Nolan H. Miller’s research while affiliated with University of Illinois, Urbana-Champaign and other places

A principal provides budgets to agents (e.g., divisions of a firm or the principal's children) whose expenditures provide her benefits, either materially or because of altruism. Only agents know their potential to generate benefits. We prove that if the more "productive" agents are also more risk-tolerant (as holds in the sample of individuals we surveyed), the principal can screen agents and bolster target efficiency by offering a choice between a nonrandom budget and a two-outcome risky budget. When, at very low allocations, the ratio of the more risk-averse type's marginal utility to that of the other type is unbounded above (e.g., as with CRRA), the first-best is approached. -- A biblical opening enlivens the analysis.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Many developing countries use food-price subsidies or controls to improve nutrition. However, subsidizing goods on which households spend a high proportion of their budget can create large wealth effects. Consumers may then substitute towards foods with higher non-nutritional attributes (e.g., taste), but lower nutritional content per unit of currency, weakening or perhaps even reversing the subsidy's intended impact. We analyze data from a randomized program of large price subsidies for poor households in two provinces of China and find no evidence that the subsidies improved nutrition. In fact, it may have had a negative impact for some households. (JEL I38; O12; Q18).

Consumerism arises when patients acquire and use medical information from sources other than their physicians. This practice has been hailed as a means of improving quality. This need not be the result. Our theoretical model identifies a channel through which consumerism may reduce quality: consumerist patients place additional demands on their doctors’ time, thus imposing a negative externality on other patients. Relative to a world in which consumerism does not exist, consumerism may harm other consumerists, non-consumerists, or both. Data from a large national survey of physicians confirm the negative effects of consumerism: high levels of consumerist patients are associated with lower perceived quality among physicians.

A principal provides budgets to agents (e.g., divisions of a firm or the principal's children) whose expenditures provide her benefits, either directly or through altruism. Initially, only agents know their levels of potential benefits. We prove that if the more "productive" agents are also more risk-tolerant (as holds in the sample we surveyed), the principal can screen agents and bolster target efficiency by offering a choice between a nonrandom budget and a two-outcome risky budget. When the more risk-averse type's utility is unbounded below (e.g., as with CRRA), the first-best is approached. — A biblical opening enlivens the analysis.. We thank John Pratt for help with the proof of Lemma 1. We thank Carmen Tanner and Michael Kosfeld for help with the survey, Mario Häfeli and Ramona Westermann for research assistance, and participants in various seminars for comments. Wagner thanks the SFI, the NCCR FINRISK and the RPP "Finance and Financial Markets" for support.

Caloric intake and minimum calorie thresholds are widely used in developing countries to assess hunger and nutrition, and to construct poverty lines. However, it is generally recognized that the sufficiency of an individual's caloric intake cannot be determined, due to: a lack of consensus on the true thresholds; the fact that any such thresholds are individual-varying and unobservable; imperfect nutrient absorption; and the weak and non-monotonic empirical relationship between calories and wealth. We propose a revealed preference approach to measuring hunger and undernutrition that overcomes these challenges. Low caloric intake is associated with a large utility penalty (e.g., physical discomfort). The corresponding high marginal utility of calories causes a utility-maximizing consumer to primarily consume the cheapest available source of calories (a staple). Once they have surpassed subsistence, the marginal utility of calories declines significantly and they substitute towards foods with higher levels of non-nutritional attributes (e.g., taste). Thus, though any individual's requirements are unobserved, their choice to switch away from the staple reveals they are above that requirement. Accordingly, the percent of calories obtained from the staple can be used to indicate nutritional sufficiency. We also provide an application for China that shows the desirable empirical properties of this approach.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

The impact of a stronger work requirement for welfare recipients in a workfare program is studied in an efficiency wage model where a representative firm chooses its level of monitoring activities. A stricter workfare policy raises employment as well as the monitoring intensity. It typically increases profits and reduces the tax rate. The impact on the net wage is ambiguous. Utility levels of employed workers and welfare recipients may increase even if the net wage declines. The utility differential between these two groups of workers shrinks.

President Obama's health insurance reform efforts, as embodied in the bills passed by the House and Senate in late 2009 and signed into law in March of 2010, have been described both as a boon and a death blow for private insurance industries. Using stock-price data on health care firms in the S&P health index, we exploit Republican Scott Brown's surprise victory in the Massachusetts Special Senate election to fill the seat of the late Ted Kennedy, which stripped Democrats of the 60-vote majority needed to pass the bill in the Senate, to evaluate the market's assessment of health reform on the health care industry. We find that the reduced likelihood of Health Reform’s passage after the Brown election led to a significant increase in health industry stocks and average cumulative abnormal returns of 1.2 percent, corresponding to an increase in total market value of approximately $14.5 billion. Focusing on managed care (insurance) firms, we find an average cumulative abnormal return of 6.5 percent (a$6.7 billion increase in market value), with individual firms’ cumulative abnormal returns ranging from around 5 to 9 percent.

World food prices have increased dramatically in recent years. We use panel data from 2006 to examine the impact of these increases on the consumption and nutrition of poor households in two Chinese provinces. We find that households in Hunan suffered no nutrition declines. Households in Gansu experienced a small decline in calories, though the decline is on par with usual seasonal effects. The overall nutritional impact of the world price increase was small because households were able to substitute to cheaper foods and because the domestic prices of staple foods remained low due to government intervention in grain markets.

This paper presents a model of strategic interaction in which a third party intervenes on behalf of a government in its conflict with insurgents. It examines whether it is better for the intervenor to adopt an input-based strategy (i.e., specify the total resources it will spend) or an outcome-based strategy (i.e., specify the goal that it will achieve), and it shows that outcome- based strategies are better for the intervenor than input-based ones if and only if in the absence of intervention the insurgents are stronger than the government. A system of benchmarks that are tied to the efforts of both parties outperforms both input-based and outcome-based strategies. Lessons from the theory are applied to U.S. strategy in Iraq.

Consumerism arises when patients acquire and use medical information from sources apart from their physicians, such as the Internet and direct-to-patient advertising. Consumerism has been hailed as a means of improving quality. This need not be the result. Consumerist patients place additional demands on their doctors' time, thus imposing a negative externality on other patients. Our theoretical model has the physician treat both consumerist and ordinary patient under a binding time budget. Relative to a world in which consumerism does not exist, consumerism is never Pareto improving, and in some cases harms both consumerist and ordinary patients. Data from a large national survey of physicians shows that high levels of consumerism are associated with lower perceived quality. Three different measures of quality were employed. The analysis uses instrumental variables to control for the endogeneity of consumerism. A control function approach is employed, since our dependent variable is ordered and categorical, not continuous.