A Treatise on the Family. G. S. Becker. Cambridge, MA: Harvard University Press. 1981. Gary Becker is one of the most famous and influential economists of the second half of the 20th century, a fervent contributor to and expounder of the University of Chicago free-market philosophy, and winner of the 1992 Nobel Prize in economics. Although any book with the word "treatise" in its title is clearly intended to have an impact, one coming from someone as brilliant and controversial as Becker certainly had such a lofty goal. It has received many article-length reviews in several disciplines (Ben-Porath, 1982; Bergmann, 1995; Foster, 1993; Hannan, 1982), which is one measure of its scholarly importance, and yet its impact is, I think, less than it may have initially appeared, especially for scholars with substantive interests in the family. This book is, its title notwithstanding, more about economics and the economic approach to behavior than about the family. In the first sentence of the preface, Becker writes "In this book, I develop an economic or rational choice approach to the family." Lest anyone accuse him of focusing on traditional (i.e., material) economics topics, such as family income, poverty, and labor supply, he immediately emphasizes that those topics are not his focus. "My intent is more ambitious: to analyze marriage, births, divorce, division of labor in households, prestige, and other non-material behavior with the tools and framework developed for material behavior." Indeed, the book includes chapters on many of these issues. One chapter examines the principles of the efficient division of labor in households, three analyze marriage and divorce, three analyze various child-related issues (fertility and intergenerational mobility), and others focus on broader family issues, such as intrafamily resource allocation. His analysis is not, he believes, constrained by time or place. His intention is "to present a comprehensive analysis that is applicable, at least in part, to families in the past as well as the present, in primitive as well as modern societies, and in Eastern as well as Western cultures." His tone is profoundly conservative and utterly skeptical of any constructive role for government programs. There is a clear sense of how much better things were in the old days of a genderbased division of labor and low market-work rates for married women. Indeed, Becker is ready and able to show in Chapter 2 that such a state of affairs was efficient and induced not by market or societal discrimination (although he allows that it might exist) but by small underlying household productivity differences that arise primarily from what he refers to as "complementarities" between caring for young children while carrying another to term. Most family scholars would probably find that an unconvincingly simple explanation for a profound and complex phenomenon. What, then, is the salient contribution of Treatise on the Family? It is not literally the idea that economics could be applied to the nonmarket sector and to family life because Becker had already established that with considerable success and influence. At its core, microeconomics is simple, characterized by a belief in the importance of prices and markets, the role of self-interested or rational behavior, and, somewhat less centrally, the stability of preferences. It was Becker's singular and invaluable contribution to appreciate that the behaviors potentially amenable to the economic approach were not limited to phenomenon with explicit monetary prices and formal markets. Indeed, during the late 1950s and throughout the 1960s, he did undeniably important and pioneering work extending the domain of economics to such topics as labor market discrimination, fertility, crime, human capital, household production, and the allocation of time. Nor is Becker's contribution the detailed analyses themselves. Many of them are, frankly, odd, idiosyncratic, and off-putting. …

A Treatise on the Family

While political connections have been widely discussed in the literature on corruption, little work has been done to assess the value of these connections. This paper uses the Jakarta Stock Exchange's reaction to news about former President Suharto's health to address this issue. By examining the difference in share price reactions of firms with varying degrees of political exposure, a market valuation of the proportion of a firm’s value derived from political connections is inferred. The implied value is very high, suggesting that as much as a quarter of a firm’s share price may be accounted for by political connections. (JEL D21, G14)

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Estimating the Value of Political Connections

The quality of market volatility forecasts implied by S&P 100 index option prices

