, to induce investment which will reduce demand and congestion in later periods. When government cannot credibly commit to future tolle, the optimal toll in the each period may be low, and congestion...

This paper examines the link between international trade, investment in human capital and inequality in the distribution of income and wealth.

Caballero (1991) shows that a larger uncertainty only increases the investment of a perfectly competitive firm with a constant returns to scale technology. We show, however, that the option value generated by a one-time fixed cost can cause the increasing uncertainty to reduce investment from a...

Everyone knows that the movie business is risky. But how risky is it? Do strategies exist that reduce risk? We investigate these questions using a sample of over 200 motion pictures. We discover that the movies are very risky indeed. Box-office revenues are asymptotically Pareto-distributed and...