Showing papers in "Social Science Research Network in 1974"

A Theory of Social Interactions

Abstract: This essay incorporates a general treatment of social interactions into the modern theory of consumer demand. Section 1 introduces the topic and explores some of the existing perspectives on social interactions and their importance in the basic structure of wants. In Section 2, various characteristics of different persons are assumed to affect the utility functions of some persons, and the behavioral implications are systematically explored. Section 3 develops further implications and applications in the context of analyzing intra-family relations, charitable behavior, merit goods and multi-persons interactions, and envy and hatred. The variety and significance of these applications is persuasive testimony not only to the importance of social interactions, but also to the feasibility of incorporating them into a rigorous analysis.

Social Costs of Monopoly and Regulation

Abstract: When an industry is monopolized, price rises above and output falls below the competitive level. Those who continue to buy the product at the higher price suffer a loss, but this loss is exactly offset by the additional revenue that the monopolist obtains by charging the higher price. Other consumers, who are deflected by the higher price to substitute goods, suffer a loss, that is not offset by gains to the monopolist. This is the "deadweight loss" from monopoly, and in conventional analysis the only social cost of monopoly. The loss suffered by those who continue to buy the product at the higher cost is regarded merely as a transfer from consumers to owners of the monopoly seller and has not previously been factored into the social costs of monopoly. However, the existence of an opportunity to obtain monopoly profits will attract resources into efforts to obtain monopolies, and the opportunity costs of those resources are social costs of monopoly, too. Although the tendency of monopoly rents to be transformed into costs is no longer a novel insight, its implications both for the measurement of the aggregate social costs of monopoly and for a variety of other important issues relating to monopoly and public regulation (including tax policy) continue to be ignored. The present paper is an effort to rectify this neglect. Part I introduces the material. Part II presents a simple model of the social costs of monopoly, conceived as the sum of the deadweight loss and the additional loss resulting from the competition to become a monopolist. Part III uses the model to estimate the social costs of monopoly in the United States, and the social benefits of antitrust enforcement. Part IV explores the implications of the analysis for a variety of issues relating to monopoly and public regulation, such as public policy toward price discrimination and the choice between income and excise taxation.

Limited Knowledge and Economic Analysis

Abstract: Considers the idea that the uncertainties about economics stem from the need to understand the economics of uncertainty. Also argues that the lack of economic knowledge is largely due to the difficulty in modeling the economic agent's ignorance. The neoclassical model, founded on concepts regarding the individual economic agent and the market, is the starting point for the discussion. It is suggested that a market system is informationally economical and that the individual agent need not know very much about the economic system as a whole because there is far more in it than any one individual can learn. What the individual must know is the motivation and production conditions that define him or her. In addition, the simplification of an individual's decision making processes is possible because the markets have supplied the needed economic information in the form of prices. Also examined is the nonexistence of markets for future goods. This is done by considering the implications for the rest of the system and the reasons for the market's nonexistence. Finally, it is proposed that when uncertainty exists, risk aversion implies that steps will be taken to reduce risks. (SFL)

Estimation of a Stochastic Model of Reproduction: An Econometric Approach

Abstract: In the past few years, there has been substantial progress in the application of the economic theory of household decision making to human fertility behavior. Theoretical emphasis has been given to the effects of the costs of parental tine and money resources devoted to rearing children on the demand for the total number of children in a static framework under conditions of certainty. Empirical work has focused on explaining variation in the number of children ever born to women, who have completed their childbearing, as a function of measures of the household's total resources and the opportunity cost of time, especially the value of the wife's time. One important objection to static theories of fertility is their failure to deal with the implications of the simple fact that reproduction is a stochastic biological process in which the number and timing of births and the traits of children (e.g. sex, intelligence, health, etc.) are uncertain and not subject to direct control. In this paper, we report some initial results of a study in progress whose goal is to develop an integrated theoretical and econometric model of fertility behavior within a sequential stochastic framework. The principal contribution of the paper is to the development of an appropriate econometric methodology for dealing with some new econometric problems that arise in such models.

