Classroom games in economics : a quantitative assessment of the 'beer game'

Using an experiment, I compare the use of the 'Beer Distribution' classroom game with the more traditional 'chalk and talk' approach to teach students about inventories and the macroeconomy. My empirical results confirm and extend our understanding of the relative strengths and weaknesses of the use of classroom games: the game tends to improve interest and motivation on average, though some students dislike their use; the game is effective at driving home its key messages, but it may wrongly lead students to disregard other important factors; the game is inferior where facts mastery or de nitional learning is required. Rather than an endorsement or a criticism of classroom games, the conclusion is cautionary advice on how to best make use of games within an overall course

City of Buffalo Contracting Process: Demolition Contracts

At one time, bidding was centralized in the City of Buffalo (Buffalo). The centralized bidding was organized under the Department of Urban Renewal. Interview with James Comerford and Paul Mielcarek of the City of Buffalo Department of Economic Development Permit and Inspection Services (April 17, 2008). In the late 60s and early 70s the city moved to the current model which was based on the Chicago style of municipal bidding. The Chicago model broke out the bidding process and had each department run bidding on its own. The rationale behind this separation of the bidding process was that many of the projects being bid out were very particular and required the individuals who were deciding the bid awards to have a discrete knowledge of what it was that was being bid on. Also, the centralized bidding was seen by Chicago, and later by Buffalo, as disorganized and difficult to manage from one office. The decentralized model was seen as simplifying the process by separating out the bidding processes throughout the various departments

Inventories in motion : a new approach to inventories over the business cycle

I propose an inventories-in-motion concept which represents a new approach to inventories over the business cycle. This channel has previously been ignored by macroeconomists. I build a general equilibrium business cycle model in which inventories arise naturally as a result of gaps between production of goods and their consumption as goods are distributed. These inventories are actively managed and adjusted to meet consumption and investment needs in the economy. Although conceptually very simple, I show that such inventory behaviour matches a number of stylised facts of aggregate inventories. Nonetheless, my model does not admit an important role for inventory management improvements in declining macroeconomic volatility in the last 30 years

Classroom Games in Economics : A Quantitative Assessment of the `Beer Game'

Using an experiment, I compare the use of the `Beer Distribution' classroom game with the more traditional `chalk and talk' approach to teach students about inventories and the macroeconomy. My empirical results confirm and extend our understanding of the relative strengths and weaknesses of the use of classroom games : the game tends to improve interest and motivation on average, though some students dislike their use ; the game is e ective at driving home its key messages, but it may wrongly lead students to disregard other important factors ; the game is inferior where facts mastery or definitional learning is required. Rather than an endorsement or a criticism of classroom games, the conclusion is cautionary advice on how to best make use of games within an overall course. Key words: Classroom experiments and games ; motivation ; student learning outcomes JEL classification: A22 ; C90

Estimating bayesian decision problems with heterogeneous priors

In many areas of economics there is a growing interest in how expertise and preferences drive individual and group decision making under uncertainty. Increasingly, we wish to estimate such models to quantify which of these drive decision making. In this paper we propose a new channel through which we can empirically identify expertise and preference parameters by using variation in decisions over heterogeneous priors. Relative to existing estimation approaches, our \PriorBased Identi cation" extends the possible environments which can be estimated, and also substantially improves the accuracy and precision of estimates in those environments which can be estimated using existing methods

First Impressions Matter: Signalling as a Source of Policy Dynamics

We first establish that policymakers on the Bank of England's Monetary Policy Committee choose lower interest rates with experience. We then reject increasing confidence in private information or learning about the structure of the macroeconomy as explanations for this shift. Instead, a model in which voters signal their hawkishness to observers better fits the data. The motivation for signalling is consistent with wanting to control inflation expectations, but not career concerns or pleasing colleagues. There is also no evidence of capture by industry. The paper suggests that policy-motivated reputation building may be important for explaining dynamics in experts' policy choices.Signalling, learning, monetary policy

How Experts Decide : Identifying Preferences versus Signals from Policy Decisions

A large theoretical literature assumes that experts differ in terms of preferences and the distribution of their private signals, but the empirical literature to date has not separately identified them. This paper proposes a novel way of doing so by relating the probability a member chooses a particular policy decision to the prior belief that it is correct. We then apply this methodology to study differences between internal and external members on the Bank of England's Monetary Policy Committee. Using a variety of proxies for the prior, we provide evidence that they differ significantly on both dimensions. Key words: Bayesian decision making ; Committees ; Monetary policy JEL classification: D81 ; D82 ; E52

The Household Effects of Government Spending

This paper provides new evidence on the effects of fiscal policy by studying, using household-level data, how households respond to shifts in government spending. Our identification strategy allows us to control for time-specific aggregate effects, such as the stance of monetary policy or the U.S.-wide business cycle. However, it potentially prevents us from estimating the wealth effects associated with a shift in spending. We find significant heterogeneity in households' response to a spending shock; the effects appear vary over time depending, among other factors, on the state of business cycle and, at a lower frequency, on the composition of employment (such as the share of workers in part-time jobs). Shifts in spending could also have important distributional effects that are lost when estimating an aggregate multiplier. Heads of households working relatively few (weekly) hours, for instance, suffer from a spending shock of the type we analyzed: their consumption falls, their hours increase and their real wages fall.

