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    Glaeser, Edward L, and Andrei Shleifer. 2014. “Gary Becker (1930–2014).” Science 344 (6189): 1233. Publisher's Version Abstract
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    Gary Becker, who died on 3 May 2014 at the age of 83, redefined economics both in its methodology and scope. He radically expanded the sphere of economic analysis. As the range of issues and especially data in economics increased over the last half century, Becker's approach became more and more relevant and modern. He was awarded the 1992 Nobel Prize in Economics for “having extended the domain of microeconomic analysis to a wide range of human behavior and interaction, including nonmarket behavior.”

    Rognlie, Matthew, Andrei Shleifer, and Alp Simsek. 2018. “Investment Hangover and the Great Recession.” American Economic Journal: Macroeconomics 10 (2): 113-53. Abstract
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    We present a model of investment hangover motivated by the Great Recession. Overbuilding of durable capital such as housing requires a reallocation of productive resources to other sectors, which is facilitated by a reduction in the interest rate. When monetary policy is constrained, overbuilding induces a demand-driven recession with limited reallocation and low output. Investment in other capital initially declines due to low demand, but it later booms and induces an asymmetric recovery in which the overbuilt sector is left behind. Welfare can be improved by expost policies that stimulate investment (including in overbuilt capital), and ex-ante policies that restrict investment.

    Shleifer, Andrei. 2015. “Matthew Gentzkow, Winner of the 2014 Clark Medal.” Journal of Economic Perspectives 29 (1): 181-192. Publisher's Version Abstract
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    The 2014 John Bates Clark Medal of the American Economic Association was awarded to Matthew Gentzkow of the University of Chicago Booth School of Business. The citation recognized Matt’s “fundamental contributions to our understanding of the economic forces driving the creation of media products, the changing nature and role of media in the digital environment, and the effect of media on education and civic engagement.” In addition to his work on the media, Matt has made a number of significant contributions to empirical industrial organization more broadly, as well as to applied economic theory. In this essay, I highlight some of these contributions, which are listed on Table 1. I will be referring to these papers by their number on this list.

    Matt earned both his AB in 1997, and, after a brief career in the theatre, his PhD in 2004 from Harvard, where he began to work on the media. At Harvard he also met Jesse Shapiro, his close friend and collaborator. I was one of Matt’s (as well as Jesse’s) thesis advisors. From Harvard, both Matt and Jesse moved to Chicago Booth School, where their research truly thrived and they contributed to a fantastic group of applied economists.

    Gennaioli, Nicola, Andrei Shleifer, and Robert Vishny. 2015. “Money Doctors.” Journal of Finance 70 (1): 91-114. Publisher's Version Abstract
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    We present a new model of investors delegating portfolio management to professionals based on trust. Trust in the manager reduces an investor’s perception of the riskiness of a given investment, and allows managers to charge fees. Money managers compete for investor funds by setting fees, but because of trust, fees do not fall to costs. In equilibrium, fees are higher for assets with higher expected return, managers on average under perform the market net of fees, but investors nevertheless prefer to hire managers to investing on their own. When investors hold biased expectations, trust causes managers to pander to investor beliefs.

    Hanson, Samuel, Andrei Shleifer, Jeremy C Stein, and Robert W Vishny. 2015. “Banks as patient fixed-income investors.” Journal of Financial Economics 117 (3): 449-469. Abstract
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    We examine the business model of traditional commercial banks when they compete with shadow banks. While both types of intermediaries create safe “money-like” claims, they go about this in different ways. Traditional banks create money-like claims by holding illiquid fixed-income assets to maturity, and they rely on deposit insurance and costly equity capital to support this strategy. This strategy allows bank depositors to remain “sleepy”: they do not have to pay attention to transient fluctuations in the market value of bank assets. In contrast, shadow banks create money-like claims by giving their investors an early exit option requiring the rapid liquidation of assets. Thus, traditional banks have a stable source of funding, while shadow banks are subject to runs and fire-sale losses. In equilibrium, traditional banks have a comparative advantage at holding fixed-income assets that have only modest fundamental risk but are illiquid and have substantial transitory price volatility, whereas shadow banks tend to hold relatively liquid assets.

    Gennaioli, Nicola, Yueran Ma, and Andrei Shleifer. 2016. “Expectations and Investment.” NBER Macroeconomics Annual, Vol. 30 (2015): 379-442. Abstract
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    Using micro data from Duke University quarterly survey of Chief Financial Officers, we show that corporate investment plans as well as actual investment are well explained by CFOs’ expectations of earnings growth. The information in expectations data is not subsumed by traditional variables, such as Tobin’s Q or discount rates. We also show that errors in CFO expectations of earnings growth are predictable from past earnings and other data, pointing to extrapolative structure of expectations and suggesting that expectations may not be rational. This evidence, like earlier findings in finance, points to the usefulness of data on actual expectations for understanding economic behavior.   

    Bordalo, Pedro, Nicola Gennaioli, and Andrei Shleifer. 2016. “Competition for Attention.” Review of Economic Studies 83 (2): 481-513. Abstract
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    We present a model of market competition in which consumers' attention is drawn to the products' most salient attributes. Firms compete for consumer attention via their choices of quality and price. Strategic positioning of a product affects how all other products are perceived. With this attention externality, depending on the cost of producing quality some markets exhibit “commoditized” price salient equilibria, while others exhibit “de-commoditized” quality salient equilibria. When the costs of quality change, innovation can lead to radical shifts in markets, as in the case of decommoditization of the coffee market by Starbucks. In the context of financial innovation, the model generates the phenomenon of “reaching for yield”.

    Bordalo, Pedro, Nicola Gennaioli, and Andrei Shleifer. 2018. “Diagnostic Expectations and Credit Cycles.” Journal of Finance. Abstract
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    We present a model of credit cycles arising from diagnostic expectations – a belief formation mechanism based on Kahneman and Tversky’s (1972) representativeness heuristic. In this formulation, when forming their beliefs agents overweight future outcomes that have become more likely in light of incoming data. The model reconciles extrapolation and neglect of risk in a unified framework. Diagnostic expectations are forward looking, and as such are immune to the Lucas critique and nest rational expectations as a special case. In our model of credit cycles, credit spreads are excessively volatile, over-react to news, and are subject to predictable reversals. These dynamics can account for several features of credit cycles and macroeconomic volatility

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