The Journal of Economic Perspectives Is Now Free Online
Sunday, May 19, 2013 04:44

The American Economic Association has made all issues of the Journal of Economic Perspectives available to the public without charge at This is an excellent journal that deserves a wide readership.


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A few gems:


Mark J. Machina, “Choice Under Uncertainty: Problems Solved and Unsolved,” Summer 1987. I stayed up all night reading this article when it was published in the first issue. It made me aware of the shortcomings of expected utility theory, and it introduced me to the vast literature on normative and descriptive theories of rational choice.

Hal R. Varian, “The Arbitrage Principle in Financial Economics” and Mark Rubenstein, “Derivative Assets Analysis,” Fall 1987. This pair of articles in the second issue is a good place to start in understanding financial engineering.

Matthew Rabin and Richard H. Thaler, “Anomalies: Risk Aversion,” Winter 2001. This explains why you have to look beyond risk aversion to explain many consumer choices and why you can sometimes get away with assuming risk neutrality.

N. Gregory Mankiw, Matthew Weinzierl and Danny Yagan, “Optimal Taxation in Theory and Practice,” Fall 2009. This explains the insights and limitations of the economic theory of taxation.

Ernst Fehr and Antonio Rangel, “Neuroeconomic Foundations of Economic Choice — Recent Advances,” Fall 2011. This summarizes current research on the relationship between neuroscience and utility theory.

Jeffrey R. Brown and Amy Finkelstein, “Insuring Long-Term Care in the United States,” Fall 2011. This provides an overview of Medicaid and the market for private long-term care insurance and explains the public policy challenges in financing long-term care expenditures.

Shlomo Benartzi, Alessandro Previtero and Richard H. Thaler, “Annuitization Puzzles,” Fall 2011. This discusses why life annuities should be popular, are less popular than they should be and how to make them more popular.

Justin M. Rao and David H. Reiley, “The Economics of Spam,” Summer 2012. This explains why it would be quite reasonable to impose the death penalty on spammers (my interpretation) or to devise methods to raise spammers’ operating costs (authors’ interpretation).

I have left out many equally worthy contributions. What are your additions?


Free, Unbiased Real Estate Agent Referral Service, Using Hyper-Local Data, Connects Consumers To The Highest-Performing Agent
Friday, May 17, 2013 14:19

Tags: real estate | technology

Say you're selling a home and want to find the best real estate agent to represent you. You can rely on word of mouth and referrals, but why not use data to decide on who will best represent you?


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Agent Ace (, afree online resource, connects home buyers and sellers to the highest-performing real estate agent relative to a specific home.


"Consumers usually don't properly vet the person who will be responsible for one of the largest financial transactions in their lives," says Agent Ace founder, Mazen Fawaz. "The majority of the population, 90% in fact, find their agent based on advertisements or personal referrals from friends and family who have limited expertise in the area. Agent Ace provides an unbiased recommendation based on an agent's actual performance, giving the client the best opportunity for success with their real estate transaction."


Agent Ace uses quantitative historical data, analyzed by a patented proprietary algorithm, to recommend the best agent for a specific location, price, school district, demographics, and other local factors. Agent Ace does not publicly rank agents and only the users know who is recommended.


In addition, Agent Ace does not accept advertising from agents or allow agents to edit their profiles. "Unbiased information based on pure performance history allows consumers to trust that they're getting the very best agent for their real estate transaction," says the company.


Interestingly, Keith Krach, chairman and CEO of Docusign and Chairman of Angie's List, is on Agent Ace's board of directors. DocuSign is used by many securities brokerages and RIAs.


Will be interesting to see if such a methodology will be applied down the road to generate referrals to private wealth advisors.

The American College of Financial Planning Throws Its Weight Behind A New Retirement Designation
Tuesday, May 07, 2013 13:00

Tags: retirement income | retirement planning | RICP


While the federal government is cracking down in bogus financial advisor designations, The American College of Financial Planning, recently launched the Retirement Income Certified Professional (RICP) designation. While designation proliferation is a growing problem for consumers, regulators, and advisors with legitimate designations, The American College is a well-established educational institution for financial professionals.