Theories of Economic Regulation

Abstract: A major challenge to social theory is to explain the pattern of government intervention in the market - what we may call "economic regulation." Properly defined, the term refers to taxes and subsidies of all sorts as well as to explicit legislative and administrative controls over rates, entry, and other facets of economic activity. Two main theories of economic regulation have been proposed. One is the "public interest" theory, bequeathed by a previous generation of economists to the present generation of lawyers. This theory holds that regulation is supplied in response to the demand of the public for the correction of inefficient or inequitable market practices. It has a number of deficiencies that we shall discuss. The second theory is the "capture" theory - a poor term but one that will do for now. Espoused by an odd mixture of welfare state liberals, Marxists, and free-market economists, this theory holds that regulation is supplied in response to the demands of interest groups struggling among themselves to maximize the incomes of their members. There are crucial differences among the capture theorists. I will argue that the economists' version of the "capture" theory is the most promising but shall also point out the significant weaknesses in both the theory and the empirical research that is alleged to support it.

Age, Experience, and Wage Growth

Abstract: During the past decade, much has been said about the role that on-the-job training plays in augmenting one's stock of human capital. Up to this point, little has been done to distinguish the effect of on-the-job training from that of aging on the increase in human wealth. The reason rests primarily on the fact that it is difficult to observe or even define in some appropriate way the amount of on-the-job training that an individual possesses. In this paper, a method is developed by which one may compare the effects of work experience to those of aging per se. The difference is then attributed to on-the-job training.

Progress in Human Capital Analysis of the Distribution of Earnings

Abstract: The traditional studies of income distribution, a field with which economists are becoming increasingly concerned, must be described as basically sociological. The ascendancy of the human capital approach can be viewed as a reaction of economists to this non-economic, though certainly not irrelevant, tradition. In stressing the role played by individual and family optimizing decisions in human capital investments, important aspects of income determination are brought back within the mainstream of economic theory and within the power of its analytical and econometric tools. Human capital is not the only element of choice in the analysis of income distribution . Nevertheless, it appears that the subject of human capital investments lends itself to a more systematic and comprehensive analysis of wage differentials, than each of the other factors. The following is a description of research in the distribution of labor incomes in which human capital theory serves as an organizing principle. It is, in part, a sequel to my 1970 survey and, in part, a report of ongoing research of my own and of others.

The Statistical Analysis of Local Structure in Social Networks

Abstract: We introduce the concept of a triad census of a digraph arid show how it can be used to enumerate various types of subgraph configurations. We give the basic probabilities needed for computing means and variances for a triad census under the U-MAN distribution for digraphs. These concepts are combined to provide a way of testing propositions about social structure using sociometric data. An application to 408 sociograms is given.

The Empirical Status of the Subculture of Violence Thesis

Abstract: This article reviews some of the existing literature bearing on the subculture of violence thesis (Wolfgang, l958), reports the results of a re-analysis of survey data collected for •the President's Commission on the Causes and Prevention of Violence,and presents new data on peer esteem and social psychological correlates of fighting among males in Milwaukee, Wisconsin. It is concluded that although the subculture of violence thesis has not been definitively tested, the weight of the evidence is against it

The Incubator Hypothesis: Evidence from Five Cities

Abstract: The purpose of this paper is to review the past evidence and to offer some new data to assess whether the incubator hypothesis can be empirically supported. In particular the two general aspects of the hypothesis will be tested. First, we will examine the proposition that highly centralized locations are attracting a disproportionate number of new firms and/or the employment associated with new firms. Second, we will test the hypothesis that new firms which are formed in high density areas move outward from such sites in their early years of existence in order to expand their productive activities. We refer to these as the "simple and "dynamic" hypotheses in the rest of the paper. Our analysis is based on the experience of all manufacturers in several U.S. cities. We recognize that it is quite possible that the hypothesis could hold for certain industries even if it is unsupported for all firms together. Our intent, however, is to test the validity of the hypothesis as a general theory of intraurban location behavior. The paper consists of three sections. The first two present evidence on the "simple" and "dynamic" hypotheses. The final section summarizes our findings and offers some conclusions.

Unemployment Effects of Minimum Wages

Abstract: Empirical investigation of employment effects of minimum wage legislation is a subject of continuing interest, judging by a growing number of studies. The older studies were concerned mainly with changes in employment in low-wage industries. In the more recent work, attention has shifted to effects on unemployment in low-wage demographic groups, such as teenagers. Despite the statistical difference there is no apparent recognition of a conceptual as well as substantive distinction between minimum wage effects on employment and those on unemployment. The purpose of this paper is to explore the analytical distinction between employment and unemployment effects in the hope of providing some understanding of the observations. Though related empirical work is far from being definitive the findings appear to be informative.

