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International audience ; This paper uses a quasi-natural experiment, the recent gold boom in Burkina Faso, to document the local impact of two alternative mining techniques: artisanal and industrial mining. Artisanal mines have a bad reputation. When these mines (labor intensive and managed in common) compete for land with industrial mines (capital intensive and privatized), governments tend to favor the latter. However, more than 100 million people depend on artisanal mines for a livelihood. Our identification strategy exploits two sources of variation. The spatial variation comes from the exposure of households to different geological endowments, and the temporal variation comes from changes in the global gold price. We are the first to document the economic impact of artisanal mines. We show that a 1% increase in the gold price increases consumption by 0.12% for households near artisanal mines. Opening an industrial mine, in contrast, has no impact on local consumption.

International audience The need to collect data on governance-related issues has been growing since the 1990s. Demand gained momentum in 2015 with the adoption of SDG16 worldwide and Agenda 2063 in Africa. African countries played a key role in the adoption of SDG16 and are now leading the process of collecting harmonised household data on Governance, Peace and Security (GPS). Yet the possibility has recently been raised that sensitive survey data collected by government institutions are potentially biased due to self-censorship by respondents. This paper studies the potential bias in responses to what are seen as sensitive questions, here governance issues, in surveys conducted by public organisations. We compare Afrobarometer (AB) survey data, collected in eight African countries by self-professed independent institutions, with first-hand harmonised GPS survey data collected by National Statistics Offices (NSOs). We identify over 20 similarly worded questions on democracy, trust in institutions and perceived corruption. We first compare responses from AB survey respondents based on who they believe the survey sponsor to be. No systematic response bias is found between respondents who believe the government to be behind the AB survey and those who consider it to be conducted by an independent institution. Our estimations suggest that the observed residual differences are due to a selection bias on the observables, which is mitigated by propensity score matching procedures. The absence of a systematic self-censorship or attenuation bias is further evidenced by means of an experimental design, whereby responses from GPS surveys conducted by NSOs (the treatment) are compared with AB surveys sponsored by reportedly independent bodies. Our results provide evidence, at much higher levels of precision than other existing data sources, of the capacity and legitimacy of government-related organisations to collect data on governance as a matter of national interest and sovereignty.

International audience Heterogeneous professional sector, the work-integration sector has been influenced in recent years by a hybrid mode of public regulation: a rationale of supervisory regulation characterized by coercive mechanisms of public intervention. The goal is to correlate contracts and subsidies with the quality of the integration services provided (outcomes) by operational structures; a competitive rationale characterized by competitive mechanisms to promote the economic value and the technical efficiency of the goods and services produced (output). Consequently operational structures converge towards the adoption of entrepreneurial standards. Their economic viability requires adopting an social business model less dependent on public subsidies and more commercial. According to the same dynamics, their transformation into Work Integration Social Enterprises (WISEs) is accompanied by processes of concentration. We study the forms, configurations and properties. In particular, eight types of business combination and a territorial polarization form, the territorial cluster of economic cooperation, have been identified. ; Secteur professionnel hétérogène, l'insertion par l'activité économique (IAE) a été influencé ces dernières années par une régulation publique hybride : une régulation tutélaire caractérisée par des mécanismes coercitifs d'intervention publique, l'objectif étant de corréler contrats et subventions à des services d'insertion de qualité fournis par des structures opérationnelles ; une régulation concurrentielle caractérisée par des mécanismes de compétition promouvant la valeur économique et l'efficience technique des productions support à l'insertion. Par conséquent, les structures opérationnelles composant le secteur convergent vers l'adoption de normes entrepreneuriales. Leur viabilité économique impose d'adopter un modèle économique à finalité sociale moins adossé aux subventions publiques et plus commercial. Suivant la même dynamique, leur transformation en entreprises sociales ...

This paper examines the performance of the spatial arbitrages carried out between two regional markets for wholesale natural gas linked by a pipeline system. We develop a new empirical methodology to (i) detect if these markets are integrated, i.e., if all the spatial arbitrage opportunities between the two markets are being exploited, and (ii) decompose the observed spatial price differences into factors such as transportation costs, transportation bottlenecks, and the oligopolistic behavior of the arbitrageurs. Our framework incorporates a new test for the presence of market power and it is thus able todistinguish between physical and strategic behavior constraints on marginal cost pricing. We use the case of the "Interconnector" pipeline linking Belgium and the UK as an application. Our empirical findings show that all the arbitrage opportunities between the two zones are being exploited but confirm the presence of market power.