Why Stock Markets Crash: Critical Events in Complex Financial Systems, by Didier Sornette, 2003, Princeton, NJ: Princeton University Press Consider the following events: a pressure tank within a rocket propulsion system fails during a launch; tectonic plates shift, causing the first significant earthquake in a locale for several decades; a stock market experiences a crash after a prolonged run-up in price levels. The commonality here is that all of these events are ultimately characterized by a "rupture" in the underlying system, following a buildup of "pressure" over a period of time. The recognition of certain engineering and geologic events as analogous in this way to financial market crashes was the impetus for the interesting and enjoyable new book Why Stock Markets Crash: Critical Events in Complex Financial Systems, by Didier Sornette. The major thesis of this book is that a stock market crash is not the result of short-term exogenous events, but rather involves a long-term endogenous buildup, with exogenous events acting merely as triggers. In particular, Sornette examines financial crashes within the framework of the "spontaneous emergence of extreme events in self-organizing systems," noting that "extreme events are characteristic of many... 'complex systems.'" The author employs mathematical tools-specifically, log-periodic power laws-to study the prebubble or precrash buildup in a financial system to its critical point. Efforts by nonfinancial people to analyze and explain financial phenomena using quantitative techniques from the hard and engineering sciences can be of tremendous use and interest to those of us in the financial community-provided that the mathematical techniques are applied by an author with an exposure to and understanding of the financial instruments, processes, and markets that are being analyzed. The author of Why Stock Markets Crash has done an admirable job of understanding and appreciating the financial world and its nuances. Didier Sornette is a professor of geophysics at UCLA, as well as a research director at the National Center of Scientific Research in France. He specializes in the prediction of catastrophic events within a complex system framework. In this book, as well as in a portion of his hundreds of journal articles, he takes his previous work in the physical and geological sciences and exports his mathematical modeling and prediction skills to the financial markets. In the first chapter, Sornette places historical extreme financial events-in particular, market crashes-in a complex, self-organizing system framework. This is followed by two chapters devoted, respectively, to the basic concepts and characteristics of financial markets, and to some statistical analyses demonstrating that financial crashes are essentially outliers. …

Why Stock Markets Crash: Critical Events in Complex Financial Systems

Corruption is a threat to democracy and economic development in many societies. It arises in the ways people pursue, use and exchange wealth and power, and in the strength or weakness of the state, political and social institutions that sustain and restrain those processes. Differences in these factors, Michael Johnston argues, give rise to four major syndromes of corruption: Influence Markets, Elite Cartels, Oligarchs and Clans, and Official Moguls. In this 2005 book, Johnston uses statistical measures to identify societies in each group, and case studies to show that the expected syndromes do arise. Countries studied include the United States, Japan and Germany (Influence Markets); Italy, Korea and Botswana (Elite Cartels); Russia, the Philippines and Mexico (Oligarchs and Clans); and China, Kenya, and Indonesia (Offical Moguls). A concluding chapter explores reform, emphasising the ways familiar measures should be applied - or withheld, lest they do harm - with an emphasis upon the value of 'deep democratisation'.

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Syndromes of Corruption: Wealth, Power, and Democracy

https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=2056&context=cowles-discussion-paper-series

A strategic market game with complete markets

The non-cooperative equilibria of a trading economy with complete markets and consistent prices☆

It is well known that China's corruption problem has become more and more serious during the period of economic reform. This paper examines China's corruption problem with the help of several simple economic models. The author proposes the concepts of implicit corruption and explicit corruption. We explain how the granting of privileges has directly created implicit corruption in China's socialist market economy. We argue that the long-term existence of the same privileged group in Chinese society has led to widespread collusion among its members, and as a result, these privileged group members, by utilizing their monopoly power, are able to seize almost all the wealth created by the ordinary Chinese people. This seizure is accomplished by means of a two-part tariff in pricing their administrative service, which is the essence of the explicit corruption. Finally, we point out that, because both implicit corruption and explicit corruption are generated by China's political system, which grants and protects privileges, unless a political reform is initiated and privileges are eliminated, China's problem of corruption will never be solved.

Privilege and Corruption: The Problems of China's Socialist Market Economy

The Noncooperative Equilibria of a Trading Economy with Complete Markets and Consistent Prices

This paper develops a general equilibrium model to consider the effects of corruption caused by institutionalized privilege on economic welfare, the network size of division of labour and productivity. First a Walrasian equilibrium in a market economy is computed; then we consider the effects on welfare when a privileged group is chosen to work as high-level administrators. Finally, we allow for explicit collusion between administrators by introducing an administrator's agent who acts in the interests of all the administrators. The model shows that in equilibrium (fixed point) the degree of corruption, the degree of division of labour and productivity are interdependent.

Shuntian Yao

Papers

A strategic market game with complete markets

The non-cooperative equilibria of a trading economy with complete markets and consistent prices☆

Privilege and Corruption: The Problems of China's Socialist Market Economy

The Noncooperative Equilibria of a Trading Economy with Complete Markets and Consistent Prices

Institutionalized Corruption and Privilege in China's Socialist Market Economy: A General Equilibrium Analysis