No Good Deals - No Bad Models

Faced with the problem of pricing complex contingent claims, an investor seeks to make his valuations robust to model uncertainty. We construct a notion of a model- uncertainty-induced utility function and show that model uncertainty increases the investor's eff ective risk aversion. Using the model-uncertainty-induced utility function, we extend the \No Good Deals" methodology of Cochrane and Sa a-Requejo [2000] to compute lower and upper good deal bounds in the presence of model uncertainty. We illustrate the methodology using some numerical examples.

Age, Life-satisfaction, and Relative Income – Insights from the UK and Germany

We first confirm previous results with the German Socio-Economic Panel by Layard et al. (2010), and obtain strong negative effects of comparison income. However, when we split the sample by age, we find quite different results for reference income. The effects on lifesatisfaction are positive and significant for those under 45, consistent with Hirschman’s (1973) ‘tunnel effect’, and only negative (and larger than in the full sample) for those over 45, when relative deprivation dominates. Thus for young respondents, reference income’s signalling role, indicating potential future prospects, can outweigh relative deprivation effects. Own-income effects are also larger for the older sample, and of greater magnitude than the comparison income effect. In East Germany the reference income effects are insignificant for all. With data from the British Household Panel Survey, we confirm standard results when encompassing all ages, but reference income loses significance in both age groups, and most surprisingly, even own income becomes insignificant for those over 45, while education has significant negative effects.

Genuine savings and future well-being in Germany, 1850-2000

Genuine Savings (GS), also known as ‘net adjusted savings’, is a composite indicator of the sustainability of economic development. Genuine Savings reflects year-on-year changes in the total wealth or capital of a country, including net investment in produced capita, investment in human capital, depletion of natural resources, and damage caused by pollution. A negative Genuine Savings rate suggests that the stock of national wealth is declining and that future utility must be less than current utility, indicating that economic development is non-sustainable (Hamilton and Clemens, 1999). We make use of data over a 150 year period to examine the relationship between Genuine Savings and a number of indicators of well-being over time, and compare the relative changes in human, produced, and components of natural capital over the period. Overall, we find that the magnitude of genuine savings is positively related to changes in future consumption, with some evidence of a cointegrating relationship. However, the relationships between genuine savings and infant mortality or average heights are less clear.

Perceptions of Europe in political and economic elites: a geographical compared analysis of Germany, Spain and Poland

Elite perceptions about Europe are a very important point in order to understand the current European integration process, as well as the future perspectives for the continent. This study makes a comparison between the perceptions which political and economical elites in some European countries have about the European Union process and its mechanisms. The main goal is to identify the differences in positions of each type of elites, as well as the variations among three key countries. The database built thanks to the INTUNE (Integrated and United? A quest for Citizenship in an ¨ever closer Europe¨) Project Survey on European Elites and Masses, funded by the Sixth Framework Programme of the EU [Contract CIT 3-CT-2005-513421] have being used. The questionnaire was applied between February and May 2007, in a total of 18 European countries. The national teams got a total of almost 2000 valid responses at European level. In the analysis we have showed some general descriptive statistics about the perception of Europe taking as a reference two dimensions of the INTUNE project: identity (attachment to the national level, the meaning of being a truly national, and the threats from Turkey that EU is facing at this moment) and representation (trust in European and national institutions, preferences for a national or an European army). The results are presented distinguishing between political (national MP’s in low chambers) and economical elites (presidents of corporations, general managers…) and, at the same time, among three countries: Germany as an original member of the European Union; Spain, incorporated in 1986; and a new member, Poland, joining the EU in 2004.

The NLRP3 inflammasome in health and disease: the good, the bad and the ugly.

While interleukin (IL)-1β plays an important role in combating the invading pathogen as part of the innate immune response, its dysregulation is responsible for a number of autoinflammatory disorders. Large IL-1β activating platforms, known as inflammasomes, can assemble in response to the detection of endogenous host and pathogen-associated danger molecules. Formation of these protein complexes results in the autocatalysis and activation of caspase-1, which processes precursor IL-1β into its secreted biologically active form. Inflammasome and IL-1β activity is required to efficiently control viral, bacterial and fungal pathogen infections. Conversely, excess IL-1β activity contributes to human disease, and its inhibition has proved therapeutically beneficial in the treatment of a spectrum of serious, yet relatively rare, heritable inflammasomopathies. Recently, inflammasome function has been implicated in more common human conditions, such as gout, type II diabetes and cancer. This raises the possibility that anti-IL-1 therapeutics may have broader applications than anticipated previously, and may be utilized across diverse disease states that are linked insidiously through unwanted or heightened inflammasome activity.

