Research

In light of the rise of generative artificial intelligence (AI) and recent debates about the socio-political implications of large-language models and chatbots, Manuel Wörsdörfer analyzes the strengths and weaknesses of the European Union’s Artificial Intelligence Act (AIA), the world’s first comprehensive attempt by a government body to address and mitigate the potential negative impacts of AI technologies. He recommends areas where the AIA could be improved.

How prolific is the revolving door issue at the federal level? In a new paper, Joseph Kalmenovitz, Siddharth Vij, and Kairong Xiao analyze the prevalence of revolving door behavior in the United States government and discuss the impacts of limiting private sector job prospects for regulators.

In new research, Michal Barzuza, Quinn Curtis, and David Webber create a framework explaining why CEOs have powerful incentives to promote ESG, why these incentives are distinct from those of shareholders, why they are powerful despite the lack of governance mechanisms, and why they are at times excessive or skewed.

Government regulators may reduce corporate fines for criminal behavior if the fines threaten the firm’s survival, thus posing harms to employees and society. In a recent paper, Nathan Atkinson explores the frequency with which government regulators reduce fines and evaluates if these reductions are justified or if regulators are undermining their own capabilities to deter bad behavior and fully compensate harmed parties.

In new research, Manuel Wörsdörfer compares the philosophies of two formative antitrust thinkers writing in the late 19th and early 20th centuries in the United States and Europe: Louis D. Brandeis and Walter Eucken. A discussion of their body of thought highlights the antitrust concerns of the time and how their positions can be adapted to today’s regulatory environment, particularly regarding Big Tech.

The draft Merger Guidelines seek to reduce mergers and acquisitions, especially those that remove potential entrants. However, precluding acquisitions in those settings ignores both what incentivizes startups and investors to take initial risks, as well as the advantages that large incumbents have to parlay acquisitions into further innovation and an array of widely commercialized consumer products. The overall effect may dampen innovation, write Ginger Zhe Jin, Mario Leccese, and Liad Wagman.

Bruno Pellegrino and Geoff Zheng explain how their novel methodology combining survey data and economic modeling can be used to quantify major questions, such as the economic loss from government regulation. This loss, they find, amounts to $154 billion in seven European countries each year.

George Stigler posited that economic regulation is best understood as a product created via a market process. In the market for regulation, different participants—such as politicians, firms, and voters—buy and sell the rules of the game to serve their individual interests. In new research, Jac Heckelman and Bonnie Wilson use Stigler’s theory of economic regulation and special interest capture to study why foreign aid to developing countries that is tied to market reform has not successfully accomplished its goals.

Expert civil servants devise ever more sophisticated policies to tackle emergencies such as climate change. But when voters lose faith in experts, they vote for anti-elite populist leaders who promise to drain the swamp in the civil service. Gabriele Gratton and Barton E. Lee write that understanding populist voters’ calculations and mistrust is key to designing democratic institutions that can address the most pressing challenges of our times.

Using a household survey with information treatments conducted in the aftermath of the SVB’s collapse, we examine the potential for a large bank’s failure to trigger bank runs and the effectiveness of public communication in containing such a risk. We find that news about SVB’s collapse increases households’ propensity to withdraw bank deposits as people become more worried that their bank may fail and expect larger losses on deposits in case of bank failure. Communication by the Federal Reserve in support of the banking sector and information about FDIC deposit insurance can contain the risk of bank runs, while communication from politicians influences only their electoral base.