Showing papers in "Social Science Research Network in 1975"

The Displaced, Uncomfortable Entrepreneur

Abstract: Given that personal initiative and enterprise are taken for granted in the United States, it is surprising that - as of 1975 - only 350,000 to 500,000 individuals per year actually start a new company. This study discusses the conditions and the kinds of personalities associated with people who become entrepreneurs, in contrast to others with the same education and opportunities who do not. The research finds that most entrepreneurs are DPs, displaced persons, who have been dislodged from a comfortable, safe situation. Some are literal DPs, such as political refugees, but most common are people fired from their jobs, or deprived of an opportunity to advance in their jobs. Another factor impacting entrepreneurial behavior is the perception that the individual has no future, or does not want to do her or his current job for the rest of her or his life. This tends to occur when individuals near the age of 40 or 50. Two categories of people are identified, who differ in terms of locus of control, i.e. the degree to which people feel they can affect the world around them. Some people are "external" and believe that their success is mostly impacted by outside forces, while others are "internal" and believe in their own influence on the course of events, which tends to help in entrepreneurial success. Other entrepreneurial conditions and characteristics identified by the study are: a need for independence; being able to imagine oneself in the role of an entrepreneur; having examples around of others who resemble one and have started businesses; and coming from an ethnic group that has traditionally been associated with entrepreneurial success. Apart from all those, having the necessary resources such as labor, materials, and facilities, is a necessary element. The analysis concludes by listing certain tactics for creating more entrepreneurs -- e.g., acquiring knowledge of conditions that induce potential entrepreneurs to take action, and using this knowledge to make new towns and regions more entrepreneurially active; and demonstrating to individuals that they do have internal control. (AT)

Prerequisites Versus Diffusion: Testing Alternative Explanations of Social Security Adoption

Abstract: Social security is one of the most important means by which modern nations protect the welfare of their citizens. The first appearance of social security represents a particularly important policy juncture at which many nations broke from the anti-welfare doctrine of traditional liberalism. The bulk of scholarship on social security treats its adoption as an explanation for other aspects of the social security experience, instead of an outcome to be explained. This article analyzes two alternative explanations of the timing of adoption: the prerequisites hypothesis, involving the level of development within nations, versus diffusion among nations. Three patterns emerge. Among the earliest adopters, social security diffuses up a developmental hierarchy of nations rather than down a hierarchy; in the middle group of adopters, a pattern of spatial diffusion is present in which social security is rapidly diffused among countries at widely different levels of modernization; and among the latest adopters, a combination of hierarchical diffusion and a prerequisite explanation appear to be the most satisfactory means of accounting for the pattern of adoption.

A Beta-Logistic Model for the Analysis of Sequential Labor Force Participation by Married Women

Abstract: In this paper, we discuss statistical problems that arise in studying sequences of quantal responses (e.g., labor force participation) in panel data on heterogeneous populations (i.e., populations in which there is unobserved variation in response probabilities). Assuming that response probabilities are governed by a beta distribution, we derive a generalization of the cross-section logit model to enable it to deal with sequences of discrete events in panel data. This model is applied to panel data on labor force participation of married women. One of our findings is that the distribution of participation probabilities is U-shaped, indicating that most women have participation probabilities near zero or one.

Education and Screening

Abstract: Since the advent of the human capital concept, much attention has been devoted to the relationship between income and schooling. Their positive association is one of the most consistent empirical findings of the human capital literature. The conventional view, the productivity augmenting view, is that schooling enhances earnings via the production of marketable skills. But, recent theoretical arguments have suggested the possibility that schooling's private monetary return may be informationally based.' In the most extreme form of this screening hypothesis, schooling serves only to identify those individuals who are more productive in the market, the proposition being that an individual's productivity is unaffected- by the formal schooling process. The importance of these competing explanations relates to schooling's implied social return. If schooling's sole function is informational, its social product is determined exclusively by the gain to productive rearrangements which are made feasible by the less imperfect ex ante knowledge of individual productivities. In the most extreme form of screening it is only the relationship between aggregate output and schooling's informational content that determines, along with the resource cost of schooling, the socially optimal investment in school

Human Capital and Labor Supply: A Synthesis

Abstract: It is by now widely recognized that investment decisions play a major role in the determination of individual age-earnings profiles. The purpose of this paper is to present a simple life-cycle model of investment in human capital in which leisure choices are explicitly incorporated. In so doing, we integrate two previously disparate branches of life-cycle theory: models of labor supply with exogenous wages, and models of human capital formation with exogenous leisure. Of course, to accomplish this, we must posit utility maximization as the individual's goal rather than income maximization.

A Labor Theoretic Analysis of Criminal Choice

Abstract: In this paper we show that plausible preference restrictions are not sufficient for unambiguous household supply results in the criminal choke problem. Therefore policy prescriptions in this area do not follow from theory, but rather require empirical determination of relative magnitudes.

