Complex information is often processed through categorization. What if this shapes how we write financial contracts? We show that some components of risk become uninsurable. For simple assets to be efficient, they must be numerous and specialized.

What if geography no longer dictates trade? E-commerce cuts distance’s role by 35% but the distance effect is 69% weaker for durables, 43% for non-durables, negligible for services. New research on 9B card transactions reveals how digital trade reshapes economies #EconomicGeography @OECD @tylercowen

The paper documents that agricultural sectors diversify less than manufacturing. With love of variety, consumers then shift spending away from less-diverse sectors, worsening terms of trade for agricultural economies. Evidence confirms this matters quantitatively.

This paper studies how aging affects portfolio choices in a life-cycle model with ambiguity aversion. Consistent with US survey data, increases in life expectancy cause young and old households to adjust risky asset shares in opposite directions, widening age gaps in portfolios.

To rationalize behavioral anomalies (e.g., the Allais paradox), salience and regret theory assume people are sensitive to outcome dependencies. Our experiments find that only a minority exhibit this behavior—and in the opposite direction from that predicted.

To rationalize behavioral anomalies (e.g., the Allais paradox), salience and regret theory assume people are sensitive to outcome dependencies. Our experiments find that only a minority exhibit this behavior—and in the opposite direction from that predicted.

Eberly and Wang develop a two-sector GE model with capital and adjustment costs. Consumers weigh diversification benefits against gains from tilting investment. The framework applies to government credit support, disaster/climate risk, heterogeneous capital, and sectoral shifts.

Bitcoin's block time is stable—unless the hash supply is elastic. We show how Bitcoin's DAA can trigger cobweb-style oscillations, whereas Bitcoin Cash's ASERT avoids such crises. Instability rewards high-cost miners, so reforms may meet resistance

The US experienced falling crime alongside rising then falling incarceration after 1980.We show this puzzling pattern emerges from transitional dynamics: past criminal choices have lasting effects, and so policy changes take generations to fully materialize.

Financial shock transmission differs sharply from TFP shock transmission in equilibrium US-CAN model where firms have differing external finance need, face occasionally binding collateral constraints. Due to unique investment channel operating through persistent trade balance adjustment.

Will cryptocurrency bubbles last? This article examines this question theoretically in a monetary framework and shows that the answer is yes for some cryptocurrencies like Bitcoin. Costly mining is a coordinating device.

Since the end of COVID-19, the US government has run extraordinary budget deficits. Nevertheless, the market value of privately held debt/GDP ratio fell. Using the government budget constraint, Hall and Sargent show how real losses to bondholders close this circle.

Paper was Tom Sargent's keynote of 2025 conference organized by Peking University HSBC Business School & IER. Will be part of special issue on Financial Frictions for Firms and Households: Implications for Economic Development & Government Policies IER will publish in Dec 2025