Legality and Reality: Some Evidence on Criminal Procedure

Abstract: There is widespread concern that the criminal justice system, particularly in large urban areas, is breaking down under the strain of an increasing demand for its services and inadequate resources. At the center of the system, located between the police and the prisons, are the criminal courts. Statistics on rising crime rates, recidivism, arbitrary sentencing practices, court delay, and prison riots are taken as further evidence that the courts are failing. What has been notably scarcer is systematic empirical research on the criminal court system - research that can contribute to our understanding of the actual workings of the system and enable us to develop policies for improvement. The purpose of this study is to begin to remedy this deficiency by applying the quantitative techniques of economics to an analysis of some important issues in criminal court procedure.

On a General Computer Algorithm for the Analysis of Models with Limited Dependent Variables

Abstract: Several econometric models for the analysis of relationships with limited dependent variables have been proposed, including the probit, Tobit, two-limit probit, ordered discrete, and friction models. Widespread application of these methods has been hampered by the lack of suitable computer programs. This paper provides a concise survey of the various models; suggests a general functional model under which they may be formulated and analyzed; reviews the analytic problems and the similarities and dissimilarities of the models; and outlines the appropriate and necessary methods of analysis including, but not limited to, estimation. It is thus intended to serve as a guide for users of the various models, for the preparation of suitable computer programs, for the users of those programs; and, more specifically, for the users of the program package utilizing the functional model as implemented on the NBER TROLL system.

The Arab Oil Weapon - A Threat to International Peace

Abstract: This article addresses the use of economic coercion and the UN Charter with special attention to the Arab Oil Weapon and consequences from its use for several developing and other countries Most apparently do not recognize that use of intense economic coercion can be unlawful under the UN Charter, but there should be more adequate attention to the impact of intense economic coercion on various policies at stake under the Charter and international law more generally

The Quantity Theory of Money: Its Historical Evolution and Role in Policy Debates

Abstract: One of the oldest surviving economic doctrines is the quantity theory of money, which in its simplest and crudest form states that changes in the general level of commodity prices are determined primarly by changes in the quantity of money in circulation.

The Private Enforcement of Law

Abstract: An important question in the economic study of enforcement is the appropriate, and the actual, division of responsibilities between public and private enforcers. This question has been brought into sharp focus recently by an article in which Gary Becker and George Stigler advocate the privatization of law enforcement. In the present article, we explore the idea that the area in which private enforcement is in fact clearly preferable to public enforcement on efficiency grounds is more restricted than Becker and Stigler believe; perhaps the existing division of enforcement between the public and private sectors approximates the optimal division. Part I develops an economic model of competitive, profit-maximizing private enforcement. The model predicts the level of enforcement and the number of offenses that would occur in a world of exclusively private enforcement. Part II refines the model to account for the presence of monopoly in the private enforcement industry, different assignments of property rights in legal claims, the effect of taxing private enforcers, nonmonetary penalties, and legal errors - elements ignored in the initial development of the model in Part I. Part III contrasts our model with other economic approaches to the enforcement question. Part IV presents a number of positive implications of the model, relating to the choice between public and private enforcement of criminal versus civil laws, the assignment of exclusive rights to the victims of offenses, the budgets of public agencies, the discretionary nonenforcement of the law, and the legal treatment of blackmail and bribery. The positive implications of the model appear to be consistent with observations of the real world, although the findings in Part IV must be regarded as highly tentative. An appendix discusses the economics of rewards - an important method of compensating private enforcers.

Handbook on Peace Education

Abstract: Frankfurt am Main; Oslo : International Peace Research Association, Education Committee 1974, XI, 378 S. Padagogische Teildisziplin: Vergleichende Erziehungswissenschaft; Sonstige; als elektronischer Volltext verfugbar

Disease and Labor Productivity

Abstract: Excerpt from introduction: Our object in this paper is both to advance the understanding of the quantitative impact of parasitic diseases on output and to improve on the theoretical framework within which such estimates are made for any disease and in any region. While the study examines the productivity effects of five parasitic diseases-schistosomiasis, Ascaris (ascariasis), Trichuris (trichuriasis), Strongyloides (strongyloidiasis), and hookworm infection we have focused on schistosomiasis, which has been called the "unconquered plague." Schistosomiasis is estimated to afflict more than 100 million persons throughout wide areas of predominantly less developed countries of the tropical world; 1 and, ironically, it threatens to become still more widespread as a result of developmental efforts such as water conservation and irrigation projects, which extend habitats for the intermediate snail host of the disease. Although schistosomiasis is the subject of a large and expanding research effort aimed at finding efficient control methods, this disease, like the other four parasitic infections discussed here, is seldom directly implicated as a cause of death, and its human costs are not well understood.

