Reconsidering the Work Disincentive Effects of Social Security

This paper shows that, contrary to commonly held views, the provisions of the social security law actually provide strong work incentives for older men. The reason is that, for most workers, higher current earnings lead to higher future social security benefits. These incentives have been particularly strong for workers under 65 years of age and, although they will be reduced somewhat when the 1977 amendments to the social security law become fully effective, they will remain substantial. The findings raise serious questions about recent econometric work attributing the decline in labor force participation rates of older men to the social security system.

An exactly solvable model for the Fermi contact interaction

A model for the Fermi contact interaction is proposed in which the nuclear moment is represented as a magnetized spherical shell of radius r 0 . For a hydrogen-like system thus perturbed, the Schrödinger equation is solvable without perturbation theory by use of the Coulomb Green's function. Approximation formulas are derived in terms of a quantum defect in the Coulombic energy formula. It is shown that the usual Fermi potential cannot be applied beyond first-order perturbation theory.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/46454/1/214_2004_Article_BF00548828.pd

Social Security, Bequests, and the Life Cycle Theory of Saving: Cross-Sectional Tests

This paper studies the asset holdings of white American men near retirement age. Assets as conventional defined show no tendency to decline with age, in apparent contradiction of the life-cycle theory of saving. However, a broadened concept of assets which includes expected future pension benefits (both public and private) and expected future earnings ("human wealth") does decline more or less as predicted by the theory. No matter how they are defined, assets are a decreasing function of the number of children--which casts doubt on the strength of the bequest motive. Finally, financial assets and social security wealth fail to exhibit the inverse relationship suggested by Feldstein's displacement hypothesis. To investigate these issues econometrically, an equation for assets is developed from the strict life-cycle theory. The specification is generalized to allow for (a) a bequest motive, proxied by the number of children; (b) displacement of private wealth by social security wealth that is not exactly dollar-for-dollar; (c) a level of consumption late in life that differs systematically from what the strict life-cycle theory implies. The equation is estimated by nonlinear least squares on a rich cross- sectional data set containing over 4300 observations. The results show that the life-cycle model has little ability to explain cross-sectional variability in asset holdings. The model's key parameters are poorly identified, despite the large sample size and considerable cross-sectional variation in most variables. According to the estimates, consumption late in Life is on average only about half of what the strict life-cycle theory predicts; each dollar of social security wealth displaces about 3% (with a large standard error) of private wealth; and the bequest motive, while present, is quite weak.

Quantifying loopy network architectures

Biology presents many examples of planar distribution and structural networks having dense sets of closed loops. An archetype of this form of network organization is the vasculature of dicotyledonous leaves, which showcases a hierarchically-nested architecture containing closed loops at many different levels. Although a number of methods have been proposed to measure aspects of the structure of such networks, a robust metric to quantify their hierarchical organization is still lacking. We present an algorithmic framework, the hierarchical loop decomposition, that allows mapping loopy networks to binary trees, preserving in the connectivity of the trees the architecture of the original graph. We apply this framework to investigate computer generated graphs, such as artificial models and optimal distribution networks, as well as natural graphs extracted from digitized images of dicotyledonous leaves and vasculature of rat cerebral neocortex. We calculate various metrics based on the Asymmetry, the cumulative size distribution and the Strahler bifurcation ratios of the corresponding trees and discuss the relationship of these quantities to the architectural organization of the original graphs. This algorithmic framework decouples the geometric information (exact location of edges and nodes) from the metric topology (connectivity and edge weight) and it ultimately allows us to perform a quantitative statistical comparison between predictions of theoretical models and naturally occurring loopy graphs.Comment: 17 pages, 8 figures. During preparation of this manuscript the authors became aware of the work of Mileyko at al., concurrently submitted for publicatio

