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Author: Edward J. McCaffery
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
The task is to give an overview of what I hope to be an emerging field of behavioral public finance. Behavioral finance, as per Barberis and Thaler 2003 (and others), consists of two parts: (1) individual level heuristics and biases, which can lead to sub-optimal (inconsistent) judgment and decision-making, and (2) institutional arbitrage mechanisms. In private finance and economics, these latter, most importantly competition and markets, act to reduce and perhaps eliminate the harms from the former. Hence we get the relatively modest policy recommendations characteristic of Sunstien and Thaler's Nudge (among many other examples), such as for default rules that set participation in 401(k) plans. In public finance, in contrast - and arguably in all sectors of the economy where there are not flourishing markets (such as among the poor?) - there are no obvious arbitrage mechanisms. Politicians and the political processes can even exacerbate persistent cognitive error: consider the predilection for hidden taxes, such as the corporate tax. Behavioral public finance is a hugely important subject matter. These slides, summarizing original research done with Jon Baron of Penn (see the survey piece, McCaffery and Baron 2006), explain the general setting; group together many biases under a common isolation effect, and then use Kaplow and Shavell 2002's model of optimal legal system design, tracking the two welfare theorems - i.e., set rules (including, we argue, public finance rules), so as to maximize wealth or serve efficiency, and then redistribute from the greater social pie via the tax system - to suggest the possible problems for a democracy. These include: (a), leaving wealth on the table, because the optimally psychologically pleasing policy is not the most efficient one; (b) pitting equity or redistribution against efficiency, unnecessarily, because support for redistribution depends on the purely formal aspects of public finance; and (c) allowing skillful politicians to affect preference reversals among the citizenry, by agenda setting and framing, as by getting citizens averse to deficits and in favor of government expenditures to cut taxes, today, by isolating tax cuts from spending programs.
Author: Edward J. McCaffery
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
The task is to give an overview of what I hope to be an emerging field of behavioral public finance. Behavioral finance, as per Barberis and Thaler 2003 (and others), consists of two parts: (1) individual level heuristics and biases, which can lead to sub-optimal (inconsistent) judgment and decision-making, and (2) institutional arbitrage mechanisms. In private finance and economics, these latter, most importantly competition and markets, act to reduce and perhaps eliminate the harms from the former. Hence we get the relatively modest policy recommendations characteristic of Sunstien and Thaler's Nudge (among many other examples), such as for default rules that set participation in 401(k) plans. In public finance, in contrast - and arguably in all sectors of the economy where there are not flourishing markets (such as among the poor?) - there are no obvious arbitrage mechanisms. Politicians and the political processes can even exacerbate persistent cognitive error: consider the predilection for hidden taxes, such as the corporate tax. Behavioral public finance is a hugely important subject matter. These slides, summarizing original research done with Jon Baron of Penn (see the survey piece, McCaffery and Baron 2006), explain the general setting; group together many biases under a common isolation effect, and then use Kaplow and Shavell 2002's model of optimal legal system design, tracking the two welfare theorems - i.e., set rules (including, we argue, public finance rules), so as to maximize wealth or serve efficiency, and then redistribute from the greater social pie via the tax system - to suggest the possible problems for a democracy. These include: (a), leaving wealth on the table, because the optimally psychologically pleasing policy is not the most efficient one; (b) pitting equity or redistribution against efficiency, unnecessarily, because support for redistribution depends on the purely formal aspects of public finance; and (c) allowing skillful politicians to affect preference reversals among the citizenry, by agenda setting and framing, as by getting citizens averse to deficits and in favor of government expenditures to cut taxes, today, by isolating tax cuts from spending programs.
Author: Edward J. McCaffery
Publisher: Russell Sage Foundation
ISBN: 1610443853
Category : Business & Economics
Languages : en
Pages : 412
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Book Description
Behavioral economics questions the basic underpinnings of economic theory, showing that people often do not act consistently in their own self-interest when making economic decisions. While these findings have important theoretical implications, they also provide a new lens for examining public policies, such as taxation, public spending, and the provision of adequate pensions. How can people be encouraged to save adequately for retirement when evidence shows that they tend to spend their money as soon as they can? Would closer monitoring of income tax returns lead to more honest taxpayers or a more distrustful, uncooperative citizenry? Behavioral Public Finance, edited by Edward McCaffery and Joel Slemrod, applies the principles of behavioral economics to government's role in constructing economic and social policies of these kinds and suggests that programs crafted with rational participants in mind may require redesign. Behavioral Public Finance looks at several facets of economic life and asks how behavioral research can increase public welfare. Deborah A. Small, George Loewenstein, and Jeff Strnad note that public support for a tax often depends not only on who bears its burdens, but also on how the tax is framed. For example, people tend to prefer corporate taxes over sales taxes, even though the cost of both is eventually extracted from the consumer. James J. Choi, David Laibson, Brigitte C. Madrian, and Andrew Metrick assess the impact of several different features of 401(k) plans on employee savings behavior. They find that when employees are automatically enrolled in a retirement savings plan, they overwhelmingly accept the status quo and continue participating, while employees without automatic enrollment typically take over a year to join the saving plan. Behavioral Public Finance also looks at taxpayer compliance. While the classic economic model suggests that the low rate of IRS audits means far fewer people should voluntarily pay their taxes than actually do, John Cullis, Philip Jones, and Alan Lewis present new research showing that many people do not underreport their incomes even when the probability of getting caught is a mere one percent. Human beings are not always rational, utility-maximizing economic agents. Behavioral economics has shown how human behavior departs from the assumptions made by generations of economists. Now, Behavioral Public Finance brings the insights of behavioral economics to analysis of policies that affect us all.