A two-country, two-period model of international migration with heterogeneous agents highlights microeconomic foundations for examining the interrelation between brain drain, brain gain and whether human capital formation is undertaken at home or abroad. Ex ante choices regarding where to study depend on abilities, relative qualities of university systems, sunk educational investments, government grants, and endogenously determined, individual foreign employment probabilities. Self-selection critically defines an inherently wide-range of conceivably positive or negative net welfare effects. The optimal design of alternative educational grant schemes, aimed at enhancing the source country's welfare, also depends on the heterogeneity of abilities and associated informational assumptions.

Over the past sixty years, the world population has experienced a dramatic surge from 2.5 billion people by the end of World War II, to 7 billion in 2011. This population growth differs from previous episodes not only in importance, but also because of the joint emergence of a new and ongoing trend of rising urbanization. Expected to strengthen worldwide, this trend is a real challenge for the international community in terms of sustainability, especially for food supply. This thesis provides a theoretical treatment of food supply chain sustainability in a context of rapid and unrelenting urbanization. Halfway between economic geography and environmental economics, its primary goal is to allow for a theoretical formalization of ecological and social trade-offs in a spatially explicit framework. Besides, we argue that this issue cannot satisfactorily resolved without paying specific attention to urban-rural interactions. Our work discloses the following major element : because of the tight and inextricable interconnection between urban and rural areas, the ecological assessment of any food supply chain can only be achieved by taking into account both the demographic and physical features of cities. ; Au cours des soixante dernières années, la population mondiale a connu un sursaut spectaculaire, passant de 2,5 milliards d'habitants à la fin de la Seconde Guerre mondiale à 7 milliards en 2011. Cette croissance démographique se distingue des précédents épisodes tant par son importance que par l'apparition conjointe d'une tendance nouvelle et soutenue à la concentration des populations au sein des villes. Appelée à se renforcer partout dans le monde, cette tendance au grossissement des villes lance un véritable défi à la communauté internationale en matière de durabilité de notre système économique en général et alimentaire en particulier. Cette thèse propose un traitement théorique de la question de la durabilité des systèmes d'approvisionnement alimentaires en milieu urbain. A la frontière entre économie publique et économie géographique, elle poursuit comme objectif principal de permettre la conduite d'une analyse formalisée des arbitrages environnementaux et sociaux dans un cadre spatial explicite. En outre, l'idée selon laquelle aucune réponse ne saurait être satisfaisante sans qu'une attention spécifique soit portée aux interactions spatiales, économiques et écologiques entre espaces urbains et agriculture constitue l'un des positionnements clés défendus dans ce travail. De manière générale, les travaux de cette thèse font apparaître l'élément majeur suivant: du fait de la forte et inextricable interconnexion entre milieux urbain et rural, l'évaluation environnementale, sociale et économique d'un système alimentaire ne peut se faire qu'en connaissance des caractéristiques démographique et physique de la ville concernée.

Over the past sixty years, the world population has experienced a dramatic surge from 2.5 billion people by the end of World War II, to 7 billion in 2011. This population growth differs from previous episodes not only in importance, but also because of the joint emergence of a new and ongoing trend of rising urbanization. Expected to strengthen worldwide, this trend is a real challenge for the international community in terms of sustainability, especially for food supply. This thesis provides a theoretical treatment of food supply chain sustainability in a context of rapid and unrelenting urbanization. Halfway between economic geography and environmental economics, its primary goal is to allow for a theoretical formalization of ecological and social trade-offs in a spatially explicit framework. Besides, we argue that this issue cannot satisfactorily resolved without paying specific attention to urban-rural interactions. Our work discloses the following major element : because of the tight and inextricable interconnection between urban and rural areas, the ecological assessment of any food supply chain can only be achieved by taking into account both the demographic and physical features of cities. ; Au cours des soixante dernières années, la population mondiale a connu un sursaut spectaculaire, passant de 2,5 milliards d'habitants à la fin de la Seconde Guerre mondiale à 7 milliards en 2011. Cette croissance démographique se distingue des précédents épisodes tant par son importance que par l'apparition conjointe d'une tendance nouvelle et soutenue à la concentration des populations au sein des villes. Appelée à se renforcer partout dans le monde, cette tendance au grossissement des villes lance un véritable défi à la communauté internationale en matière de durabilité de notre système économique en général et alimentaire en particulier. Cette thèse propose un traitement théorique de la question de la durabilité des systèmes d'approvisionnement alimentaires en milieu urbain. A la frontière entre économie publique ...