The blind monks and the elephant : contrasting narratives of financial crisis

Three persuasive narratives of the US subprime crisis are explored with reference both to theory and to emergency acts of public policy undertaken. First the role of pecuniary externalities that amplify any shocks to the quality of risk-assets held by Investment Banks and others. Second is adverse selection in marketing these assets; and third the role of financial panic in making investment-banking disaster-prone. How relevant these differing perspectives proved is attested by the nature of state support and by subsequent findings in courts of law. As Chair of the US Federal Reserve, Janet Yellen argued that vulnerabilities within the US financial system in the mid-2000s were “numerous and familiar from past financial panics”. That the varied threats to stability featuring in these narratives should be complements and not substitutes is of more than technical interest: it helps to explain why the US financial system was so exposed to radical failure

Why are Prices Sticky? Evidence from Business Survey Data

This paper offers new insights on the price setting behaviour of German retail firms using a novel dataset that consists of a large panel of monthly business surveys from 1991-2006. The firm-level data allows matching changes in firms' prices to several other firm-characteristics. Moreover, information on price expectations allow analyzing the determinants of price updating. Using univariate and bivariate ordered probit specifications, empirical menu cost models are estimated relating the probability of price adjustment and price updating, respectively, to both time- and state- dependent variables. First, results suggest an important role for state-dependence; changes in the macroeconomic and institutional environment as well as firm-specific factors are significantly related to the timing of price adjustment. These findings imply that price setting models should endogenize the timing of price adjustment in order to generate realistic predictions concerning the transmission of monetary policy. Second, an analysis of price expectations yields similar results providing evidence in favour of state-dependent sticky plan models. Third, intermediate input cost changes are among the most important determinants of price adjustment suggesting that pricing models should explicitly incorporate price setting at different production stages. However, the results show that adjustment to input cost changes takes time indicating "additional stickiness" at the last stage of processing

Boundary dynamics and multiple reflection expansion for Robin boundary conditions

In the presence of a boundary interaction, Neumann boundary conditions should be modified to contain a function S of the boundary fields: (\nabla_N +S)\phi =0. Information on quantum boundary dynamics is then encoded in the $S$-dependent part of the effective action. In the present paper we extend the multiple reflection expansion method to the Robin boundary conditions mentioned above, and calculate the heat kernel and the effective action (i) for constant S, (ii) to the order S^2 with an arbitrary number of tangential derivatives. Some applications to symmetry breaking effects, tachyon condensation and brane world are briefly discussed.Comment: latex, 22 pages, no figure

WARNING: Physics Envy May Be Hazardous To Your Wealth!

The quantitative aspirations of economists and financial analysts have for many years been based on the belief that it should be possible to build models of economic systems - and financial markets in particular - that are as predictive as those in physics. While this perspective has led to a number of important breakthroughs in economics, "physics envy" has also created a false sense of mathematical precision in some cases. We speculate on the origins of physics envy, and then describe an alternate perspective of economic behavior based on a new taxonomy of uncertainty. We illustrate the relevance of this taxonomy with two concrete examples: the classical harmonic oscillator with some new twists that make physics look more like economics, and a quantitative equity market-neutral strategy. We conclude by offering a new interpretation of tail events, proposing an "uncertainty checklist" with which our taxonomy can be implemented, and considering the role that quants played in the current financial crisis.Comment: v3 adds 2 reference

Atomic Supersymmetry, Rydberg Wave Packets, and Radial Squeezed States

We study radial wave packets produced by short-pulsed laser fields acting on Rydberg atoms, using analytical tools from supersymmetry-based quantum-defect theory. We begin with a time-dependent perturbative calculation for alkali-metal atoms, incorporating the atomic-excitation process. This provides insight into the general wave packet behavior and demonstrates agreement with conventional theory. We then obtain an alternative analytical description of a radial wave packet as a member of a particular family of squeezed states, which we call radial squeezed states. By construction, these have close to minimum uncertainty in the radial coordinates during the first pass through the outer apsidal point. The properties of radial squeezed states are investigated, and they are shown to provide a description of certain aspects of Rydberg atoms excited by short-pulsed laser fields. We derive expressions for the time evolution and the autocorrelation of the radial squeezed states, and we study numerically and analytically their behavior in several alkali-metal atoms. Full and fractional revivals are observed. Comparisons show agreement with other theoretical results and with experiment.Comment: published in Physical Review