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Programme 19 – 23 August 2014 Lindau & Mainau Island, THE MEETINGS ONLINE TABLE OF CONTENTS

Lindau Blog Welcome from page 4 blog.lindau-nobel.org Scientific Programme from page 8

Lindau Mediatheque Abstracts from page 24 mediatheque.lindau-nobel.org

About the Meetings from page 44

Nobel Labs 360° nobellabs.lindau-nobel.org Supporters from page 48

Maps from page 56

Lindau Alumni Community alumni.lindau-nobel.org Good to Know from page 62

Facebook www.facebook.com/LindauNobelLaureatesMeeting

Twitter twitter.com/lindaunobel (#lindauecon14)

2 3 WELCOME WELCOME

For the 5th Lindau Meeting on Economic Sciences, once again, Winners of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel have been invited to lecture on a topic of their deliberate choice and show- case the wide range of research fields. One particular highlight will be the lecture by Nobel Writer Mario Vargas Llosa. The Lindau Nobel Laureate Meetings have always encouraged promising and passionate young scientists from around the globe not only to strive With 19 Laureates and approximately 460 young scientists from more than for excellence in their fields of research but also to look beyond their actual th 86 countries, the 5 Lindau Meeting on Economic Sciences is a landmark research. on the agenda of the international scientific dialogue. The most esteemed This year´s meeting will again stimulate the valuable exchange of knowl- of our times and promising young talents will share their en- edge and ideas. Our leitmotif “Educate. Inspire. Connect.” embodies a holistic thusiasm for economic sciences, discuss the latest research findings, and and therefore sustainable understanding of the concept of learning. At the help expand a community across generations, cultures and disciplines. It is Lindau Nobel Laureate Meetings, education means more than learning from a great pleasure for the Council for the Lindau Nobel Laureate Meetings and textbooks. It should be part of everyone’s education to make inspiring and the Foundation Lindau Nobel Laureate Meetings to welcome our appreci- lasting experiences and share them with others. This approach distinguish- ated guests. es the Lindau Meetings from common scientific conferences. Since 1951, Nobel Laureates in physiology or medicine, , and chemis- In order to foster the understanding of science in society, our “Mission Edu- try have gathered annually in Lindau to mentor and inspire the next genera- cation” comprises various initiatives and projects, including the Lindau Me- tion of excellent scientists. From their beginnings six decades ago, the Lin- diatheque, educational films, the initiative Teaching Spirit and the travel- dau Meetings have evolved into an international forum for global debate. ling exhibition “Sketches of Science”. They all have the potential to generate In 2004, meetings on economic sciences have completed the set of Nobel public awareness of the importance and fascination of science and research. disciplines in Lindau. Prior to that, several Nobel Economists participated The council and the foundation would like to express their gratitude to the in meetings dedicated to the other disciplines: , who shared participating Laureates, this meeting’s scientific chairs, our academic part- the first Prize in with in 1969, began the tradition ners from all continents, the donors and benefactors as well as all support- just two years later in 1971, followed by in 1976. Friedrich ers for their continuous commitment to our Mission Education. August von Hayek, who attended six meetings in total, James E. Meade, and came in 1978; Leonid V. Kantorovich in 1979; Meade returned in We welcome you to join and share an unforgettable experience. 1982, joining Tjalling C. Koopmans and Paul A. Samuelson that year. Gérard Debreu and Herbert A. Simon were guests in 1986, and James M. Buchanan Council for the Lindau Nobel Laureate Meetings Jr. attended in 1989. Foundation Lindau Nobel Laureate Meetings 4 5 ABSTRACTS

PARTICIPATING LAUREATES

ROBERT J. AUMANN PETER A. DIAMOND FINN E. KYDLAND ERIC S. MASKIN DANIEL L. MCFADDEN ROBERT C. MERTON JAMES A. MIRRLEES ROGER B. MYERSON JOHN F. NASH JR. EDMUND S. PHELPS EDWARD C. PRESCOTT ALVIN E. ROTH WILLIAM F. SHARPE CHRISTOPHER A. SIMS VERNON L. SMITH JOSEPH E. STIGLITZ MARIO VARGAS LLOSA

6 7 PROGRAMME OVERVIEW PROGRAMME OVERVIEW

Tuesday, 19 August Wednesday, 20 August Thursday, 21 August Friday, 22 August Saturday, 23 August

07.00 Science Breakfast Science Breakfast 07.00 Science Breakfast Science Breakfast hosted by hosted by

08.00 Boat Trip 08.00 Mars, UBS AG Incorporated SAP SE to Mainau Island Lecture Hansen supported by SAP SE 09.00 Lecture Roth Lecture Stiglitz Lecture Merton 09.00

Lecture Phelps Lecture Maskin Lecture McFadden

10.00 Coffee Break Lecture Kydland Lecture Mirrlees 10.00

Lecture Sims Lecture Aumann Coffee Break 11.00 Lecture Smith Coffee Break Closing Panel Discussion 11.00

Lecture Nash Lecture Myerson How Useful is Economics – How is Economics Useful? 12.00 Lecture Lecture 12.00 Selten Prescott Diamond, Merton, Roth Lunch Break Lecture Sharpe Lecture Diamond 13.00 13.00

14.00 Lunch Break Lunch Break Lunch Break 14.00 Opening Ceremony

Panel Discussion Panel Discussion 15.00 Registration 15.00 Break The Future of : Structural Farewell Ceremony 12 - 20 hrs Strategic Behavior, Incentives, Restrictions, Parametric Methods and and Big Data Maskin, Mirrlees, Myerson 16.00 Discussions Hansen, McFadden, Sims 16.00

Hansen | Phelps Roth | Sims | Smith Break Break 17.00 Discussions Master Classes Discussions Boat Trip 17.00 to Lindau Aumann | Kydland Hansen Diamond | McFadden | Merton Maskin | Nash Mirrlees supported by Myerson Selten Myerson | Prescott SAP SE 18.00 Sharpe | Stiglitz 18.00

Break Break Break 19.00 Social Function Lecture Meeting 19.00 Mario Vargas Llosa Childhood Award Presentations 20.00 Social Function Social Function Social Function 20.00 Dinner Dinner 21.00 Bavarian Evening 21.00 supported by the Get-Together Free State of Bavaria 22.00 22.00 Free Evening

8 9 TUESDAY, 19 AUGUST

12.00 Meeting Registration Registration from 12.00 – 20.00 hrs continuously Inselhalle 19.00 Dinner Catering Tent Access: young scientists only

SKETCHES OF SCIENCE Exhibition

Japan, Tohoku University | 30 July – 31 August 2014 South Korea, National Science Museum, Seoul | 13 October – 30 November 2014 USA, UC Davis | December – February 2015 Germany, Hannover Messe | April – Mai 2015

11 WEDNESDAY, 2O AUGUST WEDNESDAY, 20 AUGUST

08.30 Lars Peter Hansen 13.45 Seats for the Opening Ceremony need to be taken by 13.45 hrs at the Plenary Lecture and Valuation latest. Strictly no access after 13.45 hrs. Inselhalle 14.00 Opening Ceremony 09.00 Alvin E. Roth Opening Plenary Lecture Repugnant Markets and Prohibited Transactions Ceremony Welcome Inselhalle Inselhalle Countess Bettina Bernadotte 09.30 Edmund S. Phelps President of the Council Plenary Lecture Bringing Dynamism, Homegrown Welcome Address Inselhalle and Human Flourishing into Economics Lars Heikensten 10.00 Coffee Break Executive Director, ,

10.30 Christopher A. Sims Induction of a New Member to the Honorary Senate Plenary Lecture , Fear of Inflation, and Public Debt of the Foundation Lindau Nobel Laureate Meetings Inselhalle Walter B. Kielholz 11.00 Vernon L. Smith Chairman, Swiss Re, Switzerland Plenary Lecture Rethinking Experiments in the Shadow Keynote Address Inselhalle of : The Good and the Sometimes Ugly; Propositions on Recessions Angela Merkel Chancellor of the Federal Republic of Germany 11.30 Lunch Break Catering Tent Access: young scientists and media only Master of Ceremony: Till Nassif

Access: all registered participants Note: Due to security reasons, no participants are admitted to the con- 15.00 Break ference venue Inselhalle between 11.45 hrs and 13.00 hrs. Please be aware that upon re-entry for participation in the Open- ing Ceremony, all participants are required to identify themselves with a photo ID, even if they have done so earlier already. Kindly note that there are dedicated entrances for young scientists (rear entrance of the Inselhalle), guests (front side entrance) and media (restaurant entrance). No bags larger than laptop bags may be brought into the audito- rium. Due to security reasons, no participants without special permis- sion are allowed to the venue between 15.30 hrs and 19.30 hrs.

