Policymakers often use the output gap, a noisy signal of economic activity, as a guide for setting monetary policy. Noise in the data argues for policy caution. At the same time, the zero bound on nominal interest rates constrains the central bank’s ability to stimulate the economy during downturns. In such an environment, greater policy stimulus may be needed to stabilize the economy. Thus, no...

This paper analyzes optimal copyright levies in a representative consumer model and derives welfare implications for harmonization of levy rates. When the policymakers place enough weight on the interests of collecting societies, harmonization could lead to a reduction in social welfare. When countries are asymmetric, the country with a larger proportion of foreign consumption and more ine¢ cie...

Can the Pareto criterion guide policymakers who do not know the true model of the economy? If policymakers specify ex ante preferences for agents, then Pareto improvements from a distorted status quo are usually possible, and with more commodities than states, one can implement almost every Pareto optimum. Unlike the standard second welfare theorem, planners cannot dictate allocations: agents m...

States play an increasing role in setting U.S. health policy. A survey of 292 state government policymakers finds that officials are overwhelmed by the volume of information they receive and have a strong preference for information that is concise and more relevant to current debates. Younger officials are more likely to use electronic information, while older policymakers prefer printed materi...

We examine cost shifting within the context of Medicare payment policy. We briefly review economic theory and available data and discuss the importance of cost shifting for policy. Then we present four central findings on cost shifting based on the views of former high-level policymakers. First, Medicare's early (pre-prospective) payment policy was a boon to hospitals. Second, Medicare payment ...