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Its entrance into the retirement income specialty is likely to be looked upon skeptically by some fee-only financial planners, but The American College has for decades had the financial backing of the insurance industry and its professional education programs are credible. In fact, Wade Pfau, an award-winning Princeton-educated retirement income analyst, in April joined the faculty of The American College as Professor of Retirement Income in a new Ph.D. program on Financial Services and Retirement Planning.
In April, the college announced that it had awarded its first RICP designations to 11 individuals. “The RICP educational curricula is the most complete and comprehensive program available to professional financial advisors looking to help their clients create sustainable retirement income,” according to press release.
Candidates for the RICP designation must complete a minimum of three advanced college-level courses and pass six hours of proctored exams to earn the credential.

Consumer Financial Protection Board issued a report on April 25 recommending ways to address the problems posed to senior citizens by designation proliferation, since some designations are little more than cover for selling products to seniors. The American College, an 86 year old not-for-profit educational institution, might have the influence and financial power needed to make RICP a recognized and respected designation, as baby boomers begin to hit their retirement years and retirement income becomes more important than ever.


TIAA-CREF Study Recommends Ways To Improve Defined Contribution Plans And Boost Retirement Readiness
Friday, April 26, 2013 10:03

Tags: 401(k) | retirement | retirement income

TIAA-CREF, the leading provider of retirement services in the academic, research, medical and cultural fields and a half trillion dollar under management, today released a study recommending best practices for improving retirement plan effectiveness and retirement readiness of plan particpants.

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The white paper identified several additional retirement plan features that help drive overall retirement readiness and some surprisingly detailed recommendations that advisors advising on qualified plans should take note of:


  • Automatic plan enrollment works, but contribution rates need to be at least 4% and increase automatically. Many organizations auto-enroll employees at a default rate of 2 to 3%. Too many employees stay at that rate, which is far too low to provide enough for retirement.
  • Employer matches drive plan participation, but the algebra needs an update. Most employers match dollar-for-dollar to a certain rate, frequently in the range of 4 to 5%. Instead, employers should consider matching 50 cents on the dollar up to 8 or 10%. Employees view matches as “free money” and a match on a higher employee contribution percentage could encourage employees to raise their contribution rates accordingly without increasing the dollar amount of the employer’s matching contribution.

    Annuitization options should be in all plans. Employees who save enough to generate at least 70% of pre-retirement income (including Social Security) have a good chance at a successful retirement. Yet research also has found that a retiree electing to take systematic withdrawals equal to the same income payments they would receive from an annuity has more than a 50% chance of running out of money in retirement. TIAA-CREF research suggests retirees should annuitize enough of their savings to generate approximately 20 to 30% of their overall income needs.
  • The optimal number of investment options is between 5 and 10. Having too many investment choices leads to lower plan participation, employee indecision and increased fiduciary and administrative responsibilities for plan sponsors.
  • Guidance is not enough. TIAA-CREF research found that individuals receiving actionable financial advice are five times more confident in their retirement prospects than the average American worker.
  • Employee experience is crucial to plan success. To optimize participation rates and plan success, it is critical to target employees with personalized, relevant communications and educational tools that are available in person, online and over the phone.
  • Limit or altogether eliminate retirement plan borrowing. Loans raise plan cost and detract from employee retirement readiness.
Mind Mapping Streamlines A Business Negotiation
Thursday, April 25, 2013 14:08

Tags: mind maps

"It was an ugly business divorce with a lot of moving parts," says Rob O'Dell, whose firm manages $135 million for 71 clients through offices in Wheaton, Ill., and Naples, Fla. "There were other siblings involved who didn't have ownership in the business, there was real estate, there were family dynamics and some complicated business finances."


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Those complexities led Mr. O'Dell to a solution that changed his entire approach to financial advising. What was needed, Mr. O'Dell realized, was a way for each brother to see the situation from the other's perspective. And Mr. O'Dell had a method to literally make that happen: Mind mapping.


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