Intelligence, Human Capital, and Economic Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach

Human capital plays an important role in the theory of economic growth, but it has been difficult to measure this abstract concept. We survey the psychological literature on cross-cultural IQ tests and conclude that intelligence tests provide one useful measure of human capital. Using a new database of national average IQ, we show that in growth regressions that include only robust control variables, IQ is statistically significant in 99.8% of these 1330 regressions, easily passing a Bayesian model-averaging robustness test. A 1 point increase in a nation’s average IQ is associated with a persistent 0.11% annual increase in GDP per capita.     

Urban population distribution,family income,and social prejudice: I. The long,narrow city

We present an idealized model of a one-dimensional “city”, characterized by interactions between the costs of social prejudice, transportation, and housing.Using variational techniques, we show that under rather simple assumptions the model leads to a “suburban-urban” dichotomy, and also to a “segregated” neighborhood structure.In this abstract city, optimal “social policies” result in Pareto-efficient population distributions.     

A model of population distribution,traffic congestion,and neighborhood crowding in a circular city

An idealized static equilibrium model of a circularly symmetric city is presented. The model allows one to compute the spatial distribution of residences, given certain simple and plausible assumptions about the “costs” of transport, housing and neighborhood crowding. The model is chosen so as to guarantee that in first approximation, the residential population distribution which would be considered optimal by a perfect planner is identical to the distribution reached in a push-shove, laissez-faire equilibrium. This aspect of the construction is shown to be related in a simple way to the familiar “external diseconomy” situation in which a free resource is allocated among alternative uses by equating average, rather than marginal products. The existence of an infinite class of models in which the associated planner's optimum and laissez-faire equilibria are equivalent follows naturally from the standard theory of the private and social costs of highway congestion. The model leads naturally to exponentially falling population distributions which exhibit an “urban-suburban” dichotomy, to a particular overall city size, and to an optimal allocation of land between transport and residential uses.     

Statistical Issues in fMRI for Brain Imaging

Functional magnetic resonance imaging is a technique developed in the last decade and used in the fields of cognitive psychology and neuroscience, among others, to study the processes underlying the working of the human brain. In this paper we examine some of the statistical issues in functional magnetic resonance imaging for brain research. We start by giving a brief introduction to the physics of magnetic resonance imaging. Using a psychological experiment as a case study, we then describe questions of design and statistical analysis. The data obtained from functional magnetic resonance imaging studies are of a highly complex nature, displaying both spatial and temporal correlation, as well as high levels of noise from different sources. Given this, the scope for statistics is vast, and is not limited to simple analysis of the data, once collected.     

GENERAL PROPERTIES OF ISOELASTIC UTILITY ECONOMIES

This paper studies the class of single‐good Arrow–Debreu economies in which all agents have isoelastic utility functions and homogeneous beliefs, but have possibly different cautiousness parameters and endowments. For each economy in this class, the equilibrium stochastic discount factor is an exponential function of the inverse mapping of a completely monotone function, evaluated at the aggregate consumption. This fact allows for general properties of the class to be studied analytically in terms of known properties of completely monotone functions. For example, conditions are presented under which the agents’ cautiousness parameters and a distribution of initial wealth can be recovered from an equilibrium stochastic discount factor, even if nothing is known about the agents’ endowments. This is a multiagent inverse problem since information about economic primitives is extracted from equilibrium prices. Several example economies are used to illustrate the results.     

Assessing Conformity with Generally Accepted Accounting Principles Using Expert Accounting Witness Evidence and the Conceptual Framework

To enhance understanding of the status of the Financial Accounting Standards Board's Conceptual Framework for Financial Reporting, we analyse important rules of evidence in United States (US) courts regarding the presentation of expert accounting witness testimony. We draw on this analysis to recommend the relocation of the Conceptual Framework in the US Generally Accepted Accounting Principles (GAAP) hierarchy. For empirical support, we explore how rules of evidence in the criminal trial in 2006 of Enron's two most senior executives affected assessment of whether Enron's financial reports conformed with the FASB's GAAP. We recommend that the FASB's Conceptual Framework should be included in authoritative literature as the uppermost authority, and that it be grounded closely in user needs and the ethical principles associated with meeting those needs. Further, we recommend that accounting expert witnesses adopt an overriding concern for objectivity and impartiality in assisting courts to understand complex accounting matters within the Conceptual Framework.     

