Peter Diamond
Biographic Data
| ID | 3605344 |
|---|---|
| NAME | Peter Diamond |
| GIVEN NAMES | Peter |
| FAMILY NAME | Diamond |
| SIGNATURE | DIAMOND P |
| AFFILIATIONS | Massachusetts Institute of Technology |
| VERIFIED | No |
| TOTAL WORKS | 22 |
| TOTAL CITATIONS | 352 |
| AUTHOR COUNT | 22 |
| EDITOR COUNT | 0 |
| FIRST PUBLICATION YEAR | 1965 |
| LATEST PUBLICATION YEAR | 2011 |
| H-INDEX | 6 |
The Case for a Progressive Tax: From Basic Research to Policy Recommendation
This paper presents the case for tax progressivity based on recent results in optimal tax theory. We consider the optimal progressivity of earnings taxation and whether capital income should be taxed. We critically discuss the academic research on these topics and when and how the results can be used for policy recommendations. We argue that a result from basic research is relevant for policy only if 1) it is based on economic mechanisms that are…
Reforming pensions: Principles, analytical errors and policy directions
This article, sets out a series of principles for pension design rooted in economic theory: pension systems have multiple objectives, analysis should consider the pension system as a whole, analysis should be framed in a second‐best context, different systems share risks differently, and systems have different effects by generation and by gender. That discussion is reinforced by identification of a series of widespread analytical errors — errors …
Reforming Public Pensions in the US and the UK
This essay describes the current debate on reforming Social Security in the US, along with a brief description of how the program works. Along the way it comments on the quality of some reform proposals as well as their political standing. Where issues are similar, some inferences are drawn for the UK
Saving Social Security
Social Security is one of America's most successful government programs. It has helped millions of Americans avoid poverty in old age. To be sure, the program faces a long-term deficit and is in need of updating. But Social Security's long-term financial health can be restored: the projected deficit is small enough that it can be eliminated through a progressive reform that combines modest benefit reductions and revenue increases
Managerial incentives: On the Near Linearity of Optimal Compensation
Contracts are examined when outcomes depend on managers' choices as well as efforts. As the cost of effort shrinks relative to payoffs, the optimal contract converges to a linear payoff if the control space of the agent has full dimensionality, but not otherwise. Thus, when the agent can trade expected return for greater correlation with other returns, it is better to ignore relative performance when the cost of effort is small. When the choices …
Thomas Reid on the Animate Creation: Papers Relating to the Life Sciences. Paul Wood
Money Illusion
The term “money illusion” refers to a tendency to think in terms of nominal rather than real monetary values. Money illusion has significant implications for economic theory, yet it implies a lack of rationality that is alien to economists. This paper reviews survey questions regarding people's reactions to variations in inflation and prices, designed to shed light on the psychology that underlies money illusion. We propose that people often thin…
Public Provision of Pensions: The Doug Purvis Memorial Lecture
Public provision of pensions to the general population comes in a variety of forms. Systems designed around a benefit formula and systems designed around a contribution rate differ in their economic implications and differ in their political settings. Canada has a defined benefit system with fallback automatic adjustment of tax rates. This paper contrasts the Canadian system with the Chilean (privatized) defined contribution system which has rece…
Proposals to Restructure Social Security
This paper discusses five proposed changes in Social Security: indexing the normal retirement age to life expectancy (as Sweden is doing); investing part of the trust funds in private securities; partial privatization (as has been proposed by Senators Kerrey and Simpson, Sweden is doing and Mexico has done); replacing Social Security by individually mandated savings (as was done in Chile in 1981); and mandating employer provided retirement saving…
Virtue and the Promise of Conservatism: The Legacy of Burke and Tocqueville. Bruce Frohnen
On the duty of man and citizen
Contingent Valuation: Is Some Number Better than No Number
Without market outcomes for comparison, internal consistency tests, particularly adding-up tests, are needed for credibility. When tested, contingent valuation has failed. Proponents find surveys tested poorly done. To the authors' knowledge, no survey has passed these tests. The 'embedding effect' is the similarity of willingness-to-pay responses that theory suggests (and sometimes requires) be different. This problem has long been recognized bu…
Rational Expectations Business Cycles in Search Equilibrium
We examine the rational expectations equilibrium paths of the model of search and barter in Diamond's "Aggregate Demand Management in Search Equilibrium." For some initial positions, there are two equilibrium paths converging to different steady states, with the high-activity path Pareto-dominating the low-activity path, With some parameters there is also a continuum of equilibrium paths converging to another steady state. Moreover, there can be …
The New Keynesian Economics: Unemployment, Search and Contracting
Books in Review
Aggregate Demand Management in Search Equilibrium
Equilibrium is analyzed for a simple barter model with identical risk-neutral agents where trade is coordinated by a stochastic matching process. It is shown that there are multiple steady-state rational expectations equilibria, with all non-corner solution equilibria inefficient. This implies that an economy with this type of trade friction does not have a unique natural rate of unemployment