Over the past sixty years, the world population has experienced a dramatic surge from 2.5 billion people by the end of World War II, to 7 billion in 2011. This population growth differs from previous episodes not only in importance, but also because of the joint emergence of a new and ongoing trend of rising urbanization. Expected to strengthen worldwide, this trend is a real challenge for the international community in terms of sustainability, especially for food supply. This thesis provides a theoretical treatment of food supply chain sustainability in a context of rapid and unrelenting urbanization. Halfway between economic geography and environmental economics, its primary goal is to allow for a theoretical formalization of ecological and social trade-offs in a spatially explicit framework. Besides, we argue that this issue cannot satisfactorily resolved without paying specific attention to urban-rural interactions. Our work discloses the following major element : because of the tight and inextricable interconnection between urban and rural areas, the ecological assessment of any food supply chain can only be achieved by taking into account both the demographic and physical features of cities. ; Au cours des soixante dernières années, la population mondiale a connu un sursaut spectaculaire, passant de 2,5 milliards d'habitants à la fin de la Seconde Guerre mondiale à 7 milliards en 2011. Cette croissance démographique se distingue des précédents épisodes tant par son importance que par l'apparition conjointe d'une tendance nouvelle et soutenue à la concentration des populations au sein des villes. Appelée à se renforcer partout dans le monde, cette tendance au grossissement des villes lance un véritable défi à la communauté internationale en matière de durabilité de notre système économique en général et alimentaire en particulier. Cette thèse propose un traitement théorique de la question de la durabilité des systèmes d'approvisionnement alimentaires en milieu urbain. A la frontière entre économie publique ...

La financiarisation des marchés agricoles est un fait ancien. Le fait nouveau, à la fin des années 2000, est le développement fulgurant du montant des investissements par de nouveaux types d'opérateurs utilisant des instruments innovants. L'augmentation des investissements dits spéculatifs est concomitante avec la forte hausse des prix en 2007-08 et avec l'augmentation de la volatilité implicite sur les marchés agricoles de référence. Une controverse s'est alors développée sur la responsabilité des nouveaux fonds d'investissement, avec comme conséquence la volonté publique de réguler les marchés de matières premières, les produits agricoles en particulier. Le point culminant de la réflexion politique mondiale correspond à la réunion du G-20 en France début novembre 2011, point précédé d'un G-20 agricole trois mois plus tôt. L'article explore l'hypothèse de cette responsabilité en décomposant les relations de causalité théoriques puis en testant leur existence sur la base de données publiques mais non utilisées sur le plan académique à notre connaissance.

International audience In this paper, I focus on the extension of transaction costs to appropriative activity and coercive power in the property rights approach. It has been argued that including the costs of appropriation and violent enforcement in transaction costs is based on the assumption that Coaseian bargaining can be extended to any institutional scenario, i.e., voluntary as well as coercive exchange. However, voluntary transactions cannot capture the logic of coercive power. This means that the assumption of an efficient political market is not valid, and that the "Political Coase Theorem" (PCT) lacks the logical consistency to provide a cornerstone for political theory. ; L'objectif de ce papier consiste à fournir un survol critique de l'approche en termes de droits de propriété en ce qui concerne l'extension des coûts de transaction à l'activité appropriative et au pouvoir coercitif. Le théorème de Coase est la pierre angulaire des deux branches de cette approche, à savoir la branche d'actifs spécifiques (Williamson) et la branche de l'Université de Washington (Barzel, Cheung, et North). Cependant, ces deux branches divergent sur l'étendue de l'application du théorème de Coase. Alors que la branche en termes de spécificité des actifs le réduit aux transactions volontaires, la branche de l'Université de Washington l'étend tant et si bien qu'il comprend l'activité appropriative, le pouvoir coercitif, et la politique. Cette extension est nommée " le théorème politique de Coase ". Dans ce papier, on explore comment ces deux approches arrivent à des résultats contradictoires eu égard aux coûts de transaction des actifs génériques et idiosyncrasiques. Puis, on examine dans quelle mesure ces résultats contradictoires sont liés à la façon dont le théorème de Coase est formulé initialement selon chaque branche. On démontre que l'hypothèse principale pour intégrer les coûts de l'activité appropriative et de la mise en œuvre violente (violent enforcement) dans les coûts de transaction repose sur l'idée selon ...

