Explorations in Pragmatic Economics

by Akerlof, George A.

• ISBN13: 9780199253913
• ISBN10: 0199253919
• Format: Paperback
• Copyright: 2005-06-02
• Publisher: Oxford University Press

Summary

For twenty years since the publication of his seminal paper "The Market for 'Lemons'", George A. Akerlof's work has changed the way we see economics. This collection of Akerlof's most important papers provide both an introduction to Akerlof's work and a grounding in modern economics. Divided into two broad areas, micro- and macroeconomics, they cover the economics of information; the theory of unemployment; macroeconomic equilibria; the demand for money; psychology and economics; and the nature of discrimination and other social issues. Akerlof's substantial introduction to this volume tells the story of these papers, connecting them and showing how his later work has built upon his early contributions, in many cases improving their arguments, their subtlety, and their usefulness today.

Author Biography

George A. Akerlof is Koshland Professor of Economics at the University of California, Berkeley, and the 2001 Nobel Laureate in Economics.

Table of Contents

Introduction: Explorations in Pragmatic Economics	1	(3)
Microeconomics	4	(10)
Macroeconomics	14	(13)
Part I. Microeconomics
The Market for Lemons: Quality Uncertainty and the Market Mechanism	27	(12)
George A. Akerlof
Introduction	27	(1)
The Model with Automobiles as an Example	28	(3)
Examples and Applications	31	(6)
Counteracting Institutions	37	(1)
Conclusion	38	(1)
The Economics of Caste and of the Rat Race and Other Woeful Tales	39	(17)
George A. Akerlof
Introduction	39	(2)
Sharecropping	41	(1)
Work Conditions: The Rat Race	42	(3)
Statistical Discrimination	45	(2)
Caste and Group Organizations	47	(7)
Conclusion	54	(2)
Discriminatory, Status-based Wages among Tradition-oriented, Stochastically Trading Coconut Producers	56	(11)
George A. Akerlof
The Model Explained	57	(2)
The Formal Model	59	(1)
The Nondiscriminatory Equilibrium	60	(2)
A Discriminatory Equilibrium	62	(3)
Conclusion	65	(2)
Economics and Identity	67	(33)
George A. Akerlof
Rachel E. Kranton
Introduction	67	(2)
Utility Function and Evidence of Identity-Related Behavior	69	(8)
Economics and Identity: A Prototype Model	77	(3)
Identity, Gender, and Economics in the Workplace	80	(5)
Identity and the Economics of Exclusion and Poverty	85	(5)
Identity and the Economics of the Household	90	(3)
Conclusion	93	(7)
The Economics of Tagging as Applied to the Optimal Income Tax, Welfare Programs, and Manpower Planning	100	(19)
George A. Akerlof
Introduction	100	(4)
A Simple Example and Explanation of Mirrlees-Fair	104	(1)
A Simple Example of Optimal Taxes and Subsidies with Tagging	105	(5)
Generalized Problem	110	(1)
Cost--Benefit Evaluation of Manpower Programs and Tagging	111	(1)
Summary and Conclusions	112	(7)
An Analysis of Out-of-Wedlock Childbearing in the United States	119	(33)
George A. Akerlof
Janet L. Yellen
Michael L. Katz
Introduction	119	(4)
Basic Trends	123	(7)
A Rudimentary Model of Female Immiseration	130	(5)
Sexual Participation, Abortion, and Shotgun Marriage	135	(6)
Discussion of Models and Experience in the United States	141	(6)
Conclusions	147	(5)
Men without Children	152	(25)
George A. Akerlof
Model of Marriage	156	(2)
Married vs. Single	158	(6)
Tests of the Effects of Marriage on Human Capital	164	(6)
Change in Fixed Effects Coincidental with Timing of Marriage	170	(3)