12 13 WEDNESDAY, 20 AUGUST THURSDAY, 21 AUGUST

16.00 Lars Peter Hansen Partner Event Paths to Innovation: Restoring Grassroots Dynamism to Discussion Discussion with young scientists 07.00 Address Global Challenges Altes Rathaus Science Breakfast hosted by Mars, Incorporated Forum am See 16.00 Edmund S. Phelps Ralph Jerome Discussion Discussion with young scientists Vice President, Corporate Innovation, Mars, Incorporated Forum am See Edmund S. Phelps 16.00 Alvin E. Roth Department of Economics, Discussion Discussion with young scientists Hotel Bay. Hof Young scientist (tbd) Moderator: Romesh Vaitilingam 16.00 Christopher A. Sims VoxEU.org Discussion Discussion with young scientists Landratsamt Access: with online pre-registration only 16.00 Vernon L. Smith 09.00 Joseph E. Stiglitz Discussion Discussion with young scientists Plenary Lecture Inequality, Wealth, and Growth: Hotel Bayr. Hof Inselhalle Why Capitalism is Failing 17.30 Break 09.30 Eric S. Maskin 20.00 Get-Together Plenary Lecture Why Haven’t Global Markets Reduced Inequality in Inselhalle Social Function Access: all participants Developing ? Inselhalle 10.00 Finn E. Kydland Plenary Lecture and the Growth of Nations Inselhalle 10.30 Robert J. Aumann Plenary Lecture Collectives as Individuals Inselhalle 11.00 Coffee Break

11.30 John F. Nash Jr. Plenary Lecture Artificial Intelligence and Cooperative Games Inselhalle 12.00 Reinhard Selten Plenary Lecture How Does One Learn by Experience? HAVING A BRILLIANT THOUGHT? Inselhalle Share it with us on 12.30 William F. Sharpe Plenary Lecture Economic Analysis of Retirement Income Strategies twitter.com (#lindauecon14) Inselhalle

14 15 THURSDAY, 21 AUGUST THURSDAY, 21 AUGUST

13.00 Lunch Break 17.00 Joseph E. Stiglitz Catering Tent Access: young scientists and media only Discussion Discussion with young scientists Forum am See 15.00 Panel Discussion: 17.00 Master Class with Roger B. Myerson Panel Discussion The Future of Econometrics: Structural Restrictions, Master Class and Inselhalle Parametric Methods and Big Data Inselhalle young scientists (tbd) Lars Peter Hansen Access: with online pre-registration only Becker Friedman Institute for Research in Economics, The 17.00 Master Class with Lars Peter Hansen Daniel L. McFadden Master Class Macro The G.W. Hooper Research Foundation, University of California Inselhalle young scientists (tbd) Christopher A. Sims Access: with online pre-registration only Department of Economics, Moderator: Peter Englund 18.30 Break Department of Finance, School of Economics 19.00 Mario Vargas Llosa 16.30 Break Lecture A Panoramic View on the Situation and Perspectives in City theatre Latin America 17.00 Robert J. Aumann Access: all participants Discussion Discussion with young scientists Evang. Hospital 20.00 Dinner 17.00 Finn E. Kydland Dinner Please see your personal agenda for details. Discussion Discussion with young scientists Various locations Altes Rathaus 17.00 Eric S. Maskin Discussion Discussion with young scientists Altes Rathaus 17.00 John F. Nash Jr. Discussion Discussion with young scientists Hotel Bayr. Hof 17.00 Reinhard Selten Discussion Discussion with young scientists Hotel Bayr. Hof 17.00 William F. Sharpe Discussion Discussion with young scientists Landratsamt

16 17 FRIDAY, 22 AUGUST FRIDAY, 22 AUGUST

Partner Event Innovation from the Edge – 09.00 Robert C. Merton 07.00 How could we possibly solve the “Innovator’s Dilemma” Plenary Lecture Measuring the Connectedness of the Financial System: Science Breakfast through the Power of Diversity? Inselhalle Implications for Systemic Risk Measurement and Forum am See hosted by SAP SE Management Robert D. Austin 09.30 Daniel L. McFadden Management of Creativity and Innovation, Plenary Lecture The New Science of Pleasure Copenhagen Business School Inselhalle Joseph E. Stiglitz 10.00 School of International and Public Affairs, James A. Mirrlees Columbia University Plenary Lecture Some Interesting Taxes and Subsidies Inselhalle Anka Wittenberg Head of People Sustainability, Chief Diversity & Inclusion Officer, 10.30 Coffee Break SAP SE 11.30 Roger B. Myerson Young scientist (tbd) Plenary Lecture Moral-Hazard Credit Cycles with Risk-Averse Agents Moderator: Vlasta Dusil Inselhalle HR Director SAP (Switzerland) AG 12.00 Edward C. Prescott Access: with online pre-registration only Plenary Lecture Innovation in Neoclassical Growth Theory Inselhalle Partner Event Banking and Banking Regulation after the Financial 07.00 Crisis 12.30 Peter A. Diamond Plenary Lecture Science Breakfast hosted by UBS AG Hotel Bay. Hof Inselhalle Mark Haefele 13.00 Global Chief Officer, UBS AG Lunch Break Catering Tent Access: young scientists and media only Director, Max Planck Institute for Research on Collective , 15.00 Panel Discussion: Strategic Behavior, Incentives, and Bonn (Germany) Panel Discussion Mechanism Design City Theatre Roger B. Myerson Eric S. Maskin Department of Economics, University of Chicago Department of Economics, Young scientist (tbd) James A. Mirrlees Access: with online pre-registration only The Chinese University of Hong Kong Roger B. Myerson Department of Economics, University of Chicago Moderator: Martin Hellwig Director, Max Planck Institute for Research on Collective Goods 16.30 Break

18 19 FRIDAY, 22 AUGUST SATURDAY, 23 AUGUST

17.00 Peter A. Diamond 07.15 Boat Trip to Mainau Island Discussion Discussion with young scientists MS Sonnenkönigin supported by SAP SE Forum am See Access: all participants 17.00 Daniel L. McFadden Discussion Discussion with young scientists 07.15 Check in (Lindau) Hotel Bay. Hof Lindau Harbour 17.00 Robert C. Merton 07.45 Departure (Lindau) Discussion Discussion with young scientists Lindau Harbour Altes Rathaus 08.00 Arrival (Hotel Bad Schachen) 17.00 James A. Mirrlees Bad Schachen Discussion Discussion with young scientists 08.15 Hotel Bay. Hof Departure (Hotel Bad Schachen) Bad Schachen 17.00 Roger B. Myerson Welcome Discussion Discussion with young scientists Evang. Hospital Countess Bettina Bernadotte President of the Council 17.00 Edward C. Prescott Discussion Discussion with young scientists Anka Wittenberg Altes Rathaus Head of People Sustainability, Chief Diversity & Inclusion Officer, SAP SE 18.30 Break 10.20 Arrival (Mainau Island) Partner Event Students’ Final Childhood Award Presentations Mainau Island 19.00 hosted by the World Childhood Foundation Meeting founded by H. M. Queen Silvia of Sweden Hotel Bay. Hof Access: upon invitation only

20.00 Bavarian Evening Social Function supported by the Free State of Bavaria MISSED SOMETHING? Inselhalle Bavarian Music & Folk Dance Watch it online at mediatheque.lindau-nobel.org Bavarian Buffet Dinner

Access: all participants

20 21 SATURDAY, 23 AUGUST SATURDAY, 23 AUGUST

11.00 Welcome 13.00 Lunch Break Closing Session Count Björn Bernadotte af Wisborg Lunch Break Mainau Island Mainau Island Castle Meadow Countess Bettina Bernadotte af Wisborg 15.15 Conclusion & Farewell Welcome Address Castle Courtyard Countess Bettina Bernadotte H. M. Queen Silvia of Sweden President of the Council Award Ceremony 16.15 Boat Trip to Lindau Global Childhood Challenge “Your Big Ideas will Help Mainau Harbour Departure (Mainau Island) Small People” supported by SAP SE Access: all participants Panel Discussion: How Useful is Economics - How is Economics Useful? 18.15 Arrival (Hotel Bad Schachen) Bad Schachen Peter A. Diamond Department of Economics, 18.30 Arrival (Lindau) Institute of Technology Lindau Harbour Robert C. Merton Note: Sloan School of Management, Massachusetts Institute of Technology For all participants departing on Saturday and not returning to their hotel: No travel luggage may be taken on the boat. Two Alvin E. Roth luggage buses will be available; please place your luggage accord- Department of Economics, ingly. Moderator: Bus 1: to “Mainau Island”: for those not returning to Lindau. Pick- Institute for International Economic Studies, up at main entrance on Mainau Island. Access: all participants Bus 2: to “Lindau”: for those leaving directly after their return to Lindau. Pick-up at Lindau harbour. Certificates of Attendance will only be available on the boat.