La financiarisation des marchés agricoles est un fait ancien. Le fait nouveau, à la fin des années 2000, est le développement fulgurant du montant des investissements par de nouveaux types d'opérateurs utilisant des instruments innovants. L'augmentation des investissements dits spéculatifs est concomitante avec la forte hausse des prix en 2007-08 et avec l'augmentation de la volatilité implicite sur les marchés agricoles de référence. Une controverse s'est alors développée sur la responsabilité des nouveaux fonds d'investissement, avec comme conséquence la volonté publique de réguler les marchés de matières premières, les produits agricoles en particulier. Le point culminant de la réflexion politique mondiale correspond à la réunion du G-20 en France début novembre 2011, point précédé d'un G-20 agricole trois mois plus tôt. L'article explore l'hypothèse de cette responsabilité en décomposant les relations de causalité théoriques puis en testant leur existence sur la base de données publiques mais non utilisées sur le plan académique à notre connaissance.

International audience Polanyi (1944, [1957] 1968) has distinguished three 'patterns of social integration,' namely 'reciprocity', 'redistribution' and 'exchange.' This triad has provided the starting point for most subsequent discussion. Our purpose is to introduce a further type of coordination, the 'destructive mode of coordination'. This mode achieves coordination by intimidation, threat, and the use of non-institutionalized coercive means. Resources and human efforts are allocated in order to appropriate what other people produce. Two simple examples provide an introductory illustration, traffic circles (roundabouts) and prisons. Appropriation through pirating provides a further example of destructive coordination. More specifically, biopiracy (blood patenting) is discussed in order to clarify the relationship between destructive coordination and the institutionalization of property rights. Finally, we focus on the role of destructive coordination as a transitional mechanism that is supported by the institutional vacuum ultimately yielding to other modes of coordination.

My first post described a few anecdotes about what a warm person Bob Lucas was, and such a great colleague. Here I describe a little bit of his intellectual influence, in a form that is I hope accessible to average people.The "rational expectations" revolution that brought down Keynesianism in the 1970s was really much larger than that. It was really the "general equilibrium" revolution. Macroeconomics until 1970 was sharply different from regular microeconomics. Economics is all about "models," complete toy economies that we construct via equations and in computer programs. You can't keep track of everything in even the most beautiful prose. Microeconomic models, and "general equilibrium" as that term was used at the time, wrote down how people behave — how they decide what to buy, how hard to work, whether to save, etc.. Then it similarly described how companies behave and how government behaves. Set this in motion and see where it all settles down; what prices and quantities result. But for macroeconomic issues, this approach was sterile. I took a lot of general equilibrium classes as a PhD student — Berkeley, home of Gerard Debreu was strong in the field. But it was devoted to proving the existence of equilibrium with more and more general assumptions, and never got around to calculating that equilibrium and what it might say about recessions and government policies. Macroeconomics, exemplified by the ISLM tradition,  inhabited a different planet. One wrote down equations for quantities rather than people, for example that "consumption" depended on "income," and investment on interest rates. Most importantly, macroeconomics treated each year as a completely separate economy. Today's consumption depended on today's income, having nothing to do with whether people expected the future to look better or worse. Economists recognized this weakness, and a vast and now thankfully forgotten literature tried fruitlessly to find "micro foundations" for Keynesian economics. But building foundations under an existing castle doesn't work. The foundations want a different castle. Bob's "islands" paper is famous, yes, for a complete model of how unexpected money might move output in the short run and not just raise inflation. But you can do that with a half a page of simple math, and Bob's paper is hard to read. It's deeper contribution, and the reason for that difficulty, is that Bob wrote out a complete "general equilibrium" model. People, companies and government each follow described rules of behavior. Those rules are derived as being the optimal thing for people and companies to do given their environment. And they are forward-looking. People think about how to make their whole lives as pleasant as possible, companies to maximize the present value of profits. Prices adjust so supply = demand. Bob said, by example, that we should do macroeconomics by writing down general equilibrium models. General equilibrium had also been abandoned by the presumption that it only studies perfect economies. Macroeconomics is really about studying how things go wrong, how "frictions" in the economy, such as the "sticky" wages underlying Keynesian thinking, can produce undesirable