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This chapter describes the importance of peer effects and offers new empirical evidence on their existence. Estimating peer effects is difficult. First, one must decide on the appropriate set of educational outcomes believed to be sensitive to peer attributes. Second, one must specify the relevant peer attributes. Third, and perhaps most difficult, one must contend with the fact that selection bias is rampant in the estimation of peer effects. The chapter uses a unique data set that combines data for three schools from the Andrew W. Mellon Foundation's College and Beyond data for the entering class of 1989, along with phonebook data identifying roommates, to implement a quasi-experimental empirical strategy aimed at measuring peer effects in academic outcomes. In particular, the chapter uses data on individual student's grades, Scholastic Aptitude Test (SAT) scores, and the SAT scores of their roommates to estimate the effect of roommates' academic characteristics on an individual's grades.

This chapter provides an overview organized around four types of competitive advantages that can explain the existence of private schools. First, private schools enjoy greater resource efficiency—that is, they may be more effective at translating dollars into outcomes valued by parents. Second, private schools are able to serve niche markets by more effectively targeting their pedagogical approach to the needs of particular subsets of families. Third, private schools derive an advantage from positive peer effects by skimming the cream of students. Finally, private schools allow parents to unbundle schooling and housing choices within a metropolitan area. The chapter begins with an overview of the complexity faced by education policy makers and the resulting complexity of an economic approach to analyzing the policy makers’ problem. The advantages mentioned above are also related to the benefits and costs of mobilizing the private sector.

This chapter analyzes the impact that social and cultural factors may have on the student’s choice of college major and in particular on gender differences. The difference in choice between men and women does not seem driven by academic skill differentials that exist and are usually in favor or women. Non-academic skill differentials and psychological attitudes towards competition and towards others may explain part of the choice. The impact of high school peers is found to be more relevant for women while the choice of a better partner (from the economic point of view) does not seem to drive the choice of college major as people seem to marry within major rather than across them.

This chapter explores what the reasons for deviating from modified universalism in practice may be. To do so, it draws on behavioural international law and economics. The chapter argues that certain decision-making biases may play a role in cross-border insolvency and can explain both negative inclinations and instances of lack of cooperation, as well as the relative success of modified universalism. The key argument here is that instead of yielding to territorial inclinations, cross-border insolvency law has a debiasing role to play. It should attempt to align choices with optimal solutions, overcoming biases, and should also close gaps in the cross-border insolvency system in line with modified universalism.

Chapter 7 answers a number of lingering questions about the processes that generate inequalities in schools. Drawing both on data from the current study and on an analysis of prior research, this chapter discusses the significance of class-based strategies and how they change as students move through school. It examines how gender and race might matter in shaping students’ interactions with teachers, how class-based patterns might vary across schools with different types of characteristics, and the extent to which students might learn class-based behaviors from their peers. The findings in this chapter highlight the difficulty involved in trying to learn new class-based behaviors, either through exposure to peers or through more formal training.

The dot-com bubble, the great housing market convulsion of 2000-2007 and the associated crash in the value of mortgage-backed securities left many observers convinced that investors were less than rational. One simple alternative to perfect rationality is that individuals are “Credulous Bayesians,” who overweight the opinions of others because they underestimate the role of shared sources of information. Credulous Bayesianism can readily generate the excess asset price volatility seen in asset price variations, and other predictions that this paper explores. Underestimating the size of shared errors also implies a failure to correct fully for the connection between past experience and information, which can explain why observable characteristics correlate with many beliefs. Credulous Bayesianism can also predict social multipliers, and the even more puzzling phenomenon of aggregation reversals, when an individual-level relationship has the opposite sign of an aggregate relationship.

Michail Bletsas, Director of Computing at the MIT Media Lab and Director of the Network Computing Systems Group at MIT, is convinced that the 21st century will see the emergence of biological intelligence. He starts the dialogue with an explanation of why the Internet and its huge computational system, - the most complex human-built system -, is forcing us to learn to engage with systems that are becoming even more complicated, with varying levels of complexity. He describes later the arrival of the finely granular Internet, which in consequence led to the concept of connectivity everywhere. Later he outlines the Internet of Things’ capabilities that he and his team have deployed inside the new MIT Media Lab building. Michael then goes on to argue why we have to separate issues of business from scientific arguments and prediction—the important thing in business is not only what’s going to happen, but when it will happen. Michael also relates why the best type of innovation is bottom up, before going on to explain how not only innovation, but also evolution, is gradually improving things.