ICLE Academic Affiliate Ivan Png produced a video with Yun Hou and Ivan Png  describing a benchmarking experiment they did with food-stalls hawkers in Singapore, which found that showing firm owners their relative performance increased exit among poor performers. The full video is embedded below.

In recent decades, various measures of “business dynamism”—such as new business entry rates and gross job or worker flows—have seen significant declines in the U.S. (figure 1, right panel). Over a similar time frame, there is evidence that an important measure of market power—the average markup—has risen significantly (figure 1, left panel; De Loecker, Eeckhout, and Unger 2020). A natural question is whether these patterns are related.

My last post provided an overview of my draft article The Cost of Justice at the Dawn of AI and explained the basic logic of Baumol’s cost disease for the practice of law. Just as in any other market, if the productivity of lawyers increases at a slower rate than the rest of the economy, legal services will become more expensive. And if a technology like artificial intelligence leads legal productivity to increase at a faster rate than the rest of the economy, then legal services will become cheaper.

It has been a while since my last post on the Volokh Conspiracy. In 2021, I became associate dean at George Washington and did not have time to write. Last year, I switched associate dean roles and my portfolio became smaller, so I was fortunate to have some time to return to scholarship and to complete several articles. I’ll begin my return to blogging by writing a series of posts offering shorter versions of the key arguments in a recently completed article that I have now submitted to law reviews, entitled The Cost of Justice at the Dawn of AI.

Abstract

Enrolling financiers is critical to new venture success. Building on the challenges of communicating novel and complex projects under Knightian uncertainty, we describe two approaches—the opportunity discovery path vis-à-vis the effectuation/bricolage path—entrepreneurs and financiers can use to resolve alternative sources of uncertainty sequentially rather than simultaneously.

Abstract

While modern mathematical models of settlement bargaining in litigation generally seek to identify perfect Bayesian Nash equilibria, previous computational models have lacked game theoretic foundations. This article illustrates how computational game theory can complement analytical models. It identifies equilibria by applying linear programming techniques to a discretized version of a cutting-edge model of settlement bargaining. This approach makes it straightforward to alter some assumptions in the model, including that the evidence about which the parties receive signals is irrelevant to the merits and that the party with a stronger case on the merits also has better information. The computational model can also toggle easily to explore cases involving liability rather than damages and can incorporate risk aversion. A drawback of the computational model is that bargaining games may have many equilibria, complicating assessments of whether changes in equilibria associated with parameter variations are causal.

Read at SSRN.

Abstract

In this paper, I make the case for a nominal GDP level target in the U.S. I begin by arguing that the Federal Reserve’s current flexible average inflation targeting regime is deficient. I then argue that since a competitive monetary equilibrium is optimal, monetary policy should seek to replicate the competitive monetary model. Doing so resembles nominal GDP targeting. Finally, I offer the following practical reasons why policymakers might prefer a nominal GDP target. Nominal GDP targeting (a) does not require policymakers to determine whether current economic fluctuations are demand-driven or supply-driven nor does it require real-time estimates of the output gap, (b) automatically prevents the central bank from exacerbating supply shocks, and (c) leads to greater financial stability.

ICLE Chief Economist Brian Albrecht was a guest on the Lead-Lag Live podcast to discuss the issues of market concentration, inflation, and the role of “superstar” firms in the economy. Audio of the full episode is embedded below.