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James Choi on Fed's response to rate rise

Responding to "Fed Zeroes In on Vulnerability to Rate Rise" in the Wall Street Journal, Professor James Choi noted: It seems intuitive that locking in a fixed stream of interest income (or payments) for a long time is a risk-reducing move, but this article shows that long-maturity fixed-rate debt actually exposes you to interest rate risk unless the other side of your balance sheet has a similarly long cash flow duration.

James Choi on why earnings per share is a flawed metric

From Professor James Choi: For years, I have taught students that earnings per share is a highly flawed metric that is vulnerable to manipulation, and this article highlights one manifestation of its flaws. Responding to "As Companies Step Up Buybacks, Executives Benefit, Too" in the Wall Street Journal.

The science of pleasure

Berkeley economist Daniel McFadden, who won the Nobel Prize for his work analyzing choice, proposes a new "science of pleasure" that will shed greater light on how consumers make decisions. In a working paper, he writes that our understanding of social networks as well as research from cognitive psychology, anthropology, evolutionary biology, and neurology should all play into our understanding of the economics of choice.

For more see:

Yale psychologist Paul Bloom on "Why do we like what we like?"

Our issue devoted to behavioral research.

An economist's take on happiness research.

Why is corporate investment so low?

Corporate investment is at its lowest point since the Great Depression, while profits have soared to record levels. It seems like an unsustainable dynamic. A post at FTAlphaville tries to understand how this could happen and what it means for the economy as a whole.

One result of falling investments and rising profits is that companies are sitting on mountains of cash. A recent post at DealBook details some of the factors behind Apple's decisions about what to do with enough cash to "buy every office building and retail space in New York."

Mushfiq Mobarak on intellectual property protection in developing countries

From Professor Ahmed Mushfiq Mobarak: Intellectual property protection is important for developing countries if they want to attract innovative businesses from abroad, or want to encourage domestic innovation. Protecting the rights of innovators may come at a human cost, since it may make the innovative output, such as essential medicines, beyond the financial reach of many consumers. Countries may also find it optimal to choose a strategy of adapting existing technologies developed abroad rather than innovate and create new ones at home. Developing countries' decisions on how stringently to protect intellectual property therefore has important economic and human rights implications and tradeoffs.

Responding to “Why Chemotherapy That Costs $70,000 in the U.S. Costs $2,500 in India” by Thomas Bollyky writing in the Atlantic.

Pieces of the energy puzzle

Two pieces of the energy puzzle:

Bloomberg New Energy Finance forecasts that falling costs for renewable energy production will lead to increased investment and increased production—reaching 50% of total energy supply by 2030. Government subsidies for clean energy will play a smaller role in the industry as business incentives take over, according to the report.

In the U.S., trucking accounts for almost 15% of the country’s oil consumption. The New York Times reports that more and more companies are switching to natural gas to power long-haul trucks, which promises to decrease demand for oil and lower toxic emissions. The supply of natural gas has shot up in recent years with the widespread use of hydraulic fracturing to reach shale gas deposits.

The power of video recording to improve healthcare

"The Power of Video Recording: Taking Quality to the Next Level" by Martin A. Makary in the Journal of the American Medical Association.

"The article caught my attention because it raises once again the questions of: How far can and are health systems and professionals willing to go with use of technological platforms? Will they embrace technologies (video and internet) that enable virtual care delivery, the virtual monitoring of care delivery at the bedside in real time, etc., knowing that the learning and quality-enhancing benefits come with greater oversight and accountability? If this shift takes place, how long will it take? The article also reminded me that a core skill for organizational leaders in our ever-changing world is to create work environments that support reliable execution of what is known and (continuous) learning for improvement."

The difficulties of designing a carbon market

Recent troubles in the EU's carbon trading market point to the difficulty of designing markets, with the necessary supporting institutions, that can advance social interests as well as purely fiscal ones. Our 2007 interview with Martin Shubik is still a great introduction to how to think about market design.

Cross-border patent laws

Differences in intellectual property laws—and how governments enforce those laws—create complex business challenges across markets. When the product is a life-saving drug, the quandary becomes more difficult. Thomas Bollyky, writing for the Atlantic, analyzes a recent court ruling in India that puts the issues in stark relief.

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