American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Symposia The Economics of Online Crime TylerMooreCRCS, Harvard U RichardClaytonU Cambridge RossAndersonU Cambridge 3 20 This paper will focus on online crime, which has taken off as a serious industry since about 2004. Until then, much of the online nuisance came from amateur hackers who defaced websites and wrote malicious software in pursuit of bragging rights. But now criminal networks have emerged -- online black markets in which the bad guys trade with each other, with criminals taking on specialized roles. Just as in Adam Smith's pin factory, specialization has led to impressive productivity gains, even though the subject is now bank card PINs rather than metal ones. Someone who can collect bank card and PIN data, electronic banking passwords, and the information needed to apply for credit in someone else's name can sell these data online to anonymous brokers. The brokers in turn sell the credentials to specialist cashiers who steal and then launder the money. We will examine the data on online crime; discuss the collective-action aspects of the problem; demonstrate how agile attackers shift across national borders as earlier targets wise up to their tactics; describe ways to improve law-enforcement coordination; and we explore how defenders' incentives affect the outcomes. http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.3 10.1257/jep.23.3.3 American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Symposia Priced and Unpriced Online Markets BenjaminEdelmanHarvard U 21 36 Some online resources are free and others are not -- but it can be hard to predict which resources are in which category. In some cases, users are charged for things such as web-based e-mail, wireless Internet access, and software, while in other cases, they aren't. Zero prices offer important benefits, even relative to small positive prices. For one, fee-free access reduces transaction costs -- eliminating the need for billing systems as well as, in many cases, account setup, usernames, and the like. Furthermore, zero prices seem to create an environment of experimentation and progress for products and consumers. Finally, consumers overwhelmingly favor zero-price products, even beyond what might be predicted by their ordinary efforts to maximize consumer surplus. Yet experience in other contexts offers cause for concern. Although marginal costs may be near zero for many levels of use of online resources, costs generally eventually increase as usage nears a capacity constraint given by technological capability or system design. More generally, experience in other contexts repeatedly reveals overconsumption, scarcity, and even hoarding when resources are provided without charge. With competing forces both supporting and opposing zero prices, typical Internet-related activities -- like surfing the web, web searches, and e-mail, along with behind-the-scenes practices like domain names and the allocation of IP (Internet protocol) addresses -- present a natural context to reevaluate our sense of the tradeoffs that arise between free and a positive price. http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.21 10.1257/jep.23.3.21 American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Symposia The Online Advertising Industry: Economics, Evolution, and Privacy David S.EvansU College London and U Chicago 37 60 Online advertising accounts for almost 9 percent of all advertising in the United States. This share is expected to increase as more media is consumed over the Internet and as more advertisers shift spending to online technologies. The expansion of Internet-based advertising is transforming the advertising business by providing more efficient methods of matching advertisers and consumers and transforming the media business by providing a source of revenue for online media firms that competes with traditional media firms. The precipitous decline of the newspaper industry is one manifestation of the symbiotic relationship between online content and advertising. Online-advertising is provided by a series of interlocking multisided platforms that facilitate the matching of advertisers and consumers. These intermediaries increasingly make use of detailed individual data, predictive methods, and matching algorithms to create more efficient matches between consumers and advertisers. Some of their methods raise public policy issues that require balancing benefits from providing consumers more valuable advertising against the possible loss of valuable privacy. http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.37 10.1257/jep.23.3.37 American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Symposia Subsidizing Creativity through Network Design: Zero-Pricing and Net Neutrality Robin S.LeeNYU TimWuColumbia U and New American Foundation 61 76 This paper focuses on the pricing aspect of the "net neutrality" debate -- in particular, the de facto ban on fees levied by Internet service providers on content providers to reach users. This "zero-price" rule may prove desirable for several reasons. Using a two-sided market analysis, we suggest that it subsidizes creativity and innovation in new content creation -- goals shared by copyright and patent laws. The rule also helps to solve a coordination problem: since Internet service providers do not completely internalize the effects of their own pricing decisions, lack of regulation may lead to even higher fees charged by all. Finally, allowing for such fees runs the risk of creating horizontally differentiated Internet service providers with different libraries of accessible content, thereby foreclosing consumers and leading to Internet fragmentation. http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.61 10.1257/jep.23.3.61 American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Symposia What Are Grades Made Of? Alexandra C.AchenU MI Paul N.CourantU MI 77 92 The term "grade inflation" covers a multitude of phenomena, some of which are even alleged to be sins. Continuing increases in average grades have been widely documented in many universities over the last several decades. Also widely documented, and often associated with grade inflation, are systematic differences in grade levels by field of study, with a common belief that the sciences and math grade harder than the social sciences, which in turn grade harder than the humanities -- and that economics behaves more like the natural sciences than like the social sciences. The general persistence of these relative differences in grades seem to us to be more interesting and more difficult to explain than the persistence of modest grade inflation in general, and they are the principal focus of this paper. Why, for example, should average grades in English be much higher than average grades in chemistry? And what is going on when relative grades change, when a department's grading practices change markedly relative to other departments? We explore such questions using detailed data on grades at the University of Michigan from Fall 1992 through Winter 2008. http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.77 10.1257/jep.23.3.77 