and unnecessary recessions. But here too, Bob requires us to write down the frictions explicitly. In his model, people don't see the aggregate price level right away, and do the best they can with local information. That is the real influence of the paper  and Bob's real influence in the profession. (Current macroeconomic modeling reflects the fact that the Fed sets interest rates, and does not control the money supply.) You can see this influence in Tom Sargent's textbooks. The first textbook has an extensive treatment of Keynesian economics. It's about the most comprehensible treatment there is — but it is no insult to Tom to say that in that book you can see how Keynesian economics really doesn't hang together. Tom describes how, the minute he learned from Bob how to to general equilibrium, everything changed instantly. Rational expectations was, like any other advance, a group effort. But what made Bob the leader was that he showed the rest how to do general equilibrium. This is the heart of my characterization that Bob is the most important macroeconomist of the 20th century. Yes, Keynes and Friedman had more policy impact, and Friedman's advocacy of free markets in microeconomic affairs is the most consequential piece of 20th century economics. But within macroeconomics, there is before Lucas and after Lucas.  Everyone today does economics the Lucas way. Even the most new-Keynesian article follows the Lucas rules of how to do economics. Once you see models founded on complete descriptions of people, businesses, government, and frictions, you can see the gaping holes in standard ISLM models. This is some of his stinging critique, such as "after Keynesian macroeconomics." Sure, if people's income goes up they are likely to consume more, as the Keynesians posited. But interest rates, wages, and expectations of the future also affect consumption, which Keynesians leave out. "Cross equations restrictions" and "budget constraints" are missing. Now, the substantive prediction that monetary policy can only move the real economy via unexpected money supply growth did not bear out, and both subsequent real business cycles and new-Keynesianism brought persistent responses. But the how we do macroeconomics part is the enduring contribution. The paper still had enduring practical lessons. Lucas, together with Friedman and Phelps brought down the Phillips curve. This curve, relating inflation to unemployment, had been (and sadly, remains) at the center of macroeconomics. It is a statistical correlation, but like many correlations people got enthused with it and started reading it as stable relationship, and indeed a causal one. Raise inflation and you can have less unemployment. Raise unemployment in order to lower inflation. The Fed still thinks about it in that causal way. But Lucas, Friedman, and Phelps bring a basic theory to it, and thereby realize it is just a correlation, which will vanish if you push on it. Rich guys wear Rolexes. That doesn't mean that giving everyone a Rolex will have a huge "multiplier" effect and make us all rich. This is the essence of the "Lucas critique" which is a second big contribution that lay readers can easily comprehend. If you push on correlations they will vanish. Macroeconomics was dedicated to the idea that policy makers can fool people. Monetary policy might try to boost output in a recession with a surprise bit of money growth. That will wok once or twice. But like the boy who cried wolf, people will catch on, come to expect higher money growth in recessions and the trick won't work anymore. Bob showed here that all the "behavioral" relations of Keynesian models will fall apart if you exploit them for policy, or push on them, though they may well hold as robust correlations in the data. The "consumption function" is the next great example. Keynesians noticed that when income rises people consume more, so write a consumption function relating consumption to income. But, following Friedman's great work   on consumption, we know that correlation isn't always true in the data. The relation between consumption and income is different across countries (about one for one) than it is over time (less than one for one). And we understand that with Friedman's theory: People, trying to do their best over their whole lives don't follow mechanical rules. If they know income will fall in the future, they consume a lot less today, no matter what today's current income. Lucas showed that people who behave this sensible way will follow a Keynesian consumption function, given the properties of income overt the business cycle. You will see a Keynesian consumption function. Econometric estimates and tests will verify a Keynesian consumption function. Yet if you use the model to change policies, the consumption function will evaporate. This paper is devastating. Large scale Keynesian models had already been constructed, and used for forecasting and policy simulation. It's natural. The model says, given a set of policies (money supply, interest rates, taxes, spending) and other shocks, here is where the economy goes. Well, then, try different policies and find ones that lead to better outcomes. Bob shows the models are totally useless for that effort. If the policy changes, the model will change. Bob also showed that this was happening in real time. Supposedly stable