22 23 ABSTRACTS ABSTRACTS

LECTURE ABSTRACTS (in alphabetical order by last name) the curve is structural has been a staple of the academic literature since at least 1958. This interpretation has an obvious policy implication: however Robert J. Aumann useful aggregate stabilization policies while unemployment is very high, Collectives as Individuals they are likely to fail in lowering the unemployment rate all the way to the Session: Thursday, 21 August, 11.00 hrs levels that prevailed before the , since the labor market is structur- In many applications of Game Theory, a player is a collective such as a house- ally less efficient than before in creating successful matches. This lecture hold, team, political party, country or the like. Usually, this is understood as reviews the theory underlying the Beveridge curve and US evidence on the an idealization. In games where, say, countries are modeled as players, the ability to draw an inference of structural change from its shift or a shift in “real” players are the individual citizens, with their individual goals and in- the hiring (matching) function. dividual decisions and individual free will. It’s only because this “true” game is too big and unwieldy to analyze that, it is held, game theorists model play- Lars Peter Hansen ers as they do. Uncertainty and Valuation Here, we advance the thesis that it *IS* really that way: that in large part, Session: Wednesday, 20 August, 08.30 hrs collectives are like individual people, and may be thought of as such. And, I will explore how alternative sources of uncertainty have an impact on as- perhaps, not only in Game Theory. set valuation. I will show how , control theory and statistical theory provide valuable tools to model behavior and to reveal how Peter A. Diamond uncertainty is reflected in security market . In intertemporal environ- ments, risk-return tradeoffs depend on the payoff or investment horizon. Unemployment To study these tradeoffs, I will construct pricing counterparts to impulse Session: Friday, 22 August, 12.30 hrs response functions. Recall that impulse response functions measure the Debates about higher structural unemployment occur when unemploy- importance of next-period shocks for future values of a time series. The as- ment has stayed high. With monthly publication of the US Beveridge curve set-pricing counterparts are shock elasticities which measure the expected (the relationship between the unemployment and vacancy rates), the re- contribution to a cash flow from a shock in the next period shock and the cent debate has focused on the shift in the Beveridge curve and whether the of that shock. shift will be lasting long enough to move the full- point. The curve appears stable through the NBER identified through Finn E. Kydland in June 2009 or possibly the month of the maximal unemployment rate in October 2009. This shift in the Beveridge curve, with the experi- Economic Policy and the Growth of Nations encing a higher level of unemployment than before for the same level of Session: Thursday, 21 August, 10.00 hrs the vacancy rate, suggests a deterioration in the matching/hiring process in The business environment in large parts of the world today is character- the economy. It is tempting to interpret this decline as a structural change ized by an extent of uncertainty that is unprecedented over the past several in the way that the labor market works and thus assume that it is orthogo- decades. The main reason is lack of clarity in economic policy making. In nal to changes in . Indeed, an assumption that a shift in order to be properly informed and well founded, important business deci- sions, such as innovative activity, investment in new productive capacity, 24 25 ABSTRACTS ABSTRACTS the choice of new markets, and so on, require an assessment – an expecta- centive theory and mechanism design, project evaluation, and the introduc- tion – of the policy environment years into the future. Among the impor- tion and marketing of private and public . Understanding tant policy dimensions are tax policy, especially as it affects businesses, and modeling consumer welfare was central in early economics, and re- spending and debt policy, extent of restrictions, and the regulatory en- mains so, with a continuing tension between elements of illusion, tempera- vironment in general. Based on economic theory, the increase in policy un- ment, and subjectivity in consumer behavior, and the need for stable, pre- certainty over the past half-dozen years was quite predictable. The talk will dictive indicators for demand and well-being. The neoclassical model of the expound on the fundamental reasons and on the prospects for more clarity individualistic -maximizing consumer that forms the basis of most for the next few years. Contexts include China, the Euro Zone (with a special economic analysis is largely a finished subject, but new studies of consumer visit to Ireland), the , , and parts of Latin America. behavior and interesting new measurements are coming into economics from cognitive psychology, , anthropology, market science, evolu- Eric S. Maskin tionary biology, and neurology. This behavioral revaluation challenges the Why Haven’t Global Markets Reduced Inequality in Developing neoclassical conclusion that unconcentrated self-organized markets place Economies? consumers on a welfare frontier, and suggests new directions for the con- Session: Thursday, 21 August, 09.30 hrs tinuing development of consumer theory. This talk gives a broad, brief sur- vey of behavioral consumer theory, and places its findings in the context of The theory of predicts that globalization should the early writings of economists on the science of pleasure. cause income inequality in emerging economies to fall. However, this has not happened in the current era of increasing (although Reference the prediction held up well for previous globalizations). In this lecture, I D. McFadden, “The New Science of Pleasure”, NBER Working Paper No. 18687, February sketch an alternative theory - developed in collaboration with Michael 2013, forthcoming in Handbook of Choice Modelling, S. Hess and A. J. Daly, (eds.), Edward Elgar, 2014. Kremer - that seems to fit recent history well. Our model conceives of glo- balization as an increase in international production (Computers provide a Robert C. Merton good example: they may, for instance, be designed in the U.S., programmed in Europe and assembled in China). We show that when the barriers to in- Measuring the Connectedness of the Financial System: Implications for Systemic Risk Measurement and Management ternational production come down, moderately-skilled workers in emerg- Session: Friday, 22 August, 09.00 hrs ing economies get new employment opportunities and unskilled workers Macrofinancial systemic risk is an enormous issue for both governments don’t. It is this disparity, we argue, that accounts for rising inequality in and large asset pools. The increasing globalization of the financial system, many developing countries. while surely a positive for economic development and growth, does increase the potential impact of systemic risk propagation across geopolitical bor- Daniel L. McFadden ders, making its control and repairing the damage caused a more complex The New Science of Pleasure and longer process. As we have seen, the impact of the realization of system- Session: Friday, 22 August, 09.30 hrs ic risk can be devastating for entire economies. The of 2008- At the base of economic analysis is the consumer, whose behavior and well- 2009 and the subsequent European Debt Crisis were centered around credit being motivate a whole gamut of questions spanning demand analysis, in- 26 27 ABSTRACTS ABSTRACTS risk, particularly credit risk of financial institutions and sovereigns, and the James A. Mirrlees interplay of the two. The propagation of credit risk among financial insti- Some Interesting Taxes and Subsidies tutions and sovereigns is related to the degree of “connectedness” among Session: Friday, 22 August, 10.00 hrs them. The effective measurement of potential systemic risk exposures from There are situations where marginal tax rates of 100% or nearly 100% may credit risk may allow the realization of that risk to be avoided through poli- be justified. Three models will be sketched, using indifference curves. One, cy actions. Even if it is not feasible to avoid the systemic effects, the impact which makes unusual assumptions about preferences for labour, can jus- of those effects on the economy may be reduced by dissemination of that tify income subsidies of low incomes with implicit marginal tax rate of information and subsequent actions to protect against those effects and to 100%. The second, assuming high substitutability between consumption subsequently repair the damage more rapidly. This paper applies the struc- and work, might justify marginal tax rates approaching 100% on the high- tural credit models of finance to develop a model of systemic risk propa- est incomes. The last, with between skilled workers (such as gation among financial institutions and sovereigns. Tools for applying the sportsmen or inventors) for market share, might justify marginal rates of model for measuring connectedness and its dynamic changes are presented 100% on high incomes of a particular type. The assumptions under which using network theory and econometric techniques. Unlike other methods these conclusions follow may not hold in actual economies, but they might that require accounting or institutional positions data as inputs for deter- sometimes. In any case, extreme results, and the reasons for them, can help mining connectedness, the approach taken here develops a reduced-form us understand how incentives work and their implications for taxation. model applying only market data to implement it. Thus, this model can be refreshed almost continuously with “forward-looking” data at low Roger B. Myerson cost and therefore, may be more effective in identifying dynamic changes in connectedness more rapidly than the traditional models. This new research Moral-Hazard Credit Cycles with Risk-Averse Agents is still in progress. The basic approach and the empirical findings are en- Session: Friday, 22 August, 11.30 hrs couraging and it would seem that at a minimum, this approach will provide We consider a simple overlapping-generations model with risk-averse fi- “good “questions, if not always their answers, so that overseers and policy nancial agents subject to . Efficient contracts for such financial makers know better where to look and devote resources to discovery among intermediaries involve back-loaded late-career rewards. Compared to the the myriad of places within the global financial system. In particular, it analogous model with risk-neutral agents, tends to reduce the holds promise for creating endogenously specified stress test formulations. growth of agents’ responsibilities over their careers. This moderation of ca- The talk closes with some discussion of the importance of a more integrated reer growth rates can reduce the amplitude of the widest credit cycles, but approach to monetary, fiscal and stability policies so as to better recognize it also can cause small deviations from steady state to amplify over time the unintended consequences of policy actions in one of these on the others. in rational-expectations equilibria. We find equilibria in which fluctuations increase until the economy enters a boom/bust cycle where no financial Background reading agents are hired in booms. Merton, R.C., 1977, “An Analytical Derivation of the Cost of Deposit Insurance and Loan Guarantees,” Journal of Banking and Finance, vol. 1 (June); pp. 3-11. Gray, D. F., Merton R. C. and Z. Bodie, 2007, “Contingent Claims Approach to Measuring and Managing Sovereign Credit Risk”, Journal of Investment Management, Vol. 5, No. 4, pp. 5-28. 28 29 ABSTRACTS ABSTRACTS