Conclusion	173	(4)
The Economic Consequences of Cognitive Dissonance	177	(17)
George A. Akerlof
William T. Dickens
An Overview	178	(1)
Psychological Evidence for the Basic Premises	179	(2)
A Model	181	(8)
Potential Applications	189	(3)
Conclusion	192	(2)
The Economics of Illusion	194	(15)
George A. Akerlof
Public Choice Models of Illusion	199	(5)
Warriors and Victims	204	(3)
Conclusion	207	(2)
Procrastination and Obedience	209	(23)
George A. Akerlof
Salience and Decisions	210	(1)
Procrastination	211	(3)
Procrastination: Substance Abuse, Savings, and Organizational Failures	214	(4)
Indoctrination and Obedience	218	(3)
Cults	221	(2)
Crime and Drugs	223	(3)
Politics and Economics	226	(2)
Bureaucracies	228	(1)
Conclusion	229	(3)
Looting: The Economic Underworld of Bankruptcy for Profit	232	(51)
George A. Akerlof
Paul M. Romer
An Abstract Model of Looting	235	(6)
Examples of Looting	241	(7)
The Looting of Savings and Loans during the 1980s	248	(26)
Conclusion	274	(9)
Part II. Macroeconomics
Relative Wages and the Rate of Inflation	283	(20)
George A. Akerlof
The Microeconomic Foundations of a Flow of Funds Theory of the Demand for Money	303	(25)
George A. Akerlof
Introduction	303	(2)
The Model of Payments Flows and Properties of Money Demand	305	(2)
Examples of Payments Shifts Which Cause Large and Small Shifts in Money Demanded	307	(2)
Example of Shifts in Payments Flows between Units of Different Scale	309	(2)
Implications	311	(1)
Conclusion	312	(16)
Irving Fisher on his Head: The Consequences of Constant Threshold-Target Monitoring of Money Holdings	328	(17)
George A. Akerlof
Introduction	328	(4)
Relation between Payments Flows and Money Demand with Threshold-Target Monitoring	332	(4)
Comments on the Model	336	(2)
Agreement with Empirical Evidence	338	(1)
Summary and Conclusion	339	(6)
Jobs as Dam Sites	345	(17)
George A. Akerlof
Introduction	345	(2)
Common Features in Models of Non-Utilization and Analogy Between Jobs and Dam Sites	347	(3)
Specific Technology and Jobs	350	(2)
A Partial Equilibrium Example	352	(1)
A General Equilibrium Example	353	(7)
Summary and Conclusion	360	(2)
Labor Contracts as Partial Gift Exchange	362	(24)
George A. Akerlof
Introduction	362	(2)
The Non-neoclassical Behavior of the Cash Posters or of the Eastern Utilities Co.	364	(2)
Sociological Explanation of Cash Posters'--Eastern Utilities' Behavior	366	(3)
Reference Groups	369	(3)
The Fair Wage	372	(1)
A Model	373	(2)
Two Examples	375	(8)
Conclusion	383	(3)
The Fair Wage--Effort Hypothesis and Unemployment	386	(24)
George A. Akerlof
Janet L. Yellen
Introduction	386	(1)
Motivation for the Fair Wage-Effort Hypothesis	387	(8)
A Rudimentary Model of Unemployment with the Fair Wage-Effort Hypothesis	395	(3)
A Relative Deprivation Model of the Fair Wage	398	(9)
Conclusion	407	(3)
A Near-Rational Model of the Business Cycle, with Wage and Price Inertia	410	(14)
George A. Akerlof
Janet L. Yellen
Introduction	410	(5)
A Model of Cyclical Unemployment	415	(7)
Conclusion	422	(2)
The Macroeconomics of Low Inflation	424	(48)
George A. Akerlof
William T. Dickens
George L. Perry
Simulation Model	438	(26)
Appendix A	464	(8)
Behavioral Macroeconomics and Macroeconomic Behavior	472	(31)
George A. Akerlof
Asymmetric Information	475	(1)
Involuntary Unemployment	476	(3)
Effectiveness of Monetary Policy	479	(3)
The Phillips Curve and the NAIRU	482	(5)
Undersaving	487	(3)
Asset Markets	490	(2)
Poverty and Identity	492	(2)
Conclusion	494	(9)
Index	503