parameters drifted around. (This one is also very simple mathematically. You can see the point instantly. Bob always uses the minimum math necessary. If other papers are harder, that's by necessity not bravado.) This devastation is sad in a way. Economics moved to analyzing policies in much simpler, more theoretically grounded, but less realistic models. Washington policy analysis sort of gave up. The big models lumber on, the Fred's FRBUS for example, but nobody takes the policy predictions that seriously. And they don't even forecast very well. For example, in the 2008 stimulus, the CEA was reduced to assuming a back of the envelope 1.5 multiplier, this 40 years after the first large scale policy models were constructed. Bob always praised the effort of the last generation of Keynesians to write explicit quantitative models, to fit them to data, and to make numerical predictions of various policies. He hoped to improve that effort. It didn't work out that way, but not by intention. This affair explains a lot of why economists flocked to the general equilibrium camp. Behavioral relationships, like what fraction of an extra dollar of income you consume, are not stable over time or as policy changes. But one hopes that preferences, — how impatient you are, how much you are willing to save more to get a better rate of return — and technology — how much a firm can produce with given capital and labor — do not change when policy changes. So, write models for policy evaluation at the level of preferences and technology, with people and companies at the base, not from behavioral relationships that are just correlations. Another deep change: Once you start thinking about macroeconomics as intertemporal economics — the economics that results from people who make decisions about how to consume over time, businesses make decisions about how to produce this year and next — and once you see that their expectations of what will happen next year, and what policies will be in place next year are crucial, you have to think of policy in terms of rules, and regimes, not isolated decisions. The Fed often asks economists for advice, "should we raise the funds rate?" Post Lucas macroeconomists answer that this isn't a well posed question. It's like saying "should we cry wolf?" The right question is, should we start to follow a rule, a regime, should we create an institution, that regularly and reliably raises interest rates in a situation like the current one? Decisions do not live in isolation. They create expectations and reputations. Needless to say, this fundamental reality has not soaked in to policy institutions. And that answer (which I have tried at Fed advisory meetings) leads to glazed eyes. John Taylor's rule has been making progress for 30 years trying to bridge that conceptual gap, with some success.  This was, and remains, extraordinarily contentious. 50 years later, Alan Blinder's book, supposedly about policy, is really one long snark about how terrible Lucas and his followers are, and how we should go back to the Keynesian models of the 1960s. Some of that contention comes back to basic philosophy.  The program applies standard microeconomics: derive people's behaviors as the best thing they can do given their circumstances. If people pick the best combination of apples and bananas when they shop, then also describe consumption today vs. tomorrow as the best they can do given interest rates. But a lot of economics doesn't like this "rational actor" assumption. It's not written in stone, but it has been extraordinarily successful. And it imposes a lot of discipline. There are a thousand arbitrary ways to be irrational.  Somehow though, a large set of economists are happy to write down that people pick fruit baskets optimally, but don't apply the same rationality to decisions over time, or in how they think about the future. But "rational expectations" is really just a humility condition. It says, don't write models in which the predictions of the model are different from the expectations in the model. If you do, if your model is right, people will read the model and catch on, and the model won't work anymore. Don't assume you economist (or Fed chair) are so much less behavioral than the people in your model. Don't base policy on an attempt to fool the little peasants over and over again. It does not say that people are big super rational calculating machines. It just says that they eventually catch on. Some of the contentiousness is also understandable by career concerns. Many people had said "we should do macro seriously like general equilibrium." But it isn't easy to do. Bob had to teach himself, and get the rest of us to learn, a range of new mathematical  and modeling tools to be able to write down interesting general equilibrium models. A 1970 Keynesian can live just knowing how to solve simple systems of linear equations, and run regressions.  