John F. Nash Jr. correspondingly involve “”). Such a basic type of three- Artificial Intelligence and Cooperative Games person game is completely defined by its “characteristic function” speci- Session: Thursday, 21 August, 11.30 hrs fying v(0)=0, v(1)=k1, v(2)=k2, v(3)=k3, v(1,2)=j12, v(1,3)=j13, v(2,3)=j23, and Recently I have been researching in the area of “cooperative games” with the v(1,2,3)=m123. (And usually the characteristic function is presumed to be stimulation of an idea which effectively enables the theoretical reduction of “super-additive”.) a cooperative game to a non-cooperative game of a special sort or variety, My first involvement in these studies led to a program of calculations which specifically the sort of game which arises when several players COULD do developed as sponsored research and led to a publication in “The Interna- well, playing among themselves with legitimate “game moves”, but where, tional Game Theory Review”. An experimental games study deriving from if they were not given some mechanism that would tend to induce them to that work attempts to study cooperative games and cooperation in games take game actions relatively favorable for the joint welfare of all of them to- through the device of “the method of agencies” which provides a standard gether, then they might naturally behave so badly in relation their possible means for the formation of effective coalitions and the enabling of coopera- mutual best that that would be like the simple non-cooperative tion. equilibrium in a prisoners’ dilemma game. (The second publication has four co-authors and appeared recently in the One of the observations that can be made here is that a human player play- Proceedings of the National Academy of Sciences (USA).) ing in a game and strictly following a completely detailed game becomes equivalent to a robot and behaves as if he were an “artificial intel- Edmund S. Phelps ligence”. Bringing Dynamism, Homegrown Innovation and Human Flourishing So we have the possibility of gaining understanding of “cooperative games” into Economics through gaining understanding of how a good class of model “artificial in- Session: Wednesday, 20 August, 09.30 hrs telligences” might naturally play them. The economics practiced today is basically neoclassical with an overlay of Keynesian theory from which the unknowable, animal spirits and long- The class of cooperative games introduced by Von Neumann and Morgen- term expectations have been removed. Abstraction is always fruitful. But stern in their book still provides a good and stimulating challenge to game this standard amalgamated economics, which met many earlier problems, theorists. seems not to meet the syndrome of problems faced by the West in our time; Perhaps nothing like a set of points, or a class of sets of points, nor some- nor some old problems faced by historians. That is because the standard times any single point would be the ideal concept that we would like to find economics excludes the heart of these problems – the sources are hidden in and appreciate relating to these games (which have transferable utility (like some variables interpreted as “shocks” or some time trend. As a result, this a conveniently transferable utility) usable as businesses use ). But economics offers us the policy tools of the standard models with which we there is the natural psychology to appreciate something that might seem can hope to obtain symptomatic relief from our illness, but cannot expect comparable to the solution of a classical “chess problem”. a cure. I have myself been involved with studies which have considered games of In my theory, prevailing values, or felt needs, are basic to an economy. In three players that are DEFINED by a “characteristic function” (and which any nation there are people who feel the need for individual expression – to 30 31 ABSTRACTS ABSTRACTS exercise their curiosity, ingenuity or creativity; whose vitalism stirs them 2008-2009 recession and the subsequent depression that has persisted for to “act on the world” and make a difference; and who need careers that are over 5 years. a journey into the unknown – a voyage in which, as they form ideas, cre- One major problem was how to account for intangible investment in this ate and discover outcomes, they test, discover and create themselves. Such theory, which assumes competitive markets, and the aggregates reported in needs fuel a desire to innovate: The extent and intensity of this desire, to- the national income and product accounts. McGrattan and Prescott (2009) gether with the capacity and talent of people to hit upon new products that developed a way, with technology capital that can be used at any location if would be adopted, and the latitude society is willing to give to , permitted by policy. Locational rents, not rents are what provide constitute a nation’s dynamism – its ability, or propensity, to innovate. This the incentive to innovate. With this extension there is a reason for direct dynamism largely determines the nation’s homegrown innovation – the foreign investment (See McGrattan and Prescott 2010). The predicted gains supply of it, to be precise, while various market forces impact on the actual from openness are three times bigger than the standard trade models pre- innovation achieved. And the nation’s rate of innovation is the main source dictions, but still only a third of what the empirics indicate. Other factors of the prosperity there – in all its dimensions, including what is called are important with the leading candidates being lowering of incentives to flourishing. By the 1800s, the accretion of modern values gave birth to the set barriers to more efficient production and increasing the rate at which dynamism sparking the epoch of innovation in Britain and America, later knowledge useful in production diffuses. Determining the quantitative im- Germany and . Now, losses of dynamism have cost us much of our portance of these two factors are two major open problems in aggregate prosperity. economic theory.

Edward C. Prescott Readings “Technology Capital and the U.S. Current Account,” E. R. McGrattan and E. C. Prescott, Innovation in Neoclassical Growth Theory , 100 (4), 1493-1522, September 2010. Session: Friday, 22 August, 12.00 hrs “Openness, Technology Capital, and Development,” E. R. McGrattan and E. C. Prescott, Neoclassical growth theory is a theory that has been successfully used to Journal of Economic Theory 144, 2454–76, November 2009. quantitatively address many aggregate economic questions. These ques- tions include the quantitative contribution of various factors to business Alvin E. Roth cycle fluctuations and the large difference in hours worked across countries Repugnant Markets and Prohibited Transactions and over time. In the process of using the theory, deviations from the theory Session: Wednesday, 20 August, 09.00 hrs emerged, and in process of resolving these puzzling deviations, the theory I’ll speak about “repugnant transactions,” which are transactions that some was advanced. One major advance was figuring out a way to incorporate people want to do, and other people don’t want them to do. That turns out intangible capital produced and owned by businesses. The investment in to be a very broad class of transactions that include some things economists this form of capital is known to be big and nearly all is expense and there- understand well (e.g. opposition to transactions with clear negative exter- fore most is not part of GDP. This extension resolved the puzzled of why the nalities to third parties), and other things we understand much less well U.S. boomed in the 1990s even though GDP per hour and corporate profits (e.g. opposition to same sex marriage). I began to pay attention to repug- were low. The model that resolved that puzzle also is consistent with the nant transactions in connection with my work on kidney exchange: while no one opposes kidney transplantation, including living kidney donation, 32 33 ABSTRACTS ABSTRACTS

almost every country in the world has laws against paying for kidneys. The Reinhard Selten only exception I know of is the Islamic Republic of Iran, where kidneys can How Does One Learn by Experience? legally be bought and sold, although of course there are illegal black markets Session: Thursday, 21 August, 12.00 hrs in many places. (It turns out that in Germany, even kidney exchange, of the No abstract available. kind my colleagues and I have helped establish in the U.S. and elsewhere, is illegal.) William F. Sharpe I’ll touch on a wide range of repugnant transactions, which have changed Economic Analysis of Retirement Income Strategies over time (e.g. on loans, markets for slaves) and are different in dif- Session: Thursday, 21 August, 12.30 hrs ferent places. I’ll argue that these are important phenomena that we econo- Percentages of older people are increasing in most countries. Moreover, mists would do well to understand better. in the United States and other countries there is a trend towards reliance Suggested readings on individuals’ to supplement social retirement plans. This places Roth, Alvin E. “Repugnance as a Constraint on Markets”, Journal of Economic a considerable burden on individual to choose appropriate strat- Perspectives, 21:3, Summer, 2007, pp. 37-58. egies to use savings to efficiently provide income during their retirement You can browse the many blog posts I’ve written about repugnant transactions at years. This presentation will cover tools of economic analysis that can help http://marketdesigner.blogspot.com/search/label/repugnance inform such choices, including Monte Carlo analysis, equilibrium asset pric- ing theory, conditions for expected utility maximization and approaches for cost minimization. Their use will be illustrated in an analysis of a complex financial product in which an investment company and a life insurer jointly provide an investment fund with a guaranteed lifetime withdrawal benefit.

Christopher A. Sims TOO ABSTRACT? Inflation, Fear of Inflation, and Public Debt Session: Wednesday, 20 August, 10.30 hrs Visit the laureates No abstract available. in their labs: nobellabs.lindau-nobel.org Vernon L. Smith Rethinking Market Experiments in the Shadow of Recessions: The Good and the Sometimes Ugly; Propositions on Recessions Session: Wednesday, 20 August, 11.00 hrs In all economic recessions consumer non-durable expenditures are relatively stable, characteristics that have long applied to certain experimental markets. The experiments of the 1960s and 1970s reliably and rap- 34 35 ABSTRACTS ABSTRACTS

idly converged to the predicted equilibrium. These markets also were for non- durables: all sales were final; items could not be re-traded; subjects each knew their buyer (or seller) role in advance of entering the market. In eleven of the last fourteen U.S. Recessions, new housing expenditure was a leading indicator of decline. Moreover, economic recovery is always asso- ciated with housing. The experimental asset markets of the 1980s and 1990s likewise exhibited unexpected and unpredictable tendencies to bubble and crash. The larger the endowments of cash or the greater the inflow of cash, the bigger is the bubble; housing bubbles are also associated with the in- flow of mortgage credit money. In the macroeconomic accounts, re-tradability, long durability, and credit inflow seem to be the key to instability.

