Folk Economics

Folk economics is the intuitive economics of untrained people. It is concerned with distribution, and does not allow for or understand incentives. Folk economic notions evolved in our ancestors m circumstances where there was little in the way of specialization, division of labor, capital investment, or economic growth. It can explain the beliefs of naïve individuals regarding matters such as international trade, labor economics, law and economics, and industrial organization. It is important that voters understand economic principles. Economists would do a better job of persuading others and of teaching if we paid explicit attention to folk economics. Because untrained individuals do not fully understand gains from trade, training in economics is likely to improve welfare by increasing the number of trading opportunities. There is evidence that this is m fact true.     

Psychology, Behavioral Economics, and Public Policy

Economics has typically been the social science of choice to inform public policy and policymakers. In the current paper we contemplate the role behavioral science can play in enlightening policymakers. In particular, we provide some examples of research that has and can be used to inform policy, reflect on the kind of behavioral science that is important for policy, and approaches for convincing policy-makers to listen to behavioral scientists. We suggest that policymakers are unlikely to invest the time translating behavioral research into its policy implications, and researchers interested in influencing public policy must therefore invest substantial effort, and direct that effort differently than in standard research practices.     

Shareholders and stakeholders: How do directors decide?

This study examines how directors make decisions that involve shareholders and other stakeholders. Using vignettes derived from seminal court cases, we construct an index of directors' shareholderism as a general orientation on this issue. In a survey of the entire population of directors and CEOs in public corporations in one country, we find that directors' personal values and roles play an important part in their decisions. Directors and CEOs are more pro‐shareholder the more they endorse entrepreneurial values—specifically, higher achievement, power, and self‐direction values and lower universalism values. While employee representative directors exhibit a lower baseline level of shareholder orientation, they nonetheless often side with shareholders. Copyright © 2011 John Wiley & Sons, Ltd.     

The global recession issue: Introduction—Part I

This special issue concentrates on the global economic downturn that reached its lowest point in late 2008. Signals of an impending crisis started in 2007 with a wave of insolvent subprime mortgages in the United States, but the seeds were planted years earlier. In its scope, length, and countries affected, this downturn is the worst in over 70 years. It is changing and will continue to change local and global business and economic environments. This issue aims to learn from past mistakes and better understand the new environment. Each part contains five articles and an introduction. Part I has a global perspective; Part II focuses on specific national economies. © 2011 Wiley Periodicals, Inc.     

Incentives for cost misrepresentation in supply chains

This paper investigates sequential manufacturer–retailer price determination and channel performance under possible misrepresentation by one member of its privately known cost. To the standard double marginalization game, we add a preliminary stage where the manufacturer (alternately the retailer) announces its privately known constant marginal cost. We prove that the manufacturer has no incentive to misrepresent its cost, and we give respective sufficient conditions on the demand function for the retailer to overreport and to underreport costs. Depending on the shape of the demand function, opportunistic behavior by the retailer may lower or raise the manufacturer’s profit and channel performance.     

Asset prices and business cycles with costly external finance

This paper asks whether the asset pricing fluctuations induced by the presence of costly external finance are empirically plausible. To accomplish this, we incorporate costly external finance into a dynamic stochastic general equilibrium model and explore its implications for the properties of the returns on key financial assets, such as stocks, bonds and risky loans. We find that the mean and volatility of the equity premium, although small, are significantly higher than those in comparable adjustment cost models. However, we also show that these results require a procyclical financing premium, a property that seems at odds with the data.     

Costs of delay and rent-seeking under the modification of final judgment

Under the MFJ, the Bell Operating Companies are restricted in the activities they can undertake. Requests for waivers f'mm these restrictions must be approved by the Department of Justice and a Court. Most requests are ultimately approved. If we assume that all such decisions are made correctly, then the costs of delays associated with the approval process are much larger than any reasonable estimate of the benefits of the process. To these costs must be added the substantial costs of rent seeking and of the uncertainty associated with the process.     

Ingredient Optimization and Children’s Liking of Popcorn Seasoned with Fish Protein Powder/Omega-3 Fish Oil

Response surface methodology (Box-Behnken design) was used to optimize the seasoning ingredients of popped popcorn. Children’s liking of seasoned popcorn was also determined by 120 school children. The results indicated that seasoning of popcorn with fish protein powder and omega-3 fish oil could produce accepted snacks that would be more nutritious than the widely consumed regular popcorn. Fortification of popcorn with 9% fish protein powder and/or 6% omega-3 fish oil did not influence the sensory attributes of the prototypes. Liking test revealed that children in the age range of 6 to 12 years liked the selected fortified products. This fortification also provided another avenue for cereal snack food diversification and might be a healthy option to boost children’s nutritional intake and to increase fish protein consumption. Such products are good choices for health-conscious consumers.