Cahiers de recherche

  • Titre
  • Auteur(s)

Départements : Economie et Sciences de la décision

This paper revisits the ability of central banks to manage private sector's expectations depending on its credibility and how this affects the use of interest rate rules and pegs to achieve monetary policy objectives. When private agents can only provide limited incentives for the central bank to follow a policy, we show that resulting limited credibility allows a central bank to prevents the inflation from diverging by defaulting on past promises if necessary. As a result, the Taylor rule, when expected, anchors inflation expectations on a unique equilibrium path as long as the Taylor principle is satisfied. Finally, we also show that limited credibility restricts the impact of long-term interest rate pegs, so as to make current conditions less dependent on future policy changes.

Mots clés : Taylor principle, Credibility, Forward Guidance

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

We offer a model that combines and generalizes case-based decision theory and expected utility maximization. It is based on the premise that an agent looks ahead and assesses possible future scenarios, but may not know how to evaluate their likelihood and may not be sure that the set of scenarios is exhaustive. Consequently, she also looks back at her memory for past cases, and makes decisions so as to maximize a combined function, taking into account both scenarios and cases. We allow for non-additive set functions, both over future scenarios and over past cases, to capture (i) incompletely specified or unforeseen scenarios, (ii) ambiguity, (iii) the absence of information about counterfactuals, and (iv) some forms of case-to-rule induction ("abduction") and statistical inference. We axiomatize this model. Learning in this model takes several forms, and, in particular, changes the relative weights of the two forms of reasoning.

Départements : Economie et Sciences de la décision

Central banks' announcements that future interest rates will remain low could signal either a weak future macroeconomic outlook - which is bad news - or a future expansionary monetary policy - which is good news. In this paper, we use the Survey of Professional Forecasters to show that these two interpretations coexisted when the Fed engaged into date-based forward guidance policy between 2011Q3 and 2012Q4. We then extend an otherwise standard New-Keynesian model to study the consequences of such heterogeneous interpretations. We show that it can strongly mitigate the effectiveness of forward guidance and that the presence of few pessimists may require keeping rates low for longer. However, when pessimists are sufficiently numerous forward guidance can even be detrimental.

Mots clés : monetary policy, forward guidance, communication, heterogeneous beliefs, disagreement

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Why do some people become entrepreneurs when it is not optimal? We explore this question by disentangling two mechanisms that may have been confounded: overconfidence and attitude toward uncertainty. We further distinguish between two types of uncertainty: risk and ambiguity. In a laboratory experiment, we shock individuals’ level of confidence in their skills to causally identify the effect of overconfidence on entry into competitive markets. Moreover, we highlight the critical role of attitude toward ambiguity on entry: independent of their level of confidence, individuals exhibit ambiguity-seeking behavior when the result of the competition depends on their skills, which in turn leads to a higher level of entry. This preference for ambiguity can explain results that have previously been attributed to overconfidence.

Mots clés : Ambiguity, Overconfidence, Market Entry, Experiment, Entrepreneurship

  • SPE-2017-1188
  • Gross, Net, and New Job Creation by Entrepreneurs
  • T. ASTEBRO, Joacim TAG

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Using a dataset with over 24 million observations and more than 230,000 entries into entrepreneurship we analyze the gross (including the founders), net (excluding the founders), and new (jobs to the former unemployed or those outside the labor force) job creation by entrepreneurs two and six years after start-up. We show that the average entrepreneur does not create any jobs for any other than him/her-self, and that the average entrepreneur typically arrives from having another job so that even for him/her-self there is no new job created but simply a reshuffling of jobs from older to new firms. We further show that incorporation status is by far the most important correlate of job creation. High-ability individuals are more likely to form incorporated ventures and individuals with low ability are more likely to start sole proprietorships.

