Economics is undoubtedly an extremely wide area of research, ranging from labour or health economics to microeconomics and mathematical finance. Selecting papers from such a diverse range is therefore a difficult task. Two papers have however been singled out for the first issue of the MCFA Annals which reflect this diversity.
The first article "No woman, no cry": is unemployment less costly for women than for men ? deals with labour economics. In this paper Glenda Quintini compares the costs of unemployment for women and for men in the United Kingdom. The costs are measured as lost earnings after the unemployment spells and specifically the costs associated with lower wages and opportunities often following unemployment. The article is one of the rare pieces to study empirically the problem of unemployment costs for women. An interesting finding is that although costs for women follow the broad picture of men's cost, they tend to be much lower. High skilled employees and older employees are found to be those who suffer most.
The second paper is a contribution to Behavioural Economics. This field has emerged only very recently and is now a field of great dynamism. From a general perspective, one of the major criticisms of the neo-classical utilitarian approach in Economics has always been the inability of formal models to capture the true preferences of individuals. Consequently, the standard theory often fails to provide results that fit the empirical evidence we have on human decision-making and is unable to predict the behaviour of economic agents in an environment that is changing over time.
The paper by Peter Roelofsma investigates methodological and theoretical contributions to the study of time preferences. His paper provides an overview of his own work within the literature. People take decisions about events that occur in different moments in time. In addition, they have the tendency to discount short-term
events more heavily than long term events (immediacy effect). Traditional theory does not account for this type of discounting. However, it has important implications since it translates into intra-personal conflicts of preferences leading to self-control problems. Individuals behave as if their choices were governed by at least two different 'selves': one which is concerned with current payoff and takes the decision and one which is concerned with future payoffs. Given this, an optimal plan from the perspective of the current self is no longer optimal when reconsidered in the future. For instance, taking into account the current cost of fixing the bedroom shelf and the future benefit of having it fixed, the current self may want to delay the fixing until tomorrow. However, this decision may be reconsidered when ``tomorrow'' comes. More importantly, the agent may end not fixing the shelf, though it would be optimal to fix it at some point. This suggests that imposing constraints on the behaviour of future selves is the only way to avoid self-control problems.
From an empirical perspective, one of the most important questions is how to measure the discount rate. In addition, the fact that the payoffs at each period are nominal amounts or utilities matters. The reason is that the relationship between amount and utility is non-linear. Usually, discount rate measures are made for nominal amounts and not for utility. The author offers a computational method to estimate the discount rate for utility. He shows that systematic differences occur when using either the one or the other elicitation method.
These papers are two good examples of the type of articles we call for in the economics section of the Annals. Authors should however not feel limited by the two fields as the editors are willing to consider submissions in all areas of economics.