The Financial Crisis and the Systemic Failure of Academic Economics

The economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions once it started to unfold. In our view, this lack of understanding is due to a misallocation of research efforts in economics. We trace the deeper roots of this failure to the profession’s focus on models that, by design, disregard key elements driving outcomes in real-world markets. The economics profession has failed in communicating the limitations, weaknesses, and even dangers of its preferred models to the public. This state of affairs makes clear the need for a major reorientation of focus in the research economists undertake, as well as for the establishment of an ethical code that would ask economists to understand and communicate the limitations and potential misuses of their models.financial crisis, academic moral hazard, ethic responsibility of researchers

The Financial Crisis and the Systemic Failure of Academic Economics

The economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions once it started to unfold. In our view, this lack of understanding is due to a misallocation of research efforts in economics. We trace the deeper roots of this failure to the profession’s focus on models that, by design, disregard key elements driving outcomes in real-world markets. The economics profession has failed in communicating the limitations, weaknesses, and even dangers of its preferred models to the public. This state of affairs makes clear the need for a major reorientation of focus in the research economists undertake, as well as for the establishment of an ethical code that would ask economists to understand and communicate the limitations and potential misuses of their models.financial crisis; academic moral hazard; ethic responsibility of researchers

PREDICTION MARKETS: AN EXTENDED LITERATURE REVIEW

This paper presents an attempt to study and monitor the evolution of research on prediction markets (PM). It provides an extended literature review and classification scheme. The former consists of 155 articles, published between 1990 and 2006. The results show that an increasing volume of PM research has been conducted in a very diverse range of areas. The articles are further classified and the results of this classification are presented, based on a scheme that consists of four main categories: description, theoretical work, applications, and law and politics. A comprehensive list of references concludes this literature review. It is the authors’ intention to provide an expedient source for anyone interested in PM research and motivate further interest

COMPREHENSIVE INCOME IN EUROPE: VALUATION, PREDICTION AND CONSERVATIVE ISSUES

The IASB comprehensive income project extends the ââ¬Ëfair value’ measurement conceptfrom the balance sheet into the income statement. This article extends prior research, primarilybased on Anglo-Saxon countries, by using a comprehensive data set of 56,700 European firm yearsover sixteen countries. We find that other comprehensive income provides incremental informationto investors ââ¬â due to unrealised available-for-sale securities component ââ¬â and affects analysts’decision to revise price estimates. On the other hand, traditional operating net income dominatesaggregated comprehensive income as a valuation metric and in predicting cash flows. Results arerobust to pooled and country specific regressions, controls for non-linearities, impact of reportingincentives, and the underlying accounting framework (local GAAP, US GAAP, IFRS). We also findthat aggregated comprehensive income switches the conservative attributes of income towards amore timely recognition of good news over bad news, reducing the conservative agency contractingrole. One possible explanation is the mixing of different concepts of operating capital incrementswith unrealised gains and realised historic net income. An agenda item for the IASB is how incomereporting should be disaggregated with a clear delineation on capital increments, conservativeoperating income, and unrealised financial gains. This is especially important in ContinentalEurope which relies to a greater extent on debt capital and has an under-developed corpus ofequity financial analysts.comprehensive income, value relevance, analyst forecast revisions, European IFRS, accountingconservatism

Historical forest biomass dynamics modelled with Landsat spectral trajectories

Acknowledgements National Forest Inventory data are available online, provided by Ministerio de Agricultura, Alimentación y Medio Ambiente (España). Landsat images are available online, provided by the USGS.Peer reviewedPostprin

Some implications of new data sources for economic analysis and official statistics

Artículo de revistaOn the backof new technologies, new data sources are emerging. These are of very high frequency, with greater granularity than traditional sources, and can be accessed across the board, in many cases, by the different economic agents. Such developments open up new avenues and new opportunities for official statistics and for economic analysis. From a central bank’s standpoint, the use and incorporation of these data into its traditional tasks poses significant challenges, arising from their management, storage, security and confidentiality. Further, there are problems with their statistical representativeness. Given that these data are available to many agents, and not exclusively to official statistics institutions, there is a risk that different measures of the same phenomenon may be generated, with heterogeneous quality standards, giving rise to confusion among the public. Some of these sources, which consist of unstructured data such as text, require new processing techniques so that they can be integrated into economic analysis in an appropriate format (quantitative). In addition, their use entails the incorporation of machine learning techniques, among others, into traditional analysis methodologies. This article reviews, from a central bank’s standpoint, some of the possibilities and implications of this new phenomenon for economic analysis and official statistics, with examples of recent studie

Assessing farmer behaviour as affected by policy and technological innovations: bio-economic farm models

Farm Management,