Mobility Costs, Frictional Unemployment, and Efficiency
With imperfect job information flows, it is plausible that the distribution of job offerings becomes more attractive when there are more vacancies and more unemployed. With word-of-mouth communication, this condition is derived. Given this condition, steady-state equilibrium is not efficient, with welfare increased by the introduction of unemployment compensation even though all agents are risk neutral. In this way workers become more selective i…
The Role of a Stock Market in a General Equilibrium Model With Technological Uncertainty
Increases in risk and in risk aversion
A model of price adjustment
Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparison of Utility: Comment
On the Cost of Tax-exempt Bonds
Contingent Valuation: Is Some Number Better than No Number
Without market outcomes for comparison, internal consistency tests, particularly adding-up tests, are needed for credibility. When tested, contingent valuation has failed. Proponents find surveys tested poorly done. To the authors' knowledge, no survey has passed these tests. The 'embedding effect' is the similarity of willingness-to-pay responses that theory suggests (and sometimes requires) be different. This problem has long been recognized bu…
Aggregate Demand Management in Search Equilibrium
Equilibrium is analyzed for a simple barter model with identical risk-neutral agents where trade is coordinated by a stochastic matching process. It is shown that there are multiple steady-state rational expectations equilibria, with all non-corner solution equilibria inefficient. This implies that an economy with this type of trade friction does not have a unique natural rate of unemployment
Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparison of Utility: Comment
The Case for a Progressive Tax: From Basic Research to Policy Recommendation
This paper presents the case for tax progressivity based on recent results in optimal tax theory. We consider the optimal progressivity of earnings taxation and whether capital income should be taxed. We critically discuss the academic research on these topics and when and how the results can be used for policy recommendations. We argue that a result from basic research is relevant for policy only if 1) it is based on economic mechanisms that are…
Reforming pensions: Principles, analytical errors and policy directions
This article, sets out a series of principles for pension design rooted in economic theory: pension systems have multiple objectives, analysis should consider the pension system as a whole, analysis should be framed in a second‐best context, different systems share risks differently, and systems have different effects by generation and by gender. That discussion is reinforced by identification of a series of widespread analytical errors — errors …
Mobility Costs, Frictional Unemployment, and Efficiency
With imperfect job information flows, it is plausible that the distribution of job offerings becomes more attractive when there are more vacancies and more unemployed. With word-of-mouth communication, this condition is derived. Given this condition, steady-state equilibrium is not efficient, with welfare increased by the introduction of unemployment compensation even though all agents are risk neutral. In this way workers become more selective i…
Rational Expectations Business Cycles in Search Equilibrium
We examine the rational expectations equilibrium paths of the model of search and barter in Diamond's "Aggregate Demand Management in Search Equilibrium." For some initial positions, there are two equilibrium paths converging to different steady states, with the high-activity path Pareto-dominating the low-activity path, With some parameters there is also a continuum of equilibrium paths converging to another steady state. Moreover, there can be …
Saving Social Security
Social Security is one of America's most successful government programs. It has helped millions of Americans avoid poverty in old age. To be sure, the program faces a long-term deficit and is in need of updating. But Social Security's long-term financial health can be restored: the projected deficit is small enough that it can be eliminated through a progressive reform that combines modest benefit reductions and revenue increases
Proposals to Restructure Social Security
This paper discusses five proposed changes in Social Security: indexing the normal retirement age to life expectancy (as Sweden is doing); investing part of the trust funds in private securities; partial privatization (as has been proposed by Senators Kerrey and Simpson, Sweden is doing and Mexico has done); replacing Social Security by individually mandated savings (as was done in Chile in 1981); and mandating employer provided retirement saving…
Managerial incentives: On the Near Linearity of Optimal Compensation
Contracts are examined when outcomes depend on managers' choices as well as efforts. As the cost of effort shrinks relative to payoffs, the optimal contract converges to a linear payoff if the control space of the agent has full dimensionality, but not otherwise. Thus, when the agent can trade expected return for greater correlation with other returns, it is better to ignore relative performance when the cost of effort is small. When the choices …
On the Cost of Tax-exempt Bonds
Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparison of Utility: Comment
A model of price adjustment
Increases in risk and in risk aversion
The Role of a Stock Market in a General Equilibrium Model With Technological Uncertainty
Mobility Costs, Frictional Unemployment, and Efficiency
With imperfect job information flows, it is plausible that the distribution of job offerings becomes more attractive when there are more vacancies and more unemployed. With word-of-mouth communication, this condition is derived. Given this condition, steady-state equilibrium is not efficient, with welfare increased by the introduction of unemployment compensation even though all agents are risk neutral. In this way workers become more selective i…