Author: Deborah Gregory
Publisher:
ISBN:
Category :
Languages : en
Pages : 7
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Book Description
This is a PDF file of 'Emerging Research and Policy Issues in Behavioral Finance' slides from a presentation at the Seventh Annual Meeting of the Academy of Behavioral Finance & Economics, September 16-18, 2015, Drexel University Philadelphia, Pennsylvania.This special session provided conference attendees a presentation and discussion of emerging issues in behavioral finance.Note: SSRN is experimenting with enabling the distribution of different types of files: slides, spreadsheets, video, etc. This is an upload of a PDF file of PowerPoint slides. We are interested in our user's desires to distribute files that go beyond word processing text files. You can communicate with me on these issues via my email address below. We invite you to submit your own presentation slides.
Author: Aradhna Krishna
Publisher:
ISBN:
Category :
Languages : en
Pages : 15
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Book Description
In this essay we review the evidence from marketing research about price presentation of consumer products and discuss how these lessons have been applied -- consciously or unconsciously -- in the design of the U.S. tax system. Our perspective is that, in most situations, the designers of the tax system attempt to minimize the perceived burden of any given amount of tax collections. We allow, though, that in certain situations an additional goal is to maximize the perceived burden of others. We also investigate how, when the objective is to encourage a particular activity, price presentation may enhance the achievement of that goal for a given amount of tax subsidy. We conclude by addressing the ethical and normative implications of price presentation in the tax system.
Author: David Hyman
Publisher:
ISBN: 9781408094426
Category :
Languages : en
Pages :
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Book Description
Author: Mrs.Sage De Clerck
Publisher: International Monetary Fund
ISBN: 1498379214
Category : Business & Economics
Languages : en
Pages : 470
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Book Description
The 2007–09 international financial crisis underscored the importance of reliable and timely statistics on the general government and public sectors. Government finance statistics are a basis for fiscal analysis and they play a vital role in developing and monitoring sound fiscal programs and in conducting surveillance of economic policies. The Government Finance Statistics Manual 2014 represents a major step forward in clarifying the standards for compiling and presenting fiscal statistics and strengthens the worldwide effort to improve public sector reporting and transparency.
Author: Shlomo Benartzi
Publisher: Penguin
ISBN: 110158033X
Category : Business & Economics
Languages : en
Pages : 288
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Book Description
One of the world’s top experts in behavioral finance offers innovative strategies for improving 401(k) plans. Half of Americans do not have access to a retirement saving plan at their workplace. Of those who do about a third fail to join. And those who do join tend to save too little and often make unwise investment decisions. In short, the 401(k) world is in crisis, and workers need help. Save More Tomorrow provides that help by focusing on the behavioral challenges that led to this crisis inertia, limited self-control, loss aversion, and myopia—and transforms them into behavioral solutions. These solutions, or tools, are based on cutting edge behavioral finance research and they can dramatically improve outcomes by, for example, helping employees: -Save, even if they aren’t ready to do so now, by using future enrollment. -Save more by showing them images of their future selves. -Save smarter by reshuffling the order of funds on the investment menu. Save More Tomorrow is the first comprehensive application of behavioral finance to improve retirement outcomes. It also makes it easy for plan sponsors and their advisers to apply these behavioral tools using its innovative Behavioral Audit process.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 9781589060616
Category : Business & Economics
Languages : en
Pages : 218
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Book Description
This Manual, which updates the first edition published in 1986, is a major advance in the standards for compilation and presentation of fiscal statistics. It is intended as a reference volume for compilers of government finance statistics, fiscal analysts, and other users of fiscal data. The Manual introduces accrual accounting, balance sheets, and complete coverage of government economic and financial activities. It covers concepts, definitions, classifications, and accounting rules, and provides a comprehensive framework for analysis, planning, and policy determination. To the extent possible, the Manual has been harmonized with the System of National Accounts 1993.
Author: Mr. M. Cangiano
Publisher: International Monetary Fund
ISBN: 1475512198
Category : Business & Economics
Languages : en
Pages : 468
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Book Description
The first two decades of the twenty-first century have witnessed an influx of innovations and reforms in public financial management. The current wave of reforms is markedly different from those in the past, owing to the sheer number of innovations, their widespread adoption, and the sense that they add up to a fundamental change in the way governments manage public money. This book takes stock of the most important innovations that have emerged over the past two decades, including fiscal responsibility legislation, fiscal rules, medium-term budget frameworks, fiscal councils, fiscal risk management techniques, performance budgeting, and accrual reporting and accounting. Not merely a handbook or manual describing practices in the field, the volume instead poses critical questions about innovations; the issues and challenges that have appeared along the way, including those associated with the global economic crisis; and how the ground can be prepared for the next generation of public financial management reforms. Watch Video of Book Launch
Author: El Bachir Boukherouaa
Publisher: International Monetary Fund
ISBN: 1589063953
Category : Business & Economics
Languages : en
Pages : 35
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Book Description
This paper discusses the impact of the rapid adoption of artificial intelligence (AI) and machine learning (ML) in the financial sector. It highlights the benefits these technologies bring in terms of financial deepening and efficiency, while raising concerns about its potential in widening the digital divide between advanced and developing economies. The paper advances the discussion on the impact of this technology by distilling and categorizing the unique risks that it could pose to the integrity and stability of the financial system, policy challenges, and potential regulatory approaches. The evolving nature of this technology and its application in finance means that the full extent of its strengths and weaknesses is yet to be fully understood. Given the risk of unexpected pitfalls, countries will need to strengthen prudential oversight.
