I’ve spent part of the last two days at the spring 2015 Brookings Panel on Economic Activity. The BPEA papers are among my favorite produced by economists, and this year was no exception.

The first paper I’ll highlight is on statistical disclosure limitation, written by my doctoral advisor, John M. Abowd, and my pal Ian M. Schmutte. You can find the paper here, along with a short explanatory video by BPEA co-editor economist Justin Wolfers. It was said by several people in the room that this paper should be required reading for all graduate students in economics, and I agree completely.

A paper that has already enjoyed wide interest in the press took a hard look at one of economist Thomas Piketty’s main theories. The abstract is below, and you can find the whole paper here.

In the postwar era, developed economies have experienced two substantial trends in the net capital share of aggregate income: a rise during the last several decades, which is well-known, and a fall of comparable magnitude that continued until the 1970s, which is less well-known. Overall, the net capital share has increased since 1948, but when disaggregated this increase comes entirely from the housing sector: the contribution to net capital income from all other sectors has been zero or slightly negative, as the fall and rise have offset each other. When decomposed into a return on fixed assets and a residual share of pure profits, the fall and rise of capital income outside the housing sector in the US owes mostly to the residual: it is not paralleled by fluctuations in the measured value of non-housing capital. This observation—combined with the theory of factor substitution, and simulation results from a multisector model—casts doubt on explanations of changes in the net capital share that rely on changes in the value of capital. There is greater support in the data for narratives that emphasize cyclical and trend variation in market power.

The last paper I’ll highlight was co-authored by Federal Reserve Bank of Chicago president Charles Evans.

As projections have inflation heading back toward target and the labor market continuing to improve, the Federal Reserve has begun to contemplate an increase in the federal funds rate. There is however substantial uncertainty around these projections. How should this uncertainty affect monetary policy? In standard models uncertainty has no effect. In this paper, we demonstrate that the zero lower bound on nominal interest rates implies that the central bank should adopt a looser policy when there is uncertainty. In the current context this result implies that a delayed liftoff is optimal. We first demonstrate theoretically this result using two canonical macroeconomic models. On the one hand, raising rates early might lead to excessively weak growth and inflation if the economic fundamentals turns out weaker than expected. On the other hand, raising rates later might lead to inflation if economic fundamentals are stronger than expected. Near the zero lower bound, monetary policy tools are strongly asymmetric and can deal with the second scenario much more easily than with the first. We next provide a quantitative evaluation of this policy using numerical simulations calibrated to the current environment. Finally, we present narratives from Federal Reserve communications that suggest risk management is a longstanding practice, and econometric evidence that the Federal Reserve historically has responded to uncertainty, as measured by a variety of indicators.

You can find the whole paper here.

Here’s Dr. Wolfers’s video explanation, which does a great job capturing the paper’s essence.

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Click here for all the papers from this session, and click here to learn more about BPEA — one of the most important institutions in economics and public policy.

— Michael R. Strain is deputy director of economic policy studies and resident scholar at the American Enterprise Institute. You can follow him on Twitter at twitter.com/MichaelRStrain.