Joseph E. Stiglitz Inequality, Wealth, and Growth: Why Capitalism is Failing Session: Thursday, 21 August, 09.00 hrs ’s recent book has noted large increases in wealth and the wealth/income ratio. But there has not been the associated decline in in- terest rates or increases in that one might have expected. Indeed, in some countries, like the US, there has been stagnation. If we take “wealth” to be capital, it leads to a seeming paradox, a strong contradiction to the neoclassical model. At the same time, he suggests that high levels of inequality are a natural aspect of capitalism - with the short period of the few decades before 1980 representing an exception. This lecture will resolve the seeming paradox, describe the centrifugal and centripetal forces that lead to increased and diminished inequality, show how the balance between these forces has been disturbed since 1980 to lead to a higher equilibrium level of inequality, and explain, however, that this level of inequality is not just the result of market forces, but of policies and politics, THE LINDAU MEETINGS: NOW AND THEN some of which have impeded the way that a well-functioning competitive market would have behaved. The final piece of the analysis links this growing An Exhibition inequality to our financial system and the credit-creation process. 5 April – 19 October 2014 | City Museum Lindau 36 Free exhibition access with Young Scientist name badge ABSTRACTS ABSTRACTS

PANEL DISCUSSION ABSTRACTS Diamond, Merton, Roth How Useful is Economics – How is Economics Useful? Hansen, McFadden, Sims Session: Saturday, 23 August, 11.00 hrs The Future of Econometrics: Structural Restrictions, Parametric Methods Economics is often abstract. Economic models are formulated in general and Big Data terms, without reference to any particular economy. Theorizing involves as- Session: Thursday, 21 August, 15.00 hrs sumptions that are patently unrealistic. Laboratory experiments involve ar- There is a fundamental tension in empirical analysis in economics between tificial environments that may be quite different from real-world situations. relying on prior beliefs based on theory and empirical evidence - encoded in Econometric studies often exploit specific data sets that allow the research- classical hypotheses or in Bayesian priors - and letting data speak “freely”. er to identify certain effects. But we are not interested in models, experi- To what extent can and should theory be used to impose restrictions on pa- ments, or econometric regressions for their own sake, but for the insights rameterized models? With the availability of ever larger data sets in many they provide about the economy at large and for the uses to which they may areas (financial transactions, medical records, consumer purchase histories put in dealing with real-world problems. Relying on the experience of the etc.), these issues are becoming increasingly important. The panel will dis- participating laureates, the panel will discuss why and under what condi- cuss new and old methods to meet these challenges. tions the insights gained from models, experiments, or econometric regres- sions can be used outside these narrow domains and how they contribute Maskin, Mirrlees, Myerson to dealing with real-world problems. Strategic Behavior, Incentives, and Mechanism Design Session: Friday, 22 August, 15.00 hrs Economics has always been concerned with incentives. For a long time, however, most formal analyses of incentive issues were limited to the be- havior of people or corporations in markets where the institutional envi- ronment was given. Since the 1960s, our understanding of incentives and incentive problems has been revolutionized by research contributions that identified asymmetric information and strategic interdependence as root causes of incentive problems and provided fundamental insights about the scope and the limits for dealing with these problems by institution design. The importance of this research was recognized by the award of the Prize in 1996 to Sir and for their “fundamental contributions to the economic theory of incentives under asymmetric in- formation” and in 2007 to , , and “for having laid the foundations of mechanism design theory”. The panel will discuss the underlying ideas and their development.

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SCIENCE BREAKFAST ABSTRACTS tion of a “grand challenge” approach at Mars to target breakthroughs that address the critical food, agriculture, and health issues faced by industry Science Breakfast hosted by Mars, Incorporated and society as a whole. Paths to Innovation: Restoring Grassroots Dynamism to Address Global The Mars, Incorporated Science Breakfast will bring together the views of Challenges Laureates, industry practitioners and young economists—both on the panel Session: Thursday, 21 August, 07.00 hrs and in the audience—to trigger robust discussion on the role of innovation While the idea of innovation is often associated with an invention or an in addressing the great global challenges. inventor, this is actually only the beginning of the complex process that Ed- mund Phelps (Economics Nobel Laureate, 2006) describes as a “new meth- Science Breakfast hosted by SAP SE od or a new product becoming a new practice”. At the Mars, Incorporated Science Breakfast, Romesh Vaitilingam (VoxEU.org) will moderate a panel Innovation from the Edge – discussion focusing on this process and what is needed to restore the grass- How could we possibly solve the “Innovator’s Dilemma” through the Power of Diversity? roots dynamism that can drive transformational innovation for better lives Session: Friday, 22 August, 07.00 hrs – or what Professor Phelps calls ‘mass flourishing’. The book “The Innovator’s Dilemma” by Clayton M. Christensen is describ- The panel will feature contributions from and Ralph Jerome ing how good companies fail because they keep focusing on things they are (Vice President of Corporate Innovation at Mars, Incorporated) as well as a already doing well and they deliver higher performance in the dimensions selected young . that existing customers . These companies are incapable to deliver dis- Edmund Phelps was awarded the for Economics in 2006 for his ruptive innovation as they rely on proven practices and established process- analysis of inter-temporal tradeoffs in . He is McVickar es. According to Prof. Robert Austin from the Copenhagen Business School, Professor of at Columbia University and Director of Co- the 21st century value creation challenge is to produce value not by generat- lumbia’s Center on Capitalism and Society. In his latest book, ‘Mass Flourish- ing similar outputs efficiently, but by generating novel (different) outputs ing: How Grassroots Innovation Created Jobs, Challenge, and Change’ (2013), more valuable than their predecessors. Professor Phelps outlines what makes nations prosper and why the sources Differences that are potentially valuable arise from different perspectives, of that prosperity are under threat today. He argues that most innovation different ways of thinking, different ways of being. is not driven by a few isolated visionaries, but rather by “dynamism” on a SAP believes that diversity is a source of innovative strength that allows the mass scale: millions of people empowered to think of, develop, and market company to better meet and understand the needs of its customers. Being new products and processes. dedicated to make the world run better, focusing on a diverse and inclusive Ralph Jerome has been the Vice President of Corporate Innovation at Mars, environment, gives us the foundation to ensure that we deliver innovative Incorporated since establishing a dedicated transformational innovation solutions for challenges our customers and society as a whole are facing function at the company in 2013. The Mars Corporate Innovation function today and in the future. We value an open company culture and are proud was set up as a flexible and interconnected organization linked to a global of the unique contribution each individual makes at SAP. Our diverse hu- network of top-class collaborators. In this context, Jerome has led the adop- man capital is the essence of our success. Thus, more than 67,000 employees 40 41 ABSTRACTS from over 120 nationalities contribute and build with their uniqueness the sustainable success of SAP. But is this enough? Not according to Christensen. So, can we create edges as source of innovation in the corporate world by employing people who think differently and who are not considered to be part of the mainstream move- ments? An important success criterion for SAP will be to bring ‘outliers’ into environments where they can spark innovation which will enhance the competitive edge of SAP. These ‘outliers’ must not be assimilated by the existing corporate culture and ways of thinking but carry a strong inherent value system that will evolutionize the company itself. Can talent from the edge change a company to embrace disruptive innovation? Is the power of diversity a way to solve “The Innovator’s Dilemma”? Join us for the discussion of highest concern – because Innovation is the business challenge – for all current market leaders that want to stay ahead.

Science Breakfast hosted by UBS AG Banking and Banking Regulation after the Financial Crisis Session: Friday, 22 August, 07.00 hrs Whereas the economies of many countries are still experiencing the fallout from the financial from crisis, regulatory reform seems to have settled down. The industry and some economists complain about over-regulation, other economists complain about under-regulation, a continuation of regulatory practices that contributed to the crisis. Discussion at the science breakfast Henri Matisse, Ikarus (VIII), 1947 © Succession Matisse, VG Bild-Kunst, Bonn 2014 Bild-Kunst, VG (VIII), Ikarus Henri Matisse, © Succession Matisse, 1947 should try to disentangle what the issues are and what is at stake. What has been the contribution of regulation to crisis developments in 2007-2009 and again since 2010? What has changed and what does this change mean? What needs to be done to get out of the malaise in which many financial VARIATION – IMPROVISATION systems currently are? What needs to be done to avoid a recurrence of fi- nancial crises on a global scale? by Henri Matisse 5 April – 31 August 2014 City Museum Lindau Free exhibition access with Young Scientist name badge 42 ABOUT THE MEETINGS ABOUT THE MEETINGS

The Meetings responsible for awarding the Nobel Prizes: at least one of the two scientific chairpersons of each conference is a member of the institutions that select The Lindau Nobel Laureate Meetings – established in 1951 – provide globally the Nobel Laureates. recognised forums for the exchange of knowledge between Nobel Laureates and young scientists. They inspire scientific generations and build sustain- The foundation was founded in the year 2000 by the council and the Berna- able networks of young scientists from around the world. dotte family on the initiative of 50 Nobel Laureates. Prof. Dr. h.c. Wolfgang Schürer serves as the chairman of the board of the foundation. Joint initia- The participants at the Lindau Meetings are characterised by diversity. They tives regarding the advancement of the Lindau Meetings and the establish- all come from a variety of national and scientific backgrounds and have ment of an international network of academic partners are key priorities very different ways of communicating. This makes the Lindau Nobel Laure- besides ensuring sustainable funding. ate Meetings unique in the world and a model of the kind of visionary co- operation which science will increasingly need in the future. Furthermore, The Lindau Meetings enjoy widespread support. More than 270 Nobel Lau- scientific progress will need to be firmly anchored in international and in- reates are members of the founders’ assembly of the foundation and dem- terdisciplinary networks of individuals working together. Lindau provides onstrate – through their membership and their participation in the Lindau the stimulus for such networks to take root and grow. Dialogue – their support for the principle of the Lindau Nobel Laureate Meetings. Personalities from the worlds of science, politics and industry The original idea of the meetings goes back to the two Lindau physicians Dr. have been inaugurated into the foundation‘s honorary senate in recogni- Franz Karl Hein and Professor Dr. Gustav Wilhelm Parade as well as Count tion of the special commitment they have shown towards scientific excel- af Wisborg, a member of the Swedish royal family who lence and the promotion of young scientists. quickly became the spiritus rector of the Lindau Meetings. It was him who recognised the significance of the meetings for the reconciliation of the peo- ples of post-war Europe early and thus systematically developed it to an in- Funding of the Lindau Nobel Laureate Meetings ternational forum for the exchange of knowledge between nations, cultures The Lindau Nobel Laureate Meetings are enabled thanks to the support re- and disciplines. ceived from companies, associations and private patrons, on the one hand, and from national and state ministries, the International The Organisers Conference and the European Commission on the other. The Council for the Lindau Nobel Laureate Meetings and the Foundation International companies, selected foundations, associations and private Lindau Nobel Laureate Meetings organise the annual meetings. The Execu- patrons assure the material basis for the Lindau Meetings by making do- tive Secretariat is responsible for their planning and realisation. nations to the assets of the Foundation Lindau Nobel Laureate Meetings. Interest earned on the endowment, plus additional annual contributions by Countess Bettina Bernadotte af Wisborg is president of the council, which benefactors cover the budget of the Lindau Meetings. Donations in kind also sets the course for the Lindau Meetings’ concept and programme. Interna- play an important role in raising the professional level of the Meetings. The tionally accredited scientists from the fields of medicine, physics, chemis- success of the Lindau Meetings can also be attributed not least to the com- try and the economic sciences are members of the council. The work of the mitment shown by the Nobel Laureates, members of the council and the council benefits from the commitment of the secretaries of the assemblies board of the foundation during the preparation, realisation and evaluation 44 45 ABOUT THE MEETINGS ABOUT THE MEETINGS of the meetings. They all give their support on a pro bono basis. Programme Session Types A full list of supporters is enclosed in this programme. The 5th Lindau Meeting on Economic Sciences features a variety of session formats. In general, the mornings usually offer plenary formats, while the The Academic Partners Network afternoons add more interactive elements.

