Economics Insights @ CBS

There are two types of prescription drug cost offsets. The first type of cost offset—from prescription drug use—is primarily about the effect of changes in drug quantity (e.g. due to changes in out-of-pocket drug costs) on other medical costs. The second type of cost offset—the cost offset from prescription drug innovation—is primarily about the effect of prescription drug quality on other medical costs.

The 30-year U.S. swap spreads have been negative since September 2008. We offer a novel explanation for this persistent anomaly. Through an illustrative model, we show that underfunded pension plans optimally use swaps for duration hedging. Combined with dealer banks' balance sheet constraints, this demand can drive swap spreads to become negative. Empirically, we construct a measure of the aggregate funding status of Defined Benefit pension plans and show that this measure is a significant explanatory variable of 30-year swap spreads.

User-generated content has become ubiquitous and very influential in the marketplace. Increasingly, this content is generated on smartphones rather than personal computers (PCs). This article argues that because of its physically constrained nature, smartphone (vs. PC) use leads consumers to generate briefer content, which encourages them to focus on the overall gist of their experiences. This focus on gist, in turn, tends to manifest as reviews that emphasize the emotional aspects of an experience in lieu of more specific details.

We develop a theory of optimal government debt in which publicly-issued and privately-issued safe assets are substitutes. While government bonds are backed by future tax revenues, privately-issued safe assets are backed by the future repayment of pools of defaultable private loans. We find that a higher supply of public debt crowds out privately-issued safe assets less than one for one and reduces the interest spread between borrowing and deposit rates.

The completion of the Human Genome Project was heralded as a step towards “personalized medicine,” offering patients individualized treatments based on genomic profiling. More recently, this vision has been eclipsed by the promise of “precision medicine” (PM), emphasizing benefits to patients from more precise diagnosis and treatment based on a range of biomarkers, along with data about patients’ environment, lifestyle, and behaviors.