This paper examines whether theoretical models of bubbles based on the notion that the price of an asset can deviate from its fundamental value are useful for understanding phenomena that are often described as bubbles, and which are distinguished by other features such as large and rapid booms...

This article shows how much a shock to the ability of firms to hire qualified workers accounts for the rise in unemployment. Using a matching function approach, the author finds that such a shock implies an unemployment rate of no more than 7.1 percent, much below the actual unemployment rate...

This review considers the design of macroeconomic policies in the face of uncertainty. In recent years, several economists have advocated that, when policy makers are uncertain about the environment they face and find it difficult to assign precise probabilities to the alternative scenarios that...

We analyze an incentive pay scheme for educators that links educator compensation to the ranks of their students within appropriately defined comparison sets, and we show that under certain conditions this scheme induces teachers to allocate socially optimal levels of effort to all students....

We propose an incentive pay scheme for educators that links educator compensation to the ranks of their students within appropriately defined comparison sets, and we show that under certain conditions our scheme induces teachers to allocate socially optimal levels of effort to all students....

Some economists have recommended the robust control approach to the formulation of monetary policy under uncertainty when policymakers cannot attach probabilities to the scenarios that concern them. One critique of this approach is that it seems to imply aggressive policies under uncertainty,...

The author summarizes what economic theory tells us about when asset price bubbles can occur and what the welfare implications are from bursting them. In some cases, bursting a bubble may make society worse off by exacerbating the market distortions that give rise to the bubble in the first place