The Lindau Nobel Laureate Meetings interact closely with a global network Plenary Lecture of academic partners to identify highly-talented young scientists and pro- Plenary lectures are given by Laureates only. They may choose a topic of fessionals and to nominate them for participation. Partners include na- their liking – be it their Prize research, be it something else. As the time is tional academies of science, ministries, research institutions, top-ranking limited to thirty minutes, there is usually no discussion. universities, foundations, international scientific organisations and central banks. Without this support, the Lindau Nobel Laureate Meetings would not Plenary Panel Discussion be able to identify and invite the most gifted scientific talents world-wide. In a plenary panel discussion, several panelists jointly discuss one topic. This year, three discussions are offered: on Thursday (“The Future of Economet- The world’s best young scientists of tomorrow submit applications to at- rics: Structural Restrictions, Parametric Methods and Big Data”), on Friday tend the Lindau Nobel Laureate Meetings. An international, multi-stage se- (“Strategic Behavior, Incentives, and Mechanism Design”) and on Saturday lection process makes sure that the scientific elite of the future is able to (“How Useful is Economics - How is Economics Useful?”). come together with the Nobel Laureates in Lindau. Every year, several thou- sand young scientists worldwide apply. Discussion Sessions A full list of academic partners can be found in the Participant Directory. In the afternoon, all lectures held in the morning can be discussed in a sepa- rate discussion session. These research-oriented discussions are strictly limit- ed to Laureates and young scientists, and switching between sessions should Lanyard Color Key be avoided. Turquoise Laureates Grey Young Scientists Master Class Red Guests This format will offer a most intense exchange between young scientists and Yellow Journalists Laureates, as selected young scientists present their research and then en- White Lindau Alumni (from 1986) gage in an in-depth discussion with a Laureate. Attendance requires online Brown Contractors of Third Parties pre-registration. Orange Contractors Science Breakfasts Green Council & Foundation Science breakfasts are additional options for a more informal exchange. Black Staff of the Executive Secretariat They are organised by Lindau’s partners, featuring talks, discussions and a joint breakfast with a Laureate. Attendance requires online pre-registration.

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The Lindau Nobel Laureate Meetings would like to thank all maecenates, patrons PRINCIPAL PATRONS and donors for their contributions to the endowment of the foundation. Bertarelli Foundation Linde AG PRINCIPAL MAECENATES Lonza Group AG Mars, Incorporated McKinsey & Company, Inc. National Research Foundation, Singapore Volkswagen Group NOVARTIS International AG Principality of Liechtenstein MAECENATES Südwestmetall Verband der Metall- und Elektroindustrie Baden-Württemberg e.V. Audi AG Swiss Reinsurance Company Ltd Bayer AG The OPEC Fund for International Development (OFID) Verein der Bayerischen Chemischen Industrie e.V. Deutsche Bank AG Volkswagen AG Dr. Ing. h.c. F. Porsche AG Ecoscientia Stiftung EnBW Energie Baden-Württemberg AG PATRONS Freistaat Bayern, vertreten durch den Bayerischen Staatsminister Deutsche Telekom Stiftung für Bildung und Kultus, Wissenschaft und Kunst Holcim Ltd Lockheed Martin Corporation - Lockheed Environmental Systems Klaus Tschira Stiftung gGmbH & Technologies Co. Monika and Wolfgang Schürer Microsoft Corporation Robert Bosch GmbH Verein Deutscher Ingenieure e.V. RWE AG SAP AG Siemens AG Verband der Bayerischen Metall- u. Elektroindustrie

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PRINCIPAL DONORS GfK SE Hilti Foundation Boehringer Ingelheim GmbH Hovalwerk AG Cabot Corporation Foundation Ivoclar Vivadent AG Fondazione Cariplo Jack Steinberger Hansjörg Wyss Medical Foundation Jerome Karle Jacobs Foundation Joachim and Bärbel Milberg LGT Group Foundation Jörnvall Foundation maxingvest ag (Tchibo Holding AG) Jungbunzlauer AG Merck KGaA Leopoldina Nationale Akademie der Wissenschaften Synthes-Stratec Inc. Liechtensteinische Landesbank AG Verband der Chemischen Industrie e.V. (VCI) Lyndon L. Olson and Mrs. Olson Maja Dornier DONORS Paul Crutzen Paula Hirsch acatech - Deutsche Akademie der Technikwissenschaften Peter D. Dornier Alcoa Inc. PwC PricewaterhouseCoopers AG Alexander and Katalin Dembitz Robert Stolze Alexander S. Onassis Public Benefit Foundation Ruth Schilling American Chemical Society Sal. Oppenheim jr. & Cie. KGaA Andreas Büchting Salus Charity Foundation AnneMarie Lynen and Jörn Wilkening Simon W. and Alice I. Newman Artur Fischer Sparkasse Memmingen-Lindau-Mindelheim Artur Schwörer Sparkassenverband Bayern Bert Sakmann Ulrich B. Stoll Brian P. Schmidt umantis AG Carl Zeiss AG Verwaltungs- und Privatbank AG Deutsche Telekom AG DSM Nutritional Products Ltd and the Friends of the Foundation ETO Group Eva Lynen Familie Graf Lennart Bernadotte af Wisborg Fondazione Fidinam Fresenius SE & Co. KGaA GfK Nürnberg e.V. 50 51 SUPPORTERS SUPPORTERS

The Lindau Nobel Laureate Meetings would like to thank all benefactors for their BENEFACTORS support of the 5th Lindau Meeting on Economic Sciences. Alexander S. Onassis Public Benefit Foundation Christa und Hermann Laur-Stiftung PRINCIPAL BENEFACTORS Deutsche Bundesbank AKB Stiftung Deutsche Forschungsgemeinschaft (DFG) Alcoa Foundation Deutscher Akademischer Austauschdienst (DAAD) Audi AG Deutscher Sparkassen- und Giroverband bayme - Bayer. Unternehmensverband Metall und Elektro e.V. Fanelli Haag & Kilger PLLC Bundesministerium für Bildung und Forschung (BMBF), Berlin Festo AG & Co. KG Carl Zeiss Stiftung Förderverein Römerbad e.V. EnBW Energie Baden-Württemberg AG Fraunhofer-Gesellschaft Freistaat Bayern, vertreten durch den Bayerischen Staatsminister für Gerda Henkel Stiftung Bildung und Kultus, Wissenschaft und Kunst Helmholtz-Gemeinschaft Deutscher Forschungszentren e.V. International Lake Constance Conference (IBK) Hewlett-Packard, L.P. Jacobs Foundation Intersky Luftfahrt GmbH Klaus Tschira Stiftung gGmbH Jones Day Mars, Incorporated Lennart-Bernadotte-Stiftung LIGHTHOUSE Marken-Navigation GmbH Microsoft Corporation Lindau Tourismus und Kongress GmbH National Research Foundation, Singapore LISTA Office AG Robert Bosch Stiftung GmbH Mainau GmbH SAP SE MAN SE The OPEC Fund for International Development (OFID) Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V. UBS AG McKinsey & Company, Inc. vbm - Verband der Bayerischen Metall- u. Elektro-Industrie e.V. MS Management AG vbw - Vereinigung der Bayerischen Wirtschaft e.V. Oesterreichische Nationalbank Volkswagen Group Peter-Dornier-Stiftung Piekalnitis-Weber Family, Stuttgart PwC PricewaterhouseCoopers AG rose plastic AG SWS GmbH Schweizerische Nationalbank Siemens AG Sparkasse Bodensee 52 53 SUPPORTERS