American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Symposia Grade Information and Grade Inflation: The Cornell Experiment TaliaBarCornell U VrindaKadiyaliCornell U AsafZussmanHebrew U Jerusalem 93 108 Grade inflation and high grade levels have been subjects of concern and public debate in recent decades. In the mid-1990s, Cornell University's Faculty Senate had a number of discussions about grade inflation and what might be done about it. In April 1996, the Faculty Senate voted to adopt a new grade reporting policy which had two parts: 1) the publication of course median grades on the Internet; and 2) the reporting of course median grades in students' transcripts. The policy change followed the determination of a university committee that "it is desirable for Cornell University to provide more information to the reader of a transcript and produce more meaningful letter grades." It was hoped that "More accurate recognition of performance may encourage students to take courses in which the median grade is relatively low." The median grade policy has remained to date only partially implemented: median grades have been reported online since 1998 but do not yet appear in transcripts. We evaluate the effect of the implemented policy on patterns of course choice and grade inflation. Specifically, we test two related hypotheses: First, all else being equal, the availability of online grade information will lead to increased enrollment into leniently graded courses. Second, high-ability students will be less attracted to the leniently graded courses than their peers. Building on these results we perform an exercise that identifies the extent to which the change in student behavior resulted in an increase in the university-wide mean grade. http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.93 10.1257/jep.23.3.93 American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Articles Interview with Edmund S. Phelps Howard R.VaneLiverpool John Moores U ChrisMulhearnLiverpool John Moores U 109 24 Edmund S. Phelps has been McVickar Professor of Political Economy at Columbia University in New York City, New York, since 1982 and director of the Center on Capitalism and Society at Columbia University's Earth Institute since 2001. In 2006, he was awarded the Nobel Memorial Prize in Economic Science "for his analysis of intertemporal tradeoffs in macroeconomic policy." We interviewed Professor Phelps at his hotel in San Francisco, on January 3, 2009, while attending the annual meeting of the Allied Social Science Associations. http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.109 10.1257/jep.23.3.109 American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Articles The Economics of Two-Sided Markets MarcRysmanBoston U 125 43 Broadly speaking, a two-sided market is one in which 1) two sets of agents interact through an intermediary or platform, and 2) the decisions of each set of agents affects the outcomes of the other set of agents, typically through an externality. In the case of a video game system, the intermediary is the console producer -- Sony in the scenario above -- while the two sets of agents are consumers and video game developers. Neither consumers nor game developers will be interested in the PlayStation if the other party is not. Similarly, a successful payment card requires both consumer usage and merchant acceptance, where both consumers and merchants value each others' participation. Many more products fit into this paradigm, such as search engines, newspapers, and almost any advertiser-supported media (examples in which consumers typically negatively value, rather than positively value, the participation of the other side), as well as most software or title-based operating systems and consumer electronics. This paper seeks to explain what two-sided markets are and why they interest economists. I discuss the strategies that firms typically consider, and I highlight a number of puzzling outcomes from the perspective of the economics of two-sided markets. Finally, I consider the implications for public policy, particularly antitrust and regulatory policy, where there have been a number of recent issues involving media, computer operating systems, and payment cards. http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.125 10.1257/jep.23.3.125 American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Articles World Oil: Market or Mayhem? James L.SmithSouthern Methodist U 145 64 Many observers regard the world oil market as a puzzle. Why are oil prices so volatile? Why did prices spike in the summer of 2008, and what role did speculators play? How important is OPEC? Where are oil prices headed in the long run? Is "peak oil" a genuine concern? Any attempt to answer these questions must be informed and disciplined by economics. We examine the evidence on each of these issues and provide an interpretation of developments in the world oil market from the perspective of economic theory. http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.145 10.1257/jep.23.3.145 American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Articles The Three Arab Worlds James E.RauchU CA, San Diego ScottKostyshakPrinceton U 165 88 Given the attention currently focused on the Arab world in part as a result of adjustments in U.S. foreign policy, a fresh look at Arab socioeconomic performance is in order. The Arab world is defined by language rather than ethnicity. The League of Arab States, formed in 1945, consists of all countries in which (a dialect of) Arabic is the spoken language of the majority. It is useful to compare the human development diversity of the Arab world to that of Latin America, another vast geographic area defined by language and culture. Our strategy in this article is therefore to disaggregate the Arab world into Arab sub-Saharan Africa, Arab fuel-endowed economies, and a remainder we call the Arab Mediterranean, and to compare these three Arab worlds to non-Arab sub-Saharan Africa, non-Arab fuel endowed economies, and the rest of the non-Arab world. We will evaluate Arab socioeconomic progress from 1970 to as close to the present as the data allow. http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.165 10.1257/jep.23.3.165 American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Features Retrospectives: Trouble in the Inaugural Issue of the American Economic Review: The Cross/Eaves Controversy Ann MariMayU NE Robert W.DimandBrock U 189 204 http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.189 10.1257/jep.23.3.189 American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Features Recommendations for Further Reading TimothyTaylorMacalester College 205 12 http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.205 10.1257/jep.23.3.205 American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Journal Article Front Matter i iv http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.i 10.1257/jep.23.3.i American Economic Association Nashville, TN 0895-3309 Journal of Economic Perspectives http://www.aeaweb.org/jep/ 23 3 Summer 2009 http://www.aeaweb.org/issue.php?journal=JEP&volume=23&issue=3 Features Notes 213 215 http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.213 10.1257/jep.23.3.213