Measuring the Effect of an Anti-Discrimination Program

Abstract: Since 1941, six Executive Orders have been issued forbidding Federal government contractors from discriminating against minority workers. In principle, all prospective contractors are required to demonstrate compliance with the law before a contract is let. The potential penalties are severe: failure to comply with the law may result in revocation of current contracts and suspension of the right to bid on future contracts. Despite these provisions, doubts have been raised about the effectiveness of the Orders. Defenders of the Orders cite cases in which contract award dates have been postponed until firms have taken steps toward compliance with the law. In this paper, we investigate these competing claims using data from 40,445 establishments sampled in 1966 and 1970. In the first section of this paper, we distinguish what can be measured from what cannot. We develop a framework to measure and interpret program effects. In the second section we discuss the design of our sample and present results of an analysis of the randomness of this sample. In the third and concluding section, we present the estimates and discuss their plausibility.

Changes in the Recession Behavior of Wholesale Prices: The 1920s and Post World War II

Abstract: The present study examines the recession behavior of wholesale prices since World War II and compares it with the 1920s as the most recent period of earlier recessions with comparable severity The focus is on changes in recession behavior, possible bias in the data, and differences in behavior between various groups of wholesale prices (Differences between wholesale and consumer prices, though of importance, are not examined here) The purpose is to extend the evidence on the degree and uniformity of the change in price behavior and to test various interpretations of those changes

The Entropy Law, Accounting Data, and Relevance to Decision-Making

Abstract: This study uses the Entropy index of information developed by Claude Shannon and elaborated by Lev and others to measure the aggregation of accounting information. The question of interest is whether Entropy is a measure of communication to assess transmission channel in communication or the semantic measure of information. This question is discussed and evaluated using an experiment on making loan decisions by commercial lending officers. The results do not support the notion of using Entropy to convey meaning, consistent with Broadhurst and Darnell notion “eliciting meanings in others, requires a code-a set of symbols.” The Entropy measure, however, offers a unique index of data disaggregation in the sense of combining or separating different units of communicated signals.

The Federal Advisory Committee Act

Abstract: The Federal Advisory Committee Act, enacted on October 6, 1972 is a congressional attempt to institute administrative controls and to open to public scrutiny the operations of nongovernmental groups that supply advice to the government. Because many such groups have an interest in any action that the government may institute, the danger of abuse is apparent. Moreover, advisory groups are often used to divert attention from sensitive issues, or even to delay a decision on an issue where there are strongly different views. And, all too often, the advisory committee system provides a medium for bestowing political favors, such as appointment to a prestigious commission. This legislation seeks to correct such abuses by requiring balanced membership, mandating that the use of an advisory committee be justified, and opening advisory committee operations to public scrutiny. The statute also seeks to curb unnecessary expenditures on such committees through administrative controls and to terminate committees that are no longer fulfilling a useful function. This Article analyzes the problems that the statute was designed to remedy and proposes a construction to fulfill these purposes.

Years and Intensity of Schooling Investing

Abstract: An essential feature of schooling is not only that it occurs in a different site than most on-the-job training but also that it is more intensive. That is, a smaller proportion of gross potential earnings is sacrificed in on-the-job training than in schooling. In estimating human capital earnings functions it has generally been assumed that during schooling 100% of gross potential earnings are invested in all years, while in on-the-job training this percentage is smaller and is a declining function of age. This assumption has been quite useful since it allows the identification of an estimate of the rate of return on schooling from a regression of earnings on years of schooling. This paper argues that the percentage of gross earnings invested may fall below 100% well before schooling is ended, that this percentage is likely to be correlated with years of schooling, and thus this procedure yields only a biased estimate of the rate of return to schooling.

The Concept of Indexation in the History of Economic Thought

Abstract: Periods of severe monetary disturbance tend to spawn unorthodox and often ingenious stabilization schemes.