Injury-related hospitalizations in 2002 and 2012 in a Mexican rural hospital: differences between indigenous and non-indigenous inpatients

Data are lacking on the extent and distribution of injuries in rural areas. This study aimed at comparing injury-related hospitalizations between 2002 and 2012 at a rural hospital of northern Mexico focusing on differences between indigenous (IP) and non-indigenous patients (NIP). A retrospective design based on the review of records of patients hospitalized with injury diagnoses was used. Information extracted included ethnicity, sex, age, hospital duration, surgical procedures, complications and discharge outcome. Injury data comprised of main diagnosis, mechanism and body part affected. Patterns were stratified by year and ethnicity. Logistic regression was used to determine the probability of being hospitalized for >1 day. Injury-related mortality increased from 0.4% in 2002 to 3.1% in 2012. The proportion of non-indigenous patients hospitalized also increased by 4.5%. Men accounted for two-thirds of all inpatients. Weapon involvement doubled from 16.6% to 33.6%. Almost half of the patients in 2012 were victims of interpersonal violence. Indigenous patients had a 2.7 higher adjusted odds ratios of being hospitalized for >1 day in 2002 (95% CI 1.2–5.7), though the gap was reduced to 1.9 (1.1–3.5) in 2012. While indigenous patients continue to be more disadvantaged than the non-indigenous, the gaps closed in 2012; the reasons behind these disparities need to be further investigated.     

A Look Back at the Beginnings of EVA and Value‐Based Management

One of the pioneers of value‐based management discusses his life's work in converting principles of modern finance theory into performance evaluation and incentive compensation plans that have been adopted by many of the world's largest and most successful companies, including Coca‐Cola in the U.S., SABMiller in London, Siemens in Germany, and the Godrej Group in India. The issues covered include the significance of dividend payouts (are dividends really necessary to support a company's stock price and, if so, why?) as well as the question of optimal capital structure (whether and why debt might not be cheaper than equity). But the most important focus of the interview is corporate performance measurement and the use of executive pay to strengthen management incentives to increase efficiency and value. According to Stern, the widespread tendency of public companies to manage “for earnings”—or in accordance with what he refers to as “the accounting model of the firm”—often leads to value‐destroying decisions. As one example, the GAAP accounting principle that requires intangible investments like R&D and training to be written off in the year the expenses are incurred is likely to cause underinvestment in such intangibles. At the same time, the failure of conventional income statements to reflect the cost of equity almost certainly encourages corporate overinvestment. Stern's solution to this problem is an executive incentive compensation plan in which rewards are tied to increases in a measure of economic profit called economic value added, or EVA, which research has shown to have a significance relation to changes both in share value and the premium of market value over book value. Moreover, by combining such a plan with a “bonus bank” that pays out annual awards over a multi‐year period, boards can ensure that management will be rewarded not for good luck but rather for sustainable improvements in performance.     

Music for a Song: An Empirical Look at Uniform Pricing and Its Alternatives

With digital music as its context, this paper quantifies how much money would be made using alternatives to uniform pricing. Using survey‐based data on nearly 1,000 students' valuations of 100 popular songs in early 2008 and early 2009, we find that various alternatives can raise both producer and consumer surplus. Digital music revenue could be raised by between a sixth and a third relative to profit‐maximizing uniform pricing. While person‐specific uniform pricing can raise revenue by over 50 per cent, none of the non‐discriminatory schemes raise revenue's share of surplus above 40 per cent of total surplus.