Public Policy

Political Cycles and Stock Returns

Lubos Pastor, Pietro Veronesi

We develop a model of political cycles driven by time-varying risk aversion. Heterogeneous agents make two choices: whether to work in the public or private sector and which of two political parties to vote for. The model implies that when risk aversion is high, agents are more likely to elect the party promising more fiscal redistribution.

In Search of Elusive Warning Signals: Tipping Points in Ecology and Economics

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A recent wave of research has demonstrated the existence of generic Early Warning Signals (EWS’s) that help predict a large class of abrupt changes in the state of ecological systems -- e.g. “tipping points.” Examples range from experimental laboratory systems of living organisms at tiny scales such as microbes up to ecosystems at the scale of lakes, rangelands, marine systems, or coral reefs.