Labor Law,Economics, and Industrial Democracy: A Reconciliation.

This article analyzes the competing economic and industrial democracy/ voice views of unionism. It points out that the economic arguments vis-àvis unionism and the costs of union rent seeking depend on competitive markets. If markets vary in their competitive characteristics, however, and employers also have an incentive to rent-seek, then decentralized, NLRA-type unionism with minimal government interference in establishing bargaining outcomes may serve to restore competitive wages. The article concludes by evaluating some proposals to amend the NLRA in the context of this “symmetry of motives” framework.     

Implied Equity Duration: A Measure of Pandemic Shutdown Risk

Implied equity duration was originally developed to analyze the sensitivity of equity prices to discount rate changes. We demonstrate that implied equity duration is also useful for analyzing the sensitivity of equity prices to pandemic shutdowns. Pandemic shutdowns primarily impact short‐term cash flows, thus they have a greater impact on low‐duration equities. We show that implied equity duration has a strong positive relation to U.S. equity returns and analyst forecast revisions during the onset of the 2020 COVID‐19 shutdown. Our analysis also demonstrates that the underperformance of “value” stocks during this period is a rational response to their lower durations.     

Are There Tax Effects in the Relative Pricing of U.S. Government Bonds?

We investigate the impact of the Tax Reform Act of 1986 on the relative pricing of U.S. Treasury bonds. We obtain positive statistically and economically significant estimates for the implicit tax rates of a “representative” investor in the late 1970s and early 1980s. After the 1986 Tax Reform, the point estimates for the tax rate are close to zero. Tests for a regime shift associated with the 1986 Tax Reform support the hypothesis that this event largely eliminated tax effects from the term structure. We discuss both institutional and statutory explanations for this change.     

Can Interest‐Bearing Money Circulate? A Small‐Denomination Arkansan Experiment, 1861–63

Legal restrictions theory suggests that dominance of non-interest-bearing currency is possible only because legal impediments prevent financial institutions from offering interest-bearing alternatives. A viable interest-bearing medium must be issued in denominations low enough for day-to-day use, however, and without historical examples of small-denomination interest-bearing issues we cannot properly test whether interest-bearing currency will circulate as legal restrictions theory predicts. Civil War Arkansas offers a rare instance where large quantities of small-denomination interest-bearing money were actually issued, mostly below $5. The results of this Arkansan experiment show that small-denomination interest-bearing issues can indeed function as the primary medium of exchange.     

Financial Expertise as an Arms Race

We show that firms intermediating trade have incentives to overinvest in financial expertise. In our model, expertise improves firms’ ability to estimate value when trading a security. Expertise creates asymmetric information, which, under normal circumstances, works to the advantage of the expert as it deters opportunistic bargaining by counterparties. This advantage is neutralized in equilibrium, however, by offsetting investments by competitors. Moreover, when volatility rises the adverse selection created by expertise triggers breakdowns in liquidity, destroying gains to trade and thus the benefits that firms hope to gain through high levels of expertise.     

What Has—and Has Not—Been Learned about Monetary Policy in a Low‐Inflation Environment? A Review of the 2000s

As the world economy recovers from the worst financial crisis and most severe global slump in 75 years, policymakers, regulators, and academics are focusing intensely and appropriately on lessons to be learned for monetary policy. There are certainly many questions to answer. Among the most important are: Are inflation expectations “well anchored”? What, if any, influence should asset quantities and prices have on monetary policy? Do we have sufficient confidence in our alternative monetary policy tools to stabilize the economy at the zero lower bound?