Aggregate Demand Management in Search Equilibrium
Equilibrium is analyzed for a simple barter model with identical risk-neutral agents where trade is coordinated by a stochastic matching process. It is shown that there are multiple steady-state rational expectations equilibria, with all non-corner solution equilibria inefficient. This implies that an economy with this type of trade friction does not have a unique natural rate of unemployment
Books in Review
Rational Expectations Business Cycles in Search Equilibrium
We examine the rational expectations equilibrium paths of the model of search and barter in Diamond's "Aggregate Demand Management in Search Equilibrium." For some initial positions, there are two equilibrium paths converging to different steady states, with the high-activity path Pareto-dominating the low-activity path, With some parameters there is also a continuum of equilibrium paths converging to another steady state. Moreover, there can be …
The New Keynesian Economics: Unemployment, Search and Contracting
On the duty of man and citizen
Contingent Valuation: Is Some Number Better than No Number
Without market outcomes for comparison, internal consistency tests, particularly adding-up tests, are needed for credibility. When tested, contingent valuation has failed. Proponents find surveys tested poorly done. To the authors' knowledge, no survey has passed these tests. The 'embedding effect' is the similarity of willingness-to-pay responses that theory suggests (and sometimes requires) be different. This problem has long been recognized bu…
Virtue and the Promise of Conservatism: The Legacy of Burke and Tocqueville. Bruce Frohnen
Public Provision of Pensions: The Doug Purvis Memorial Lecture
Public provision of pensions to the general population comes in a variety of forms. Systems designed around a benefit formula and systems designed around a contribution rate differ in their economic implications and differ in their political settings. Canada has a defined benefit system with fallback automatic adjustment of tax rates. This paper contrasts the Canadian system with the Chilean (privatized) defined contribution system which has rece…
Proposals to Restructure Social Security
This paper discusses five proposed changes in Social Security: indexing the normal retirement age to life expectancy (as Sweden is doing); investing part of the trust funds in private securities; partial privatization (as has been proposed by Senators Kerrey and Simpson, Sweden is doing and Mexico has done); replacing Social Security by individually mandated savings (as was done in Chile in 1981); and mandating employer provided retirement saving…
Money Illusion
The term “money illusion” refers to a tendency to think in terms of nominal rather than real monetary values. Money illusion has significant implications for economic theory, yet it implies a lack of rationality that is alien to economists. This paper reviews survey questions regarding people's reactions to variations in inflation and prices, designed to shed light on the psychology that underlies money illusion. We propose that people often thin…
Managerial incentives: On the Near Linearity of Optimal Compensation
Contracts are examined when outcomes depend on managers' choices as well as efforts. As the cost of effort shrinks relative to payoffs, the optimal contract converges to a linear payoff if the control space of the agent has full dimensionality, but not otherwise. Thus, when the agent can trade expected return for greater correlation with other returns, it is better to ignore relative performance when the cost of effort is small. When the choices …
Thomas Reid on the Animate Creation: Papers Relating to the Life Sciences. Paul Wood
Saving Social Security
Social Security is one of America's most successful government programs. It has helped millions of Americans avoid poverty in old age. To be sure, the program faces a long-term deficit and is in need of updating. But Social Security's long-term financial health can be restored: the projected deficit is small enough that it can be eliminated through a progressive reform that combines modest benefit reductions and revenue increases
Reforming Public Pensions in the US and the UK
This essay describes the current debate on reforming Social Security in the US, along with a brief description of how the program works. Along the way it comments on the quality of some reform proposals as well as their political standing. Where issues are similar, some inferences are drawn for the UK
Reforming pensions: Principles, analytical errors and policy directions
This article, sets out a series of principles for pension design rooted in economic theory: pension systems have multiple objectives, analysis should consider the pension system as a whole, analysis should be framed in a second‐best context, different systems share risks differently, and systems have different effects by generation and by gender. That discussion is reinforced by identification of a series of widespread analytical errors — errors …
The Case for a Progressive Tax: From Basic Research to Policy Recommendation
This paper presents the case for tax progressivity based on recent results in optimal tax theory. We consider the optimal progressivity of earnings taxation and whether capital income should be taxed. We critically discuss the academic research on these topics and when and how the results can be used for policy recommendations. We argue that a result from basic research is relevant for policy only if 1) it is based on economic mechanisms that are…
Economics (17 works) · Political science (9 works) · Computer Science (7 works) · Economic theories and models (7 works) · Law (6 works) · Microeconomics (6 works) · Financial Literacy, Pension, Retirement Analysis (5 works) · Law (5 works) · Macroeconomics (5 works) · Econometrics (4 works)