Rating Inflation versus Deflation: On Procyclical Credit Ratings

Credit rating agencies play a crucial role in financial markets. There are two competing views regarding their behavior: some argue that they engage in rating inflation, while others suggest that they deflate ratings. This article offers a rationale that reconciles the two opposite arguments. We find that both rating inflation and rating deflation can occur in equilibrium. Furthermore, we show that credit rating is procyclical: rating inflation is more likely to happen in a boom while rating deflation is more likely to happen in a recession

Modeling the Past: The Paleoethnological Evidence

This chapter considers the earliest Paleolithic, Oldowan (Mode 1), and Acheulean (Mode 2) cultures of the Old Continent and the traces left by the earliest hominids since their departure from Africa. According to the most recent archaeological data, they seem to have followed two main dispersal routes across the Arabian Peninsula toward the Levant, to the north, and the Indian subcontinent, to the east. According to recent discoveries at Dmanisi in the Caucasus, the first Paleolithic settlement of Europe is dated to some 1.75 Myr ago, which indicates that the first “out of Africa” took place at least slightly before this date. The data available for Western Europe show that the first Paleolithic sites can be attributed to the period slightly before 1.0 Myr ago. The first well-defined “structural remains” so far discovered in Europe are those of Isernia La Pineta in Southern Italy, where a semicircular artificial platform made of stone boulders and animal bones has been excavated. The first hand-thrown hunting weapons come from the site of Scho¨ningen in north Germany, where the first occurrence of wooden spears, more than 2 m long, has been recorded from a site attributed to some 0.37 Myr ago. Slightly later began the regular control of fire. Although most of the archaeological finds of these ages consist of chipped stone artifacts, indications of art seem to be already present in the Acheulean of Africa and the Indian subcontinent

Comparison of Handaxes from Bose Basin (China) and the Western Acheulean Indicates Convergence of Form, Not Cognitive Differences

Alleged differences between Palaeolithic assemblages from eastern Asia and the west have been the focus of controversial discussion for over half a century, most famously in terms of the so-called ‘Movius Line’. Recent discussion has centered on issues of comparability between handaxes from eastern Asian and ‘Acheulean’ examples from western portions of the Old World. Here, we present a multivariate morphometric analysis in order to more fully document how Mid-Pleistocene (i.e. ∼803 Kyr) handaxes from Bose Basin, China compare to examples from the west, as well as with additional (Mode 1) cores from across the Old World. Results show that handaxes from both the western Old World and Bose are significantly different from the Mode 1 cores, suggesting a gross comparability with regard to functionally-related form. Results also demonstrate overlap between the ranges of shape variation in Acheulean handaxes and those from Bose, demonstrating that neither raw material nor cognitive factors were an absolute impediment to Bose hominins in making comparable handaxe forms to their hominin kin west of the Movius Line. However, the shapes of western handaxes are different from the Bose examples to a statistically significant degree. Moreover, the handaxe assemblages from the western Old World are all more similar to each other than any individual assemblage is to the Bose handaxes. Variation in handaxe form is also comparatively high for the Bose material, consistent with suggestions that they represent an emergent, convergent instance of handaxe technology authored by Pleistocene hominins with cognitive capacities directly comparable to those of ‘Acheulean’ hominins

A Systematic Screen for Tube Morphogenesis and Branching Genes in the Drosophila Tracheal System

Many signaling proteins and transcription factors that induce and pattern organs have been identified, but relatively few of the downstream effectors that execute morphogenesis programs. Because such morphogenesis genes may function in many organs and developmental processes, mutations in them are expected to be pleiotropic and hence ignored or discarded in most standard genetic screens. Here we describe a systematic screen designed to identify all Drosophila third chromosome genes (∼40% of the genome) that function in development of the tracheal system, a tubular respiratory organ that provides a paradigm for branching morphogenesis. To identify potentially pleiotropic morphogenesis genes, the screen included analysis of marked clones of homozygous mutant tracheal cells in heterozygous animals, plus a secondary screen to exclude mutations in general “house-keeping” genes. From a collection including more than 5,000 lethal mutations, we identified 133 mutations representing ∼70 or more genes that subdivide the tracheal terminal branching program into six genetically separable steps, a previously established cell specification step plus five major morphogenesis and maturation steps: branching, growth, tubulogenesis, gas-filling, and maintenance. Molecular identification of 14 of the 70 genes demonstrates that they include six previously known tracheal genes, each with a novel function revealed by clonal analysis, and two well-known growth suppressors that establish an integral role for cell growth control in branching morphogenesis. The rest are new tracheal genes that function in morphogenesis and maturation, many through cytoskeletal and secretory pathways. The results suggest systematic genetic screens that include clonal analysis can elucidate the full organogenesis program and that over 200 patterning and morphogenesis genes are required to build even a relatively simple organ such as the Drosophila tracheal system

Genome-Scale Analysis of Translation Elongation with a Ribosome Flow Model

We describe the first large scale analysis of gene translation that is based on a model that takes into account the physical and dynamical nature of this process. The Ribosomal Flow Model (RFM) predicts fundamental features of the translation process, including translation rates, protein abundance levels, ribosomal densities and the relation between all these variables, better than alternative (‘non-physical’) approaches. In addition, we show that the RFM can be used for accurate inference of various other quantities including genes' initiation rates and translation costs. These quantities could not be inferred by previous predictors. We find that increasing the number of available ribosomes (or equivalently the initiation rate) increases the genomic translation rate and the mean ribosome density only up to a certain point, beyond which both saturate. Strikingly, assuming that the translation system is tuned to work at the pre-saturation point maximizes the predictive power of the model with respect to experimental data. This result suggests that in all organisms that were analyzed (from bacteria to Human), the global initiation rate is optimized to attain the pre-saturation point. The fact that similar results were not observed for heterologous genes indicates that this feature is under selection. Remarkably, the gap between the performance of the RFM and alternative predictors is strikingly large in the case of heterologous genes, testifying to the model's promising biotechnological value in predicting the abundance of heterologous proteins before expressing them in the desired host

When Knowledge is an Asset: Explaining the Organizational Structure of Large Law Firms

We study the economics of employment relationships through theoretical and empirical analysis of an unusual set of firms, large law firms. Our point of departure is the property rights approach that emphasizes the centrality of ownership's legal rights to control important, non-human assets of the enterprise. From this perspective, large law firms are an interesting and potentially important object of study because the most valuable assets of these firms take the form of knowledge - particularly knowledge of the needs and interests of clients. We argue that the two most distinctive organizational features of large law firms, the use of up or out promotion contests and the practice of having winners become residual claimants in the firm, emerge naturally in this setting. In addition to explaining otherwise anomalous features of the up-or-out partnership system, this paper suggests a general framework for analyzing organizations where assets reside in the brains of employees

On the Incentive Effect of Job Rotation

The longer an agent is employed in a job, the more the principal will have learned about his ability through the history of performance. With implicit incentives, influence perceptions and effort incentives decrease over time. Rotating agents to a different job deletes learning effects about ability, creating fresh impetus for effort. However, job rotation also reduces the time horizon, and thus reduces rents from working and also incentives. In this trade-off, we derive conditions for the desirability of job rotation and show how in the presence of career concerns job rotation may emerge endogenously. Finally, our model allows for more general comments on the optimal rotation frequency as well as the preferred organizational design of a firm