Sparkasse Memmingen-Lindau-Mindelheim Sparkassenverband Bayern Stadt Lindau (B) WANT TO DISCUSS SCIENCE? Stadtverkehr Lindau (B) GmbH Stadtwerke Lindau (B) GmbH & Co. KG Visit the meeting blog at Stifterverband für die Deutsche Wissenschaft e.V. blog.lindau-nobel.org Stiftung van Meeteren Tchibo GmbH Telekommunikation Lindau (B) GmbH The Nobel Foundation Warth & Klein Grant Thornton GmbH & Co. KG Wissenschaftsgemeinschaft Gottfried Wilhelm Leibniz e. V. Zumtobel AG and anonymous benefactors

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Steinberger- Am

Straße Zentraler Umsteigepunkt, Stadtbus (k/18) | central changing station Straße z e Straße Leib rtplat ße e a Sport ra i t b s St. Maria Königin la Zechwaldstraßechs a a c la hs b i des Friedens s e t Leib ra a

Stadtbus-Haltestelle | citybus stop ße Inn S e ied n erer ße Fraunhoferstraßew d r stra ler- e le Herrnmühle- eg e r h g r ü - m straße n r Bl r l Lindau-BregenzOberhochsteg (A) – Anheggerstraße – Insel e um 1 - eg r er H m g nenw r an enw urg g n eg lem w lb Al Un eg a w nterhochste g egstraße g e W Park-Camping w s siedlung

2 i Unterreitnau – Anheggerstraße – Insel r I

Grenz- Lindau am See Grenz- Unterhochsteg

Sees e Wesen e s Iris t i r Maihofstraße 3 Oberreitnau – Anheggerstraße – Zech s aße we ß e e Sporthafen Zech g Leiblach L190 gbach Ruggb r- Am facker- 4 Gitzenweiler Hof – Anheggerstraße – Alwind Kläranlage Ho e straße

Lindauer-Straße Lindau Tourismus und Kongress GmbH 0 1 km www.lindau-tourismus.de | Phone +49 8382 260030 Vier schöne Rundwege – Beschreibungen siehe Rückseite Four walking tours – descriptions can be found on the back | www.geodaten.bayern.de Vermessungsverwaltung © Bay. | Geoinformationen KG GmbH & Co. Tourismus © Alpstein Lochau-Hörbranz d/12 g/11 q/14 i/5

0 Plan_DIN-A4_Nobel.indd 2 1 km 09.07.14 18:20 earliest Saturday Sunday every hour at latest earliest Saturday Sunday every hour at latest BUS LINES & TIME TABLE Bus Line #1 from Oberhochsteg via ZUP to Main Station (Island) Bus Line #1 from Main Station (Island) via ZUP to Oberhochsteg Oberhochsteg 5.24 6.24 7.24 24 54 22.24 Hauptbahnhof/Insel 5.21 6.21 7.21 21 51 22.21 Rickenbach 5.25 6.25 7.25 25 55 22.25 Altes Rathaus 5.28 6.28 7.28 28 58 22.28 Bayerstraße 5.26 6.26 7.26 26 56 22.26 Stadttheater 5.30 6.30 7.30 30 00 22.30 Nobelstraße 5.27 6.27 7.27 27 57 22.27 Maxhof 5.31 6.31 7.31 31 01 22.31 Wannental 5.28 6.28 7.28 28 58 22.28 Toskana 5.33 6.33 7.33 33 03 22.33 Umsteigen Lugeck 5.29 6.29 7.29 29 59 22.29 Langenweg 5.34 6.34 7.34 34 04 22.34 nach W angen Oberreitnau Nord Schule Reutin 5.30 6.30 7.30 30 00 22.30 Anheggerstraße (ZUP) 5.40 6.40 7.40 40 10 22.40 Wiedemannstraße 5.31 6.31 7.31 31 01 22.31 Bodensee-Gymnasium 5.41 6.41 7.41 41 11 22.41 Emersberg/Oberreitnau 1 Oberhochsteg - Anheggerstraße - Insel Josefskirche 5.32 6.32 7.32 32 02 22.32 Blauwiese 5.42 6.42 7.42 42 12 22.42 Köchlin 5.34 6.34 7.34 34 04 22.34 Köchlin 5.43 6.43 7.43 43 13 22.43 2 Unterreitnau - Anheggerstraße - Insel Blauwiese 5.35 6.35 7.35 35 05 22.35 Josefskirche 5.44 6.44 7.44 44 14 22.44 Marienplatz Bodensee-Gymnasium 5.36 6.36 7.36 36 06 22.36 Wiedemannstraße 5.45 6.45 7.45 45 15 22.45 Eggatsweiler Anheggerstraße (ZUP) 5.40 6.40 7.40 40 10 22.40 Schule Reutin 5.46 6.46 7.46 46 16 22.46 3 Oberreitnau - Anheggerstraße - Zech Kapelle Langenweg 5.41 6.41 7.41 41 11 22.41 Lugeck 5.47 6.47 7.47 47 17 22.47 Toskana 5.42 6.42 7.42 42 12 22.42 Wannental 5.48 6.48 7.48 48 18 22.48 Unterr eitnau 4 Rehlings/Weißensberg - Anheggerstraße - Alwind Heidenmauer 5.43 6.43 7.43 43 13 22.43 Nobelstraße 5.49 6.49 7.49 49 19 22.49 Inselhalle 5.44 6.44 7.44 44 14 22.44 Bayerstraße 5.50 6.50 7.50 50 20 22.50 Unterreitnauer Moos Hauptbahnhof/Insel an 5.46 6.46 7.46 46 16 22.46 Rickenbach 5.51 6.51 7.51 51 21 22.51 Oberhochsteg an 5.53 6.53 7.53 53 23 22.53

3 Rehlings/Weißensberg Bus Line #2 from Unterreitnau via ZUP to Main Station (Island) Bus Line #2 from Main Station (Island) via ZUP to Unterreitnau Niederhaus Lindenstraße/Weißensberg Unterreitnau 5.24 6.24 7.24 24 54 22.24 Hauptbahnhof/Insel 5.26 6.26 7.26 26 56 22.26 Eggatsweiler 5.25 6.25 7.25 25 55 22.25 Altes Rathaus 5.28 6.28 7.28 28 58 22.28 Paradies Schönbühl Schönau 5.28 6.28 7.28 28 58 22.28 Stadttheater 5.30 6.30 7.30 30 00 22.30 2 Entenberg 5.29 6.29 7.29 29 59 22.29 Maxhof 5.31 6.31 7.31 31 01 22.31 Motzacher Wald Hoyren 5.30 6.30 7.30 30 00 22.30 Toskana 5.33 6.33 7.33 33 03 22.33 Hochbuch 5.32 6.32 7.32 32 02 22.32 Langenweg 5.34 6.34 7.34 34 04 22.34 Heimesreutin 5.33 6.33 7.33 33 03 22.33 Anheggerstraße (ZUP) 5.40 6.40 7.40 40 10 22.40 Schönau Gstäudweg 5.34 6.34 7.34 34 04 22.34 Christuskirche 5.41 6.41 7.41 41 11 22.41 4 Schloß Moos 5.35 6.35 7.35 35 05 22.35 Schloß Moos 5.42 6.42 7.42 42 12 22.42 Christuskirche 5.36 6.36 7.36 36 06 22.36 Gstäudweg 5.43 6.43 7.43 43 13 22.43 Entenberg Hochbuch Heimesreutin Anheggerstraße (ZUP) 5.40 6.40 7.40 40 10 22.40 Heimesreutin 5.44 6.44 7.44 44 14 22.44 Hasenbank Motzach Langenweg 5.41 6.41 7.41 41 11 22.41 Hochbuch 5.45 6.45 7.45 45 15 22.45 Toskana 5.42 6.42 7.42 42 12 22.42 Hoyren 5.47 6.47 7.47 47 17 22.47 Gstäudweg Friedhof Heidenmauer 5.43 6.43 7.43 43 13 22.43 Entenberg 5.48 6.48 7.48 48 18 22.48 Hoyren Aeschach Rennerle l Inselhalle 5.44 6.44 7.44 44 14 22.44 Schönau 5.49 6.49 7.49 49 19 22.49 a Westliche Insel 5.45 6.45 7.45 45 15 22.45 Unterreitnau an 5.53 6.53 7.53 53 23 22.53 ent Schloß Moos n e Krankenhaus Inselbrauerei n ß e h Hauptbahnhof/Insel an 5.50 6.50 7.50 50 20 22.50 a aß c V.-Heider - W lstra ba be rstr n Gymnasium Rotmoosstr. ye ke Enzisweiler Post No a ic Lugeck B R Christus- Blauwiese Bus Line #3 from Oberreitnau Nord via ZUP to Grenzsiedlung/Zech Bus Line #3 from Grenzsiedlung/Zech via ZUP to Oberreitnau Nord Holbeinstraße kirche Köchlin 1 Schule Reutin g l e r e Bodensee- e 4 g Wiedemann - Stadtwerke st f g Gymnasium ch Oberreitnau Nord 5.23 6.23 7.23 23 53 22.23 Grenzsiedlung/Zech 5.25 6.25 7.25 25 55 22.25 d n et u g h r ZUP Josefs- straße o n n ä f r c o i ei b . T o T h Emersberg/Oberreitnau 5.24 6.24 7.24 24 54 22.24 Kunert 5.26 6.26 7.26 26 56 22.26 lst E d H e c ANHEGGER- kirche erh r nbe lba ß a b Alw ge es e er e Am a Von-Behring-Str. O Marienplatz/Oberreitnau 5.25 6.25 7.25 25 55 22.25 Metzeler 5.27 6.27 7.27 27 57 22.27 n en eb STRASSE Buttlerhügel Kamel- De n est Gi a ch w erstr buckel Kapelle 5.26 6.26 7.26 26 56 22.26 Gewerbegebiet 5.29 6.29 7.29 29 59 22.29 h a ck Aesch Jo ch ch a Berliner Platz S S l e e Jugendherberge/ Paradies 5.27 6.27 7.27 27 57 22.27 Von-Behring-Straße 5.30 6.30 7.30 30 00 22.30 W u h h rc Gewerbegebiet Schönau 5.29 6.29 7.29 29 59 22.29 Stadtwerke 5.30 6.30 7.30 30 00 22.30 Lä Langen- LIMARE iksc weg Entenberg 5.30 6.30 7.30 30 00 22.30 Kamelbuckel 5.31 6.31 7.31 31 01 22.31 Mus Toskana 3 Hoyren 5.31 6.31 7.31 31 01 22.31 Buttlerhügel 5.32 6.32 7.32 32 02 22.32 Heiden- Metzeler Krankenhaus 5.33 6.33 7.33 33 03 22.33 Berliner Platz 5.33 6.33 7.33 33 03 22.33 Inselhalle mauer Holbeinstraße 5.34 6.34 7.34 34 04 22.34 Jugendherberge/LIMARE 5.35 6.35 7.35 35 05 22.35 2 Versöhnerkirche Am Torggel 5.35 6.35 7.35 35 05 22.35 Anheggerstraße (ZUP) 5.40 6.40 7.40 40 10 22.40 1 Metzeler Maxhof Aeschach 5.36 6.36 7.36 36 06 22.36 Aeschach 5.41 6.41 7.41 41 11 22.41 Kopernikus- Anheggerstraße (ZUP) 5.40 6.40 7.40 40 10 22.40 Am Torggel 5.42 6.42 7.42 42 12 22.42 platz Jugendherberge/LIMARE 5.42 6.42 7.42 42 12 22.42 Holbeinstraße 5.43 6.43 7.43 43 13 22.43 Altes Rathaus Kunert Berliner Platz 5.43 6.43 7.43 43 13 22.43 Krankenhaus 5.44 6.44 7.44 44 14 22.44 Westliche Insel Leiblachstraße Buttlerhügel 5.44 6.44 7.44 44 14 22.44 Hoyren 5.45 6.45 7.45 45 15 22.45 Stadttheater Kamelbuckel 5.45 6.45 7.45 45 15 22.45 Entenberg 5.46 6.46 7.46 46 16 22.46 Hauptbahnhof/Insel Stadtwerke 5.46 6.46 7.46 46 16 22.46 Schönau 5.47 6.47 7.47 47 17 22.47 Von-Behring-Straße 5.46 6.46 7.46 46 16 22.46 Paradies 5.48 6.48 7.48 48 18 22.48 Grenz- Gewerbegebiet 5.47 6.47 7.47 47 17 22.47 Kapelle 5.49 6.49 7.49 49 19 22.49 siedlung/Zech Metzeler 5.48 6.48 7.48 48 18 22.48 Marienplatz 5.50 6.50 7.50 50 20 22.50 Versöhnerkirche 5.49 6.49 7.49 49 19 22.49 Oberreitnau Nord an 5.52 6.52 7.52 52 22 22.52 Kopernikusplatz/Zech 5.52 6.52 7.52 52 22 22.52 Leiblachstraße 5.52 6.52 7.52 52 22 22.52 Grenzsiedlung/Zech an 5.55 6.55 7.55 55 25 22.55

