Tamim Bayoumi, 22 September 2017

Nine years ago, Lehman Brothers collapsed and the economic world changed. This column introduces a new book that asks how the North Atlantic economy became so unstable that the failure of a medium-sized US investment bank could topple the entire North Atlantic region into deep recession, and the Eurozone into a depression. The answer lies in serial but different regulatory mistakes in Europe and the US starting in the 1980s.

Alex Haberis, Richard Harrison, Matt Waldron, 21 September 2017

In New Keynesian models, a promise to hold interest rates lower in the future has powerful effects on economic activity and inflation today. This result relies on a strong link between expected future policy rates and current activity, and also a belief that the policymaker will make good on the promise. This column argues that a tension between both of these creates a paradox – the stronger the expectations channel, the less likely it is that people will believe the promise in the first place. As a result, forward guidance promises are much less powerful than standard analysis suggests.

Benjamin Enke, 21 September 2017

Daily life requires us to cooperate with a large number of – potentially unrelated – people. This column argues that cultural variation in the ways people cooperate with each other are empirically associated with fundamentally different religious beliefs, moral values, emotions of shame and guilt, social norms, and institutions. This suggests that various psychological, biological, and institutional mechanisms co-evolved to support specific social cooperation systems.

Nicholas Bloom, Chad Jones, John Van Reenen, Michael Webb, 20 September 2017

The rate of productivity growth in advanced economies has been falling. Optimists hope for a fourth industrial revolution, while pessimists lament that most potential productivity growth has already occurred. This column argues that data on the research effort across all industries shows the costs of extracting ideas have increased sharply over time. This suggests that unless research inputs are continuously raised, economic growth will continue to slow in advanced nations.

Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis, 20 September 2017

The European Commission president’s suggestion that joining the euro should be compulsory for all EU members is not well received by over three quarters of leading economists responding to the latest Centre for Macroeconomics and CEPR survey. This column also reveals how, when asked a broader question about the success of the common currency, half the experts think it has had more benefits than costs, while only a quarter think the opposite. The majority view is that there have been significant benefits, but the way the Eurozone has been operated has also imposed significant costs.

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