To follow Bob and the rational expectations crowd, you had to learn linear time-series statistics, dynamic programming, and general equilibrium math. Bob once described how tough the year was that it took him to learn functional analysis and dynamic programming. The models themselves consisted of a mathematically hard set of constructions. The older generation either needed to completely retool, fade away, or fight the revolution. Some good summary words: Bob's economics uses"rational expectations," or at least forward-looking and model-consistent expectations. Economics becomes "intertemporal," not "static" (one year at a time). Economics is "stochastic" as well as "dynamic," we can treat uncertainty over time, not just economies in which everyone knows the future perfectly. It applies "general equilibrium" to macroeconomics. And I've just gotten to the beginning of the 1970s. When I got to Chicago in the 1980s, there was a feeling of "well, you just missed the party." But it wasn't true. The 1980s as well were a golden age. The early rational expectations work was done, and the following real business cycles were the rage in macro. But Bob's dynamic programming, general equilibrium tool kit was on a rampage all over dynamic economics. The money workshop was one creative use of dynamic programs and interetempboral tools after another one, ranging from taxes to Thai villages (Townsend). I'll mention two. Bob's consumption model is at the foundation of modern asset pricing. Bob parachuted in, made the seminal contribution, and then left finance for other pursuits. The issue at the time was how to generalize the capital asset pricing model. Economists understood that some stocks pay higher returns than others, and that they must do so to compensate for risk. The understood that the risk is, in general terms, that the stock falls in some sense of bad times. But how to measure "bad times?" The CAPM uses the market, other models use somewhat nebulous other portfolios. Bob showed us that at least in the purest theory, that stocks must pay higher average returns if they fall when consumption falls. (Breeden also constructed a consumption model in parallel, but without this "endowment economy" aspect of Bob's) This is the purest most general theory, and all the others are (useful) specializations. My asset pricing book follows. The genius here was to turn it all around. Finance had sensibly built up from portfolio theory, like supply and demand: Given returns, what stocks do you buy, and how much to you save vs. consume? Then, markets have to clear find the stock prices, and thus returns, given which people will buy exactly the amount that's for sale and consume what is produced. That's hard. (Technically, finding the vector of prices that clears markets is hard. Yes, N equations in N unknowns, but they're nonlinear and N is big.)  Bob instead imagined that consumption is fixed at each moment in time, like a desert island  in which so many coconuts fall each day and you can't store them or plant them. Then, you can just read prices from people's preferences. This gives the same answer as if the consumption you assume is fixed had derived from a complex production economy. You don't have to solve for prices that equate supply and demand. Brilliantly, though prices cause consumption to individual people, consumption causes prices in aggregate. This is part of Bob's contribution to the hard business of actually computing quantitative models in the stochastic dynamic general equilibrium tradition. Bob, with Nancy Stokey also took the new tools to the theory of taxation. (Bob Barro also was a founder of this effort in the late 1980s.) You can see the opportunity: we just learned how to handle dynamic (overt time, expectations of tomorrow matter to what you do today) stochastic (but there is uncertainty about what will happen tomorrow) economics (people make explicit optimizing decisions) for macro. How about taking that same approach to taxes? The field of dynamic public finance is born. Bob and Nancy, like Barro, show that it's a good idea for governments to borrow and then repay, so as to spread the pain of taxes evenly over time. But not always. When a big crisis comes, it is useful to execute a "state contingent default." The big tension of Lucas-Stokey (and now, all) dynamic public finance: You don't want any capital taxes for the incentive effects. If you tax capital, people invest less, and you just get less capital. But once people have invested, a capital tax grabs revenue for the government with no economic distortion. Well, that is, if you can persuade them you'll never do it again. (Do you see expectations, reputations, rules, regimes, wolves in how we think of policy?) Lucas and Stoney say, do it only very rarely to balance the disincentive of a bad reputation with the need to raise revenue in once a century calamities. Bob went on, of course, to be one of the founders of modern growth theory. I always felt he deserved a second Nobel for this work. He's absolutely right. Once you look at growth, it's hard to think about anything else. The average Indian lives on $2,000 per year. The average American, $60,000. That was $15,000 in 1950. Nothing else comes close. I only work on money and inflation because that's where I think I have answers. For us mortals, good research proceeds where you think you have an answer, not necessarily from working on Big Questions. Bob brilliantly put together basic facts and theory to arrive at the current breakthrough. Once you get out of the way, growth does not come from more capital, or even more efficiency. It comes from more and better ideas. I remember being awed by his first work for cutting through the morass and assembling the facts that only look salient in retrospect. A key one: Interest rates in poor countries are not much higher than they are in rich countries. Poor countries have lots of workers, but little capital. Why isn't the return on scarce capital enormous, with interest rates in the hundreds of percent, to attract more capital to poor countries? Well, you sort of know the answer, that capital is not productive in those countries.  