Special Operating Hours during the Meeting Bus Line #4 from Rehlings/Weißensberg via ZUP to Alwind Bus Line #4 from Alwind via ZUP to Rehlings/Weißensberg On Wednesday night, 20 August, the last buses leave at 00.10 hrs from the central connection point (ZUP) Rehlings/Weißensberg 5.23 6.23 7.23 23 53 22.23 Alwind 5.24 6.24 7.24 24 54 22.24 Lindenstraße/Weißensberg 5.25 6.25 7.25 25 55 22.25 Degelstein 5.25 6.25 7.25 25 55 22.25 and serve all stops along their lines. Motzacher Wald 5.28 6.28 7.28 28 58 22.28 Ebnet 5.26 6.26 7.26 26 56 22.26 Motzach 5.29 6.29 7.29 29 59 22.29 Johannes d. Täufer 5.27 6.27 7.27 27 57 22.27 On Friday night, 22 August the last buses leave at 23.40 hrs from the central connection point (ZUP) and Inselbrauerei 5.30 6.30 7.30 30 00 22.30 Enzisweiler Post 5.28 6.28 7.28 28 58 22.28 Rotmoosstraße 5.31 6.31 7.31 31 01 22.31 Schachener Hof 5.30 6.30 7.30 30 00 22.30 serve all stops along their lines. Rennerle 5.33 6.33 7.33 33 03 22.33 Schwesternberg 5.31 6.31 7.31 31 01 22.31 Friedhof Aeschach 5.34 6.34 7.34 34 04 22.34 Giebelbach 5.32 6.32 7.32 32 02 22.32 V.-Heider-Gymnasium 5.35 6.35 7.35 35 05 22.35 Wackerstraße 5.33 6.33 7.33 33 03 22.33 How to Read the Time Table Anheggerstraße (ZUP) 5.40 6.40 7.40 40 10 22.40 Musikschule 5.34 6.34 7.34 34 04 22.34 Lärche 5.41 6.41 7.41 41 11 22.41 Lärche 5.35 6.35 7.35 35 05 22.35 The time table on the opposite page shows operating hours and departure times for all four lines and both Musikschule 5.42 6.42 7.42 42 12 22.42 Anheggerstraße (ZUP) 5.40 6.40 7.40 40 10 22.40 Wackerstraße 5.43 6.43 7.43 43 13 22.43 V.-Heider-Gymnasium 5.41 6.41 7.41 41 11 22.41 directions. The first three columns (earliest, Saturday, Sunday) indicate when the earliest bus runs from Giebelbach 5.44 6.44 7.44 44 14 22.44 Friedhof Aeschach 5.42 6.42 7.42 42 12 22.42 Schwesternberg 5.45 6.45 7.45 45 15 22.45 Rennerle 5.43 6.43 7.43 43 13 22.43 each stop, while the last columns show the last service. The two middle columns (every hour at) show Schachener Hof 5.46 6.46 7.46 46 16 22.46 Rotmoosstraße 5.45 6.45 7.45 45 15 22.45 when buses depart between the first and last service. Example: 24/54 means that this bus departs from the Enzisweiler Post 5.48 6.48 7.48 48 18 22.48 Inselbrauerei 5.46 6.46 7.46 46 16 22.46 Johannes d. Täufer 5.49 6.49 7.49 49 19 22.49 Hasenbank 5.47 6.47 7.47 47 17 22.47 station every hour at minute 24 and 54 (e.g. at 15.24 hrs and 15.54 hrs). Ebnet 5.50 6.50 7.50 50 20 22.50 Schönbühl 5.50 6.50 7.50 50 20 22.50 Degelstein 5.51 6.51 7.51 51 21 22.51 Niederhaus 5.51 6.51 7.51 51 21 22.51 Alwind an 5.53 6.53 7.53 53 23 22.53 Rehlings/Weißensberg an 5.52 6.52 7.52 52 22 22.52 60 61 GOOD TO KNOW NOTES

Opening Hours Registration Desk

Tuesday, 19 August 12.00 - 20.00 Wednesday, 20 August 7.30 - 13.30 (YS), 8.00 - 13.30 (guests, media) Thursday, 21 August 08.30 - 18.30 Friday, 22 August 08.30 - 14.00

Onsite Contacts

Registration Desk +49 8382 260-633 Fax -660 Press Office +49 8382 260-632 Email [email protected] Emergency 112 Taxi/cab +49 8382 6006 or +49 8382 4455

Scientific Chairmen of the th5 Lindau Meeting on Economic Sciences

Peter Englund Department of Finance, Stockholm School of Economics, Sweden Member of the Economic Sciences Prize Committee, Stockholm, Sweden Martin Hellwig Director, Max Planck Institute for Research on Collective Goods, Bonn, Germany Wolfgang Schürer Chairman of the Foundation Lindau Nobel Laureate Meetings, Germany Vice-President of the Council for the Lindau Nobel Laureate Meetings, Germany

Future Meetings

4th Interdisciplinary Lindau Nobel Laureate Meeting 28 June – 3 July 2015 66th Lindau Nobel Laureate Meeting (Physics) 26 June – 1 July 2016 67th Lindau Nobel Laureate Meeting (Chemistry) 25 June – 30 June 2017 6th Lindau Meeting on Economic Sciences Copyright 2014: The Lindau Nobel Laureate Meetings. All information (as of 18 July 2014) is provided as an indication only; changes may occur at any time without prior notice. 22 – 26 August 2017 Programme Editors: Susanne Wieczorek , Wolfgang Huang, Nikolaus Turner 62 63 Council for the Lindau Nobel Laureate Meetings Foundation Lindau Nobel Laureate Meetings

Alfred-Nobel-Platz 1 88131 Lindau Germany

www.lindau-nobel.org