The Households Effects of Government Consumption

This paper provides new evidence on the effects of fiscal policy by studying, using household-level data, how households respond to shifts in government spending. Our identification strategy allows us to control for time-specific aggregate effects, such as the stance of monetary policy or the U.S.-wide business cycle. However, it potentially prevents us from estimating the wealth effects associated with a shift in spending. We find significant heterogeneity in households' response to a spending shock; the effects appear vary over time depending, among other factors, on the state of business cycle and, at a lower frequency, on the composition of employment (such as the share of workers in part-time jobs). Shifts in spending could also have important distributional effects that are lost when estimating an aggregate multiplier. Heads of households working relatively few (weekly) hours, for instance, suffer from a spending shock of the type we analyzed: their consumption falls, their hours increase and their real wages fall.

Differences in the Transmission of Monetary Policy in the Euro-Area: An Empirical Approach

This paper examines the impact of interest rate changes on real economic activity for a range of European Union (EU) countries including Ireland. The objective is to compare how monetary policy changes are transmitted to output in these economies. The analysis is based on evidence prior to the establishment of the common monetary policy within Economic and Monetary Union (EMU). A number of international studies over the last five years, in particular by the International Monetary Fund (IMF) and the Bank of International Settlements (BIS), have analysed how the effects of monetary policy can vary between countries. These studies have analysed most EU countries but Ireland has generally been omitted. This is due in part to the lack of the necessary quarterly national accounts’ data for output but also to the small weighting of Irish output in the euro area. This paper re-addresses the omission of Ireland by using a constructed quarterly GDP data series from 1972 to 1998. The paper, in line with previous international studies, applies a common methodology based on time series relationships and economic theory that incorporates three variables - prices, output and interest rates. This common methodology is applied to thirteen EU countries. In order to compare the responses similar data series, sample periods and an identical econometric framework are used for all countries. The transmission mechanism is the process through which monetary policy decisions are transmitted into changes in output. Economic theory tends to draw a distinction between the short and medium term when distinguishing the effects of monetary policy on the real economy. Over the medium term inflation is primarily a monetary phenomenon and in terms of the real effects on output, money is considered to be neutral. In the short term, however, monetary policy is considered to have real effects. There are two important dimensions to the conduct of monetary policy to be clearly distinguished. The first is the adjustment of monetary policy instruments in reaction to changes in objective variables such as output and inflation. The second is the impact of monetary authorities’ actions on the real economy. The paper concentrates on the latter. The monetary transmission mechanism consists of several inter-linked channels, such as the interest rate or money channel, the credit channel, the exchange rate channel and the asset price channel, which can differ substantially across countries. The focus of this paper is on the aggregate effect of these different transmission channels rather than on the relative importance of each in the different EU countries. The motivation for this focus arises from the need for the real effects of monetary policy to be relatively uniform across the different EU countries in order to facilitate the smooth conduct of monetary policy in the euro-area. It is also motivated by the lack of consensus on the effects of monetary policy changes through different channels in different countries or even within a given country. The lack of consensus stems from the difficulty in disentangling time series on interest rates into parts that are due to deliberate monetary policy measures and those that are due to endogenous responses of financial markets to unobserved economic disturbances. As a result, different empirical methodologies give rise to different estimates of the role and effect of monetary policy. The results from the common specification used by the international agencies would suggest that a monetary shock resulting in higher interest rates would seem to have an implausibly large and persistent impact on output in the Irish case in comparison to other EU countries. This may point to the need for a unique econometric specification for each economy in order to capture the differences in the monetary transmission mechanism more accurately rather than something unique about the Irish economy. The consequence of this recommendation would diminish the comparability of the results, but to proceed otherwise would be ill advised. Using a modified framework shows that the effects on output from interest rate changes in the smaller, peripheral countries in the EU, such as Ireland, Portugal, Finland and Denmark are deeper than those in the larger countries. While the magnitude of effects may be similar in these groups, the duration over which they occur can differ markedly. Therefore no consistent, common grouping emerges in terms of impact and duration. There is no evidence on the basis of this paper that there is a core group of countries, with the exclusion of Ireland, forming an obvious optimum currency area with the EU.