Productivity is low, meaning those countries don't make use of better ideas on how to organize production.  Ideas too are produced by economics, but, as Paul Romer crystallized, they are fundamentally different from other goods. If I produce an idea, you can use it without hurting my use of it. Yes, you might drive down the monopoly profits I gain from my intellectual property. But if you use my Pizza recipe, that's not like using my car. I can still make Pizza, where if you use my car I can't go anywhere. Thus, the usual free market presumption that we will produce enough ideas is false. (Don't jump too quickly to advocate government subsides for ideas. You have to find the right ideas, and governments aren't necessarily good at subsidizing that search.) And the presumption that intellectual property should be preserved forever is also false. Once produced it is socially optimal for everyone to use it. I won't go on. It's enough to say that Bob was as central to the creation of idea-based growth theory, which dominates today, as he was to general equilibrium macro, which also dominates today.Bob is an underrated empiricist. Bob's work on the size distribution of firms (great tweet summary by Luis Garicano) similarly starts from basic facts of the size distribution of firms and the lack of relationship between size and growth rates. It's interesting how we can go on for years with detailed econometric estimates of models that don't get basic facts right. I loved Bob's paper on money demand for the Carnegie Rochester conference series. An immense literature had tried to estimate money demand functions with dynamics, and was pretty confusing. It made a basic mistake, by looking at first differences rather than levels and thereby isolating the noise and drowning out the signal. Bob made a few plots, basically rediscovered cointegration all on his own, and made sense of it all. And don't forget the classic international comparison of inflation-output relations. Countries with volatile inflation have less Phillips curve tradeoff, just as his islands model featuring confusion between relative prices and the price level predicts. One last note to young scholars. There is a tendency today to value people by the number of papers they produce, and how quickly they rise through the ranks. Read Bob's CV. He wrote about one paper a year, starting quite late in life. But, as Aesop said, they were lions. In his Nobel prize speech, Bob also passed on that he and his Nobel-winning generation at Chicago always felt they were in some backwater, where the high prestige stuff was going on at Harvard and MIT. You never know when it might be a golden age. And the AER rejected his islands paper (as well as Akerlof's lemons). If you know it's good, revise and try again. I will miss his brilliant papers as much as his generous personality. Update: See Ivan Werning's excellent "Lucas Miracles" for an appreciation by a real theorist. 

We study a model of strategic competition among farmers for land use in an agricultural economy. Each agent can take possession of a part of the collective forest land and convert it to farming. Unconverted forest land helps preserving biodiversity, which contributes to reducing the volatility of agricultural production. Agents' utility is given in terms of a Kreps Porteus stochastic dierential utility capable of disentangling risk aversion and aversion to uctuations. We characterize the land used by each farmer and her welfare at the Nash equilibrium, we evaluate the over-exploitation of the land and the agents' welfare loss compared to the socially optimal solution and we study the drivers of the ineciencies of the decentralized equilibrium. After characterizing the value of biodiversity in the model, we use an appropriate decomposition to study the policy implications of the model by identifying in which cases the allocation of property rights is preferable to the introduction of a land conversion tax.

We study a model of strategic competition among farmers for land use in an agricultural economy. Each agent can take possession of a part of the collective forest land and convert it to farming. Unconverted forest land helps preserving biodiversity, which contributes to reducing the volatility of agricultural production. Agents' utility is given in terms of a Kreps Porteus stochastic dierential utility capable of disentangling risk aversion and aversion to uctuations. We characterize the land used by each farmer and her welfare at the Nash equilibrium, we evaluate the over-exploitation of the land and the agents' welfare loss compared to the socially optimal solution and we study the drivers of the ineciencies of the decentralized equilibrium. After characterizing the value of biodiversity in the model, we use an appropriate decomposition to study the policy implications of the model by identifying in which cases the allocation of property rights is preferable to the introduction of a land conversion tax.