The size of the underground economy in Germany: A correction of the record and new evidence from the Modified-Cash-deposit-Ratio approach

Based on the Ahumada et al. (2007, Review of Income and Wealth) critique we revise existing estimates of the size of the German underground economy. Among other things, it turns out that most of these estimates are untenable and that the tax pressure induced size of the German underground economy may be much lower than previously thought. To this extent, German policy and law makers have been misguided during the last three decades. Therefore, we introduce the Modified-Cash-Deposit-Ratio (MCDR) approach, which is not subject to the recent critique and apply it to Germany for the period 1960 to 2008. JEL: O17, Q41, C22, Keywords: underground economy, shadow economy, cash-depositratio, currency demand approach, MIMIC approach

Repeated Agenda Setting and the Unanimous Approval of Bad Policies

This paper addresses the puzzle of why legislation, even highly inefficient legislation, may pass with overwhelming majorities. We model a egislature in which the same agenda setter serves for two periods, showing how he can exploit a legislature (completely) in the first period by romising future benefits to legislators who support him. In equilibrium, large majority of legislators vote for the first-period proposal because a ote in favor maintains the chance for membership in the minimum winning coalition in the future. The model thus generates situations in which egislators approve policies by large majorities, or even unanimously, that enefit few, or even none, of them. The results are robust: some institutional arrangements, such as super-majority rules or sequential voting, imit but do not eliminate the agenda setter's power to exploit the legislature, and other institutions such as secret voting do not limit his power.

Neither Bad Apple nor Bad Barrel: How the Societal Context Impacts Unethical Behavior in Organizations

Every time another corporate scandal captures media headlines, the 'bad apple vs. bad barrel' discussion starts anew. Yet this debate overlooks the influence of the broader societal context on organizational behavior. In this article, we argue that misbehaviors of organizations (the 'barrels') and their members (the 'apples') cannot be addressed properly without a clear understanding of their broader context (the 'larder'). Whereas previously, a strong societal framework dampened the practical application of the Homo economicus concept (business actors as perfectly rational and egocentric utility-maximizing agents without any moral concern), specialization, individualization and globalization led to a business world disembedded from broader societal norms. This emancipated business world promotes a literal interpretation of Homo economicus among business organizations and their members. Consequently, we argue that the first step toward 'healthier' apples and barrels is to sanitize the larder, that is, adapt the framework in which organizations and their members evolve.Chaque fois qu'un nouveau scandale fait la une des médias, la question de savoir si le problème se situe au niveau des individus (des 'pommes isolées') ou au niveau des organisations (les 'caisses de pommes') refait surface. Ce débat tend néanmoins à sous-estimer l'influence du contexte sociétal plus large sur le comportement dans les organisations. Dans cet article, nous soutenons l'idée que les scandales éthiques dans les organisations ou parmi leurs membres ne peuvent être compris correctement sans une vision plus précise de leur contexte plus large (la 'cave à pommes'). Si dans le passé un contexte sociétal fort permettait d'adoucir les applications pratiques de l'Homo economicus (qui considère l'acteur économique comme un agent parfaitement rationnel et égocentrique cherchant à maximiser son utilité sans réflexion morale), l'individualisation et la globalisation ont conduit à un monde économique désencastré et déconnecté des normes sociales plus larges. Ce monde économique autonome promouvoit une interprétation littérale de l'Homo economicus parmi les entreprises et leurs employés. Il en résulte que le premier pas vers des pommes moins pourries passe par un assainissement de la cave, c'est-à-dire l'adoption d'un cadre socio-normatif qui permet un recadrage du contexte dans lequel les organisations économiques et leurs acteurs agissent.

Plasmacytoid dendritic cells in melanoma: can we revert bad into good?

Tumor-infiltrating plasmacytoid dendritic cells (pDCs) promote an immunosuppressive milieu that drives tumor growth in melanoma. This phenomenon typically results from the lack of appropriate pDC activation signals in the tumor microenvironment, but it is also actively controlled by tumor cells, which have evolved strategies to inhibit type I IFN production by pDCs. In this issue, Camisaschi et al. identify a new mechanism in which tumors avoid type I IFN production by triggering LAG-3-dependent activation of pDCs. Combination therapies that restore pDC functionality and trigger innate activation to produce type I IFN should be envisaged to induce effective antitumor immunity.

Breaking Bad News ... Regional Guidelines (PDF 270 KB)

Developed from Partnerships in Caring (2000)

Does unemployment hurt less if there is more of it around? A panel analysis of life satisfaction in Germany and Switzerland

This article examines the existence of a habituation effect to unemployment: Does the subjective well-being of unemployed people decline less if unemployment is more widespread? The underlying idea is that unemployment hysteresis may operate through a sociological channel: if many people in the community lose their job and remain unemployed over an extended period, the psychological cost of being unemployed diminishes and the pressure to accept a new job declines. We analyze this question with individual-level data from the German Socio-Economic Panel (1984-2010) and the Swiss Household Panel (2000-2010). Our fixed-effects estimates show no evidence for a mitigating effect of high surrounding unemployment on the subjective well-being of the unemployed. Becoming unemployed hurts as much when regional unemployment is high as when it is low. Likewise, the strongly harmful impact of being unemployed on well-being does not wear off over time, nor do repeated episodes of unemployment make it any better. It thus appears doubtful that an unemployment shock becomes persistent because the unemployed become used to, and hence reasonably content with, being without a job.