Weekly Top 5 Papers – April 16, 2018

1. Market Risk Premium and Risk-Free Rate used for 59 countries in 2018: a survey by Pablo Fernandez (University of Navarra – IESE Business School) and Vitaly Pershin (University of Navarra – IESE Business School) and Isabel Fernández Acín (University of Navarra – University of Navarra, Students)

2. The 2018 Revealed-Preferences Ranking of Law Schools by CJ Ryan (Vanderbilt University, Peabody College) and Brian L. Frye (University of Kentucky – College of Law)

In 2017, we published A Revealed-Preferences Ranking of Law Schools, which presented the first (intentionally) subjective ranking of law schools. Essentially, our ranking asks where students choose to matriculate by ranking law schools according to the combined LSAT scores and undergraduate GPAs of their 2011-16 matriculants. Other law school rankings are objective because their purpose is to tell prospective law students where to matriculate. Our “revealed-preferences” ranking is subjective because its purpose is to ask where prospective law students choose to matriculate. In other words, objective rankings tell students what they should want, but our subjective ranking asks what students actually want.
Our revealed-preferences ranking of law schools received a considerable amount of attention. It was featured in articles published by Above the Law, The Volokh Conspiracy, Scholastica, and FindLaw, among others, and was downloaded almost 8000 times. Accordingly, we created this updated ranking based on the combined LSAT scores and undergraduate GPAs of 2017 law schools matriculants. It provides additional information about student choices, and bolsters our previous conclusion that objective ranking systems fail to consider at least some factors that are salient to prospective law students. In particular, we note that some prospective law students appear to prefer law schools with a strong religious identity or ideological affiliation. Presumably, other factors are also salient to prospective law students and account for the divergence between the advice provided by objective rankings and the choices that matriculating students actually make. – CJ Ryan & Brian L. Frye

3. A Value-Added Ranking of Law Schools by CJ Ryan (Vanderbilt University, Peabody College)

Every year, “U.S. News & World Report” publishes its annual rankings of law schools in the United States, including its latest rankings, the 2019 rankings, which were released in March. While other alternative rankings have gained popularity in recent years, the “U.S. News” rankings remain the gold standard, in part because prospective law students equate the quality and value of a law school to its “U.S. News” ranking.
My article, “A Value-Added Ranking of Law Schools,” offers evidence of the relative time invariance of an important component of the “U.S. News” rankings methodology, peer review, and applies value-added modeling, a well-known methodology from the education policy literature, to the context of legal education to answer the question: to what extent do a law school’s actual post-graduation metrics for a given cohort exceed or fall short of the same cohort’s predicted performance upon admission?
The value-added rankings take a measure of a law school’s ability to improve a student’s likelihood of passing the bar and finding a job. These rankings are outcomes based, while accounting for a law school’s inputs or an entering cohort’s measurable credentials. Essentially, they measure the effect of attending law school—a first for conceptualizing the value that law schools add to their students in this way. It is my hope that this ranking will spur national discourse about the value of legal education, as well as the requirement of good data to assess the current conditions in legal education. – CJ Ryan

4. Asymmetric Information and Entrepreneurship by Deepak Hegde (New York University (NYU) – Leonard N. Stern School of Business) and Justin Tumlinson (Loughborough University)

We were inspired by an apparent paradox: the academic literature on entrepreneurs largely describes them as “misfits” who can’t find, can’t stand, or can’t stay in, conventional employment.  And yet, history and the popular press portray entrepreneurs as highly productive self-made visionaries, rejected by employers who could not discern their exceptional talents.  But are these anecdotes merely a biased sample of successful entrepreneurs? We wanted to dig deeper into why individuals become entrepreneurs and what makes some successful.

In this paper, we formally derive and empirically confirm that asymmetric information about worker ability can drive anyone, who believes her productive capabilities to be greater than employers can perceive, to become an entrepreneur.  This explanation holds over a spectrum of entrepreneurs: from immigrant food vendors (whose foreign credentials often go unrecognized) to college dropout technology moguls. Identifying this novel driver of entrepreneurial choice also moves us a step toward cracking the entrepreneurial earnings puzzle. Why individuals choose entrepreneurship likely influences their income—those choosing it for non-pecuniary benefits may reasonably earn less than employees, while those strategically responding to asymmetric information in the labor market about their ability, should earn more. – Deepak Hegde and Justin Tumlinson


5. The Fallacy of Selfish Mining in Bitcoin: A Mathematical Critique by Craig S. Wright (nChain)

There is a lot of misinformation concerning Bitcoin. The problem stems from the lack of financial understanding. The entirety of the problem is confusing revenue and profit and excluding costs. In this paper, we show that the system is robust and inventive compatible and the myth of Bitcoin not being secure is just that, a myth. In coming papers, we shall work to demonstrate the network structure and incentives in Bitcoin and esp. Bitcoin cash and demonstrate how this system can scale to millions and then billions of people. – Craig Wright

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