Mots clés : Entrepreneurship, incorporation, job creation, occupational choice, self-employment, stars and misfits

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Nudge is a concept of policy intervention that originates in Thaler and Sunstein's (2008) popular eponymous book. Following their own hints, we distinguish three properties of nudge interventions: they redirect individual choices by only slightly altering choice conditions (here nudge 1), they use rationality failures instrumentally (here nudge 2), and they alleviate the unfavourable effects of these failures (here nudge 3). We explore each property in semantic detail and show that no entailment relation holds between them. This calls into question the theoretical unity of nudge, as intended by Thaler and Sunstein and most followers. We eventually recommend pursuing each property separately, both in policy research and at the foundational level. We particularly emphasize the need of reconsidering the respective roles of decision theory and behavioural economics to delineate nudge 2 correctly. The paper differs from most of the literature in focusing on the definitional rather than the normative problems of nudge.

Mots clés : nudge, liberal paternalism, policy analysis, behavioural economics, decision theory, rationality, decision biases, Thaler and Sunstein, Kahneman and Tversky

  • ECO/SCD-2016-1182
  • Economics: Between Prediction and Criticism

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

We suggest that one way in which economic analysis is useful is by offering a critique of reasoning. According to this view, economic theory may be useful not only by providing predictions, but also by pointing out weaknesses of arguments. It is argued that, when a theory requires a non-trivial act of interpretation, it's roles in producing predictions and offering critiques vary in a substantial way. We offer a formal model i which these different roles can be captured.

Mots clés : Methodology, Models, Economic Modeling

  • ECO/SCD-2016-1162
  • The Signaling Effect of Raising Inflation

Départements : Economie et Sciences de la décision

This paper argues that central bankers should raise inflation to signal their credibility to forward guidance policies. As inflation can be stabilized in normal times either because of central banker's credibility (e.g. because of reputation concerns) or because of his aversion to inflation, the private sector is unable to infer the central banker's type from observing stable inflation before a liquidity trap, jeopardizing the efficiency of forward guidance policy. We derive optimal policy in a new-Keynesian model subject to liquidity traps where agents are uncertain about the central banker's type and we show that the credible central banker can signal his type by raising inflation before a trap. We show that this signaling motive can justify level of inflation well above 2% but also that the low inflation volatility during the Great Moderation was insufficient to ensure fully efficient forward guidance when needed

Mots clés : Forward Guidance, In ation, Signaling

  • ECO/SCD-2016-1155
  • What Are Analytic Narratives?

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

The recently born expression "analytic narratives" refers to studies that have appeared at the boundaries of history, political science, and economics. These studies purport to explain specific historical events by combining the usual narrative way of historians with the analytic tools that economists and political scientists find in rational choice theory. Game theory is prominent among these tools. The paper explains what analytic narratives are by sampling from the eponymous book Analytic Narratives by Bates, Greif, Levi, Rosenthal, and Weingast (1998) and covering one outside study by Mongin (2008). It first evaluates the explanatory performance of the new genre, using some philosophy of historical explanation and then checks its discursive consistency, using some narratology. The paper concludes that analytic narratives can usefully complement standard narratives in historical explanation, provided they specialize in the gaps that these narratives reveal and that they are discursively consistent, despite the tension that combining a formal model with a narration creates. Two expository modes, called alternation and local supplementation, emerge from the discussion as the most appropriate ones to resolve this tension

Mots clés : Analytic narratives, Rational choice theory, Game theory, Historical explanation, Text, Form of discourse, Narratology.

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

We investigate the conflict between the ex ante and ex post criteria of social welfare in a novel axiomatic framework of individual and social decisions, which distinguishes between a subjective and an objective source of uncertainty. This framework permits us to endow the individuals and society not only with ex ante and ex post preferences, as is classically done, but also with interim preferences of two kinds, and correspondingly, to introduce interim forms of the Pareto principle. After characterizing the ex ante and ex post criteria, we present a first solution to their conflict that amounts to extending the former as much possible in the direction of the latter. Then, we present a second solution, which goes in the opposite direction, and is our preferred one. This solution combines the ex post criterion with an objective interim Pareto principle, which avoids the pitfalls of the ex ante Pareto principle, and especially the problem of "spurious unanimity" discussed in the literature. Both solutions translate the assumed Pareto conditions into weighted additive utility representations, and both attribute common individual probability values only to the objective source of uncertainty.

Mots clés : Ex ante social welfare, Ex post social welfare, Objective versus subjective uncertainty, Pareto principle, Separability, Harsanyi social aggregation theorem, Spurious unanimity