Person: Summers, Lawrence
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Summers, Lawrence
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Publication Pandemic risk: how large are the expected losses?(World Health Organization, 2018) Fan, Victoria Y; Jamison, Dean T; Summers, LawrenceAbstract There is an unmet need for greater investment in preparedness against major epidemics and pandemics. The arguments in favour of such investment have been largely based on estimates of the losses in national incomes that might occur as the result of a major epidemic or pandemic. Recently, we extended the estimate to include the valuation of the lives lost as a result of pandemic-related increases in mortality. This produced markedly higher estimates of the full value of loss that might occur as the result of a future pandemic. We parametrized an exceedance probability function for a global influenza pandemic and estimated that the expected number of influenza-pandemic-related deaths is about 720 000 per year. We calculated that the expected annual losses from pandemic risk to be about 500 billion United States dollars – or 0.6% of global income – per year. This estimate falls within – but towards the lower end of – the Intergovernmental Panel on Climate Change’s estimates of the value of the losses from global warming, which range from 0.2% to 2% of global income. The estimated percentage of annual national income represented by the expected value of losses varied by country income grouping: from a little over 0.3% in high-income countries to 1.6% in lower-middle-income countries. Most of the losses from influenza pandemics come from rare, severe events.Publication Positive Feedback Investment Strategies and Destabilizing Rational Speculation(Wiley-Blackwell, 1990) De Long, J. Bradford; Shleifer, Andrei; Summers, Lawrence; Waldmann, Robert J.Analyses of the role of rational speculators in financial markets usually presume that such investors dampen price fluctuations by trading against liquidity or noise traders. This conclusion does not necessarily hold when noise traders follow positive-feedback investment strategies buy when prices rise and sell when prices fall. In such cases, it may pay rational speculators to try to jump on the bandwagon early and to purchase ahead of noise trader demand. If rational speculators' attempts to jump on the bandwagon early trigger positive-feedback investment strategies, then an increase in the number of forward-looking rational speculators can lead to increased volatility of prices about fundamentals.Publication The Noise Trader Approach to Finance(American Economic Association, 1990) Shleifer, Andrei; Summers, LawrencePublication The Size and Incidence of the Losses from Noise Trading(Wiley-Blackwell, 1989) De Long, J. Bradford; Shleifer, Andrei; Summers, Lawrence; Waldmann, Robert J.Recent empirical research has identified a significant amount of volatility in stock prices that cannot be easily explained by changes in fundamentals; one interpretation is that asset prices respond not only to news but also to irrational "noise trading." We assess the welfare effects and incidence of such noise trading using an overlapping-generations model that gives investors short horizons. We find that the additional risk generated by noise trading can reduce the capital stock and consumption of the economy, and we show that part of that cost may be borne by rational investors. We conclude that the welfare costs of noise trading may be large if the magnitude of noise in aggregate stock prices is as large as suggested by some of the recent empirical literature on the excess volatility of the market.Publication The Strategic Bequest Motive(University of Chicago Press, 1986) Bernheim, B. Douglas; Shleifer, Andrei; Summers, LawrenceAlthough recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation, our understanding of bequest motives remains incomplete. We develop a simple model of strategic bequests in which a testator influences the decisions of his beneficiaries by holding wealth in bequeathal forms and by conditioning the division of bequests on the beneficiaries' actions. The model generates falsifiable empirical predictions that are inconsistent with other theories of intergenerational transfer. We present econometric and other evidence that strongly suggests that bequests are often used as compensation for services rendered by beneficiaries.Publication The Survival of Noise Traders in Financial Markets(University of Chicago Press, 1991) De Long, J. Bradford; Shleifer, Andrei; Summers, Lawrence; Waldmann, Robert J.The authors present a model of portfolio allocation by noise traders with incorrect expectations about return variances. For such misperceptions, noise traders who do not affect prices can earn higher expected returns than rational investors with similar risk aversion. Moreover, such noise traders can come to dominate the market in that the probability that they eventually have a high share of total wealth is close to one. Noise traders come to dominate despite their taking of excessive risk and their higher consumption. The authors conclude that the case against their long-run viability is not as clear-cut as is commonly supposed.Publication Employee Crime and the Monitoring Puzzle(University of Chicago Press, 1989) Dickens, William T.; Katz, Lawrence; Lang, Kevin; Summers, LawrenceThe simplest economic theories of crime predict that profit-maximizing firms should follow strategies of minimal monitoring with large penalties for employee crime. We investigate possible reasons why firms actually spend considerable resources trying to detect employee malfeasance. We find that the most plausible explanations for firms' large outlays on monitoring of employees-legal restrictions on penalty clauses in contracts and the adverse impact of harsh punishment schemes on worker morale-are also consistent with the payment of premium (rent-generating) wages by cost-minimizing firms.Publication Noise Trader Risk in Financial Markets(University of Chicago Press, 1990) De Long, J. Bradford; Shleifer, Andrei; Summers, Lawrence; Waldmann, Robert J.We present a simple overlapping generations model of an asset market in which irrational noise traders with erroneous stochastic beliefs both affect prices and earn higher expected returns. The unpredictability of noise traders' beliefs creates a risk in the price of the asset that deters rational arbitrageurs from aggressively betting against them. As a result, prices can diverge significantly from fundamental values even in the absence of fundamental risk. Moreover, bearing a disproportionate amount of risk that they themselves create enables noise traders to earn a higher expected return than rational investors do. The model sheds light on a number of financial anomalies, including the excess volatility of asset prices, the mean reversion of stock returns, the underpricing of closed-end mutual funds, and the Mehra-Prescott equity premium puzzle.Publication How to convene an international health or development commission: ten key steps(Oxford University Press, 2018) Yamey, Gavin; Summers, Lawrence; Jamison, Dean T; Brinton, JessicaAbstract The Commission on Investing in Health (CIH), an international group of 25 economists and global health experts, published its Global Health 2035 report in The Lancet in December 2013. The report laid out an ambitious investment framework for achieving a “grand convergence” in health—a universal reduction in deaths from infectious diseases and maternal and child health conditions—within a generation. This article captures ten key elements that the CIH found important to its process and successful outcomes. The elements are presented in chronological order, from inception to post-publication activities. The starting point is to identify the gap that a new commission could help to narrow. A critical early step is to choose a chair who can help to set the agenda, motivate the commissioners, frame the commission’s analytic work, and run the commission meetings in an effective way. In selecting commissioners, important considerations are their technical expertise, ensuring diversity of people and viewpoints, and the connections that commissioners have with the intended policy audience. Financial and human resources need to be secured, typically from universities, foundations, and development agencies. It is important to set a clear end date, so that the commission’s work program, the timing of its meetings and its interim deadlines can be established. In-person meetings are usually a more effective mechanism than conference calls for gaining commissioners’ inputs, surfacing important debates, and ‘reality testing’ the commission’s key findings and messages. To have policy impact, the commission report should ideally say something new and unexpected and should have simple messages. Generating new empirical data and including forward-looking recommendations can also help galvanize policy action. Finally, the lifespan of a commission can be extended if it lays the foundation for a research agenda that is then taken up after the commission report is published.