Comparison of Robust and Varying Parameter Estimates of a Macroeconometric Model

Abstract: Four estimators of econometric models are compared for predictive accuracy. Two estimators assume that the parameters of the equations are subject to variation over time. The first of these, the adaptive regression technique (ADR), assumes that the intercept varies overtime, while the other, a varying-parameter regression technique (VPR), assumes that all parameters may be subject to variation. The other two estimators are ordinary least squares (OLS) and a robust estimator that gives less weight to large residuals. The vehicle for these experiments is the econometric model developed by Ray Fair. The main conclusion is that varying parameter techniques appear promising for the estimation of econometric models. They are clearly superior in the present context for short term forecasts. Of the two varying parameter techniques considered, ADR is superior over longer prediction intervals.

The Variances of Regression Coefficient Estimates Using Aggregate Data

Abstract: This paper considers the effect of aggregation on the variance of parameter estimates for a linear regression model with random coefficients and an additive error term. Aggregate and microvariances are compared and measures of relative efficiency are introduced. Necessary conditions for efficient aggregation procedures are obtained from the Theil aggregation weights and from measures of synchronization related to the work of Grunfeld and Griliches.

The Timing and Spacing of Births and Women's Labor Force Participation: An Economic Analysis

Abstract: This dissertation analyzes the timing and spacing of child-births within an economic framework I have attempted to explain when women in the United States begin child bearing - ie, the "timing" (of the first birth) - and the length of the interval they spend in child bearing - ie, the "spacing" of births Chapter I introduces the topic and reviews some of the relevant literature In Chapter II, an economic model is developed which predicts that women with a rising price of time over the lifetime will start having their children sooner after finishing school Those with a high price of time throughout their lifetimes will have their children closer together The model also predicts that families whose income receipts rise sharply, at least in the early years after the husband enters the labor force, will postpone their first birth and that families with a high lifetime income will have their children farther apart The data and variables used to test the model's hypotheses are described in Chapter III Chapters IV and V describe, respectively, the empirical tests of the timing and the spacing hypotheses The results of an investigation of some relationships between the timing of the various demographic events and labor force participation are reported in Chapter VI Chapter VII summarizes the theoretical analysis and the empirical results, which generally support the timing and spacing hypotheses

Inflation and Market Structure, 1967-1973

Abstract: A variety of theories have been offered to explain why prices generally respond so little to declines in demand, and do so now less than formerly. Most of these center around a dependence of prices on costs, or the anticipated trend of costs, and a greater disregard for short-run changes in demand. The more appealing hypothesis is the simple one that price setters tend to adjust slowly to changes in market conditions; they transmit but do not originate inflation. To find that prices in the less competitive markets respond more slowly to changes in market conditions - first lagging, then catching up - would support the theory that firms try to avoid frequent changes in prices but vary in their ability to do so. Are lags in price adjustment related to market structure? Previous empirical studies of the relationship are inconclusive on this point. Earlier literature, largely theoretical, has suggested that concentrated industries tend to raise prices more rapidly, thereby exerting a permanent upward push on the price level. Empirical studies have usually reported the opposite or no consistent relation, however. On the lag-and-catching-up theory, the concentrated industries should exhibit greater increases in the period of waning inflation after 1969. This study examines the data for such a pattern and finds striking evidence of it.

The Replacement of Scientific Theories: Reduction and Explication

Abstract: An examination of earlier views yields an account of theoretic change on which changes in theory which do involve changes in meanings of terms are classified as a special (and by no means exhaustive) case of theoretic change which, latter, is construed as a more general phenomenon. Only the general problem is given detailed consideration here. The account given considers the problem of how replacement of intensional theories by extensional ones may be treated within the general framework provided. Among its results is the conclusion that rational changes in a scientific theory may be cogently construed as determined by warranted decisions that a new theory is more adequate (than the old one it replaces) with regard to purposes for which a theory is sought.

Varying-Parameter Supply Functions and the Sources of Economic Distress in American Agriculture, 1866-1914

Abstract: The agrarian unrest in the United States at the end of the nineteenth century is examined. This unrest is often viewed as stemming from the inability of farmers to adapt to changing conditions in world agriculture. This hypothesis is tested in the context of a distributed lag supply function. Varying parameter estimation methods are used to trace the history of the parameters in the supply function and to decompose observed prices into permanent and transitory components over time. The patterns of variation are tested for conformity with a model of rational price-expectation formation. The conclusion is that farmers behaved as economic theory would predict, but that neither theory nor practice gave them relief from the troubles which plagued them.