Liquidity, money creation and destruction, and the returns to banking

We build on our earlier model of money in which bank liabilities circulate as medium of exchange, and investigate the provision of liquidity for a range of central-bank regulations dealing with the potential of bank failure. In our model, banks issue inside money under fractional reserves, facing the event of excess redemptions. They monitor the float of their money issue and make reserve-management decisions which affect aggregate liquidity conditions. Numerical examples demonstrate bank failure when returns to banking are low. Central-bank interventions, injecting more funds or making interest payments proportional to holdings of reserves, may improve banks’ returns and society’s welfare, followed by a reduction in bank failure. JEL Classification: E4, E5liquidity, private money creation

The Nature of Risk Preferences: Evidence from Insurance Choices

The authors use data on insurance deductible choices to estimate a structural model of risky choice that incorporates standard risk aversion (diminishing marginal utility for wealth) and probability distortions. They find that probability distortions--characterized by substantial overweighting of small probabilities and only mild insensitivity to probability changes--play an important role in explaining the aversion to risk manifested in deductible choices. This finding is robust to allowing for observed and unobserved heterogeneity in preferences. They demonstrate that neither Kőszegi-Rabin loss aversion alone nor Gul disappointment aversion alone can explain our estimated probability distortions, signifying a key role for probability weighting

Estimating Risk Preferences in the Field

We survey the literature on estimating risk preferences using field data. We concentrate our attention on studies in which risk preferences are the focal object and estimating their structure is the core enterprise. We review a number of models of risk preferences—including both expected utility (EU) theory and non-EU models—that have been estimated using field data, and we highlight issues related to identification and estimation of such models using field data. We then survey the literature, giving separate treatment to research that uses individual-level data (e.g., property insurance data) and research that uses aggregate data (e.g., betting market data). We conclude by discussing directions for future research

Private money and reserve management in a random-matching model

In this paper, we develop a model of money and reserve-holding banks. We allow for private liabilities to circulate as media of exchange in a random-matching framework. Some individuals, which we identify as banks, are endowed with a technology to issue private notes and to keep reserves with a clearinghouse. Bank liabilities are redeemed according to a stochastic process that depends on the endogenous trades. We find conditions under which note redemptions act as a force that is sufficient to stabilize note issue by the banking sector.Banks and banking ; Bank notes ; Intermediation (Finance)

Distinguishing Probability Weighting from Risk Misperceptions in Field Data

The paper outlines a strategy for distinguishing rank-dependent probability weighting from systematic risk misperceptions in field data. Our strategy relies on singling out a field environment with two key properties: (i) the objects of choice are money lotteries with more than two outcomes and (ii) the ranking of outcomes differs across lotteries. We first present an abstract model of risky choice that elucidates the identification problem and our strategy. The model has numerous applications, including insurance choices and gambling. We then consider the application of insurance deductible choices and illustrate our strategy using simulated data

Campus editorial damned

Oh boy. Here we go again. Letter from Ted O\u27Meara, Vice President of the University Student Government defending the position of the Student Senate on the Wilde-Stein club

Parallel processors and nonlinear structural dynamics algorithms and software

The adaptation of a finite element program with explicit time integration to a massively parallel SIMD (single instruction multiple data) computer, the CONNECTION Machine is described. The adaptation required the development of a new algorithm, called the exchange algorithm, in which all nodal variables are allocated to the element with an exchange of nodal forces at each time step. The architectural and C* programming language features of the CONNECTION Machine are also summarized. Various alternate data structures and associated algorithms for nonlinear finite element analysis are discussed and compared. Results are presented which demonstrate that the CONNECTION Machine is capable of outperforming the CRAY XMP/14

Patents as Promoters of Competition: The Guild Origins of Patent Law in the Venetian Republic

[T]his Article describes the artisan and merchant guild systems of the Venetian Republic. Part III explores the emergence of the patent system as a means for foreigners and Venetian citizens to compete with the guilds, as well as the eventual addition of negative exclusive rights to the basic license form of positive patent privileges. In so doing, contrary to the speculation of some scholars, we reject with near certainty the contention that the first patent law statute granting exclusionary rights for—in modern parlance—technological inventions was a silk-specific directive enacted by the Venetian Grand Council in the late fourteenth or early fifteenth century. Rather, the first record of a patent grant with exclusionary rights for such inventions is one by the Venetian Senate in 1416, and the first patent law statute was the Venetian Patent Act of 1474 (the 1474 Act). Part IV then considers the ramifications of patenting against the backdrop of a regulated economy. First, it explains how the evolution of patent laws in the West likely depended on the migration of the patent system from the highly regulated economy of Venice to less regulated economies in Europe. Second, it provides some reflections and lessons for the role of patents in today’s economy, showing that—like in the days of the Venetian Republic—patents can still function to promote competition