Inequality: Earnings vs. Human Wealth

Abstract: The objective of this paper is to draw some inferences concerning the relative magnitudes of inequality in annual earnings, the traditional measure, and in human wealth, the measure suggested by recent literature. A second objective is to assess the relative importance of schooling, measured ability and to a limited extent family background in earnings and human wealth inequality as well as the overall contribution of these variables combined. A unique feature of this study is the estimation of earnings and human wealth and their distribution for a group of men for which several age-earnings data points are available over almost an entire lifetime (ages eighteen to fifty-four).

The Independent Judiciary in an Interest-Group Perspective

Abstract: We believe that at a deeper level the independent judiciary is not only consistent with, but essential to, the interest-group theory of government. Part I of this paper explains our theory of the independent judiciary. Part II discusses several implications of the theory, relating to administrative regulation, the form of interest-group legislation, the tenure of judges, and constitutional adjudication. The appendix to this paper presents an empirical analysis of judicial independence using data on Acts of Congress that have been held unconstitutional by the Supreme Court.

The Value of the Ability to Deal with Disequilibria

Abstract: Explores the relation of a person's education and experience to the ability to reallocate resources, especially under economic disequilibrium. Examples of economic disequilibria include unemployment rate changes, geographical and occupational job shifts, and changes in incentives for geographical or occupational transfer. While this allocative ability is clearly important for entrepreneurs, it is just as important for others, and the enhancement of this ability is one of the greatest rewards of education. Study of the differing economic histories of the agricultural regions of California, Brazil and Canada show that a farmer's level of education is positively related to successful disequilibria adaptations. Likewise, education plays some role in housewives' productivity, mate choice, control of birth rates, and adaptability to the disequilibria of changing household operations. Economic models need to be developed to assess equilibrium; in these, entrepreneurial ability and function would be treated as scarce resources, likely enhanced by education and perhaps by cognitive abilities. Future cognitive studies should examine to what extent the ability to deal with disequilibrium is a learned trait, and whether this trait can be augmented. (CJC)

Notes on the Tax Treatment of Human Capital

Abstract: Section 1 presents a preliminary attempt at clarifying the ways in which taxes affect human capital accumulation. Section 2 outlines a simple general equilibrium model with two capital goods - physical and human â€" and the saving corresponding to each, to begin to deal with these issues. Once human capital is viewed as an alternative source of wealth and hence human capital investment as a source of current saving (re-sources withdrawn from current consumption to help increase future output),the old issue of the differential tax treatment of alternative types of capital arises. Sensible tax policy with respect to the taxation of either physical or human capital must take into account the tax treatment of the alternative asset. Section 3 outlines some points of departure for such an analysis.

Variation Across Household in the Rate of Inflation

Abstract: This paper reports on an empirical investigation of the distribution of inflation rates across households. The study uses a large cross-sectional survey of households to obtain information on the composition of the market bundles of goods and services purchased by each of several thousand households in the U.S. It also uses published data for the U.S. on monthly changes in the separate indices of prices of some fifty expenditure items which comprise consumers' market bundles. With information on price changes for these fifty items and the composition of households' consumption bundles, a price index is computed for each of some 11,000 households separately for several recent periods of time. The distributions of these price indices are studied and the relationships between household characteristics and these price indices are investigated.

"Hot Issue" Markets

Abstract: "Hot issue" markets, which refer to instances when stocks increase their offering prices to a level greater than average market premiums, have been overlooked in recent academic literature. Thus, this research examines factors which may aid in the prediction of hot issue markets. A sample of unseasoned stock issues offered between January 1, 1960 and October 31, 1970 is compiled, noting the stock's original offering price and their first two months' ending bids. In order to understand overall market performance during this time, data was also collected from the daily Standard & Poor 500 (SP the correlation between new issue premiums and aftermarket performance; the association between the number of monthly new offerings and simultaneous new issue premiums; and finally the correlation between new issue premiums and past market performance. Several implications for investors, issuers, and researchers are presented, as are directions for future research. The findings indicate that a level of predictability exists within the first month's residuals, which has implications for the timing of offerings and new issue purchases. A higher offering price, when compared to a cold issue market's efficient prices, may be obtained by issuers during that first month's issuance. (AKP)

Is There a Subculture of Violence in the South

Abstract: For many decades analysts have commented on the disproportionately high rates of homicide in the Southern states. In 1958, for example, the South had a homicide rate about nine per 100,000 as compared to about three per 100,000 for the rest of the country. In recent years the gap has been narrowing, as the rate of increase in the homicide rate has been higher outside the South. In 1972 the homicide rate was 12.6 per 100,000 for the South, compared to about 7.3 per 100,000 for the rest of the country. Hackney, employing regression analysis on aggregate homicide (and suicide) data from 1940, found that the regional effect remained strong even after the effects of degree of urbanization, average level of education, average income, unemployment rate, wealth of state, and average age of inhabitants of state are controlled.

The Classical Concept of the Lender of Last Resort

Abstract: Within the past ten years, a series of events has raised questions about the soundness of modern financial systems and reawakened interest in what is known among monetary economists as the lender of last resort responsibilities of the central bank.

Markets and Hierarchies: Analysis and Antitrust Implications: A Study in the Economics of Internal Organization

Abstract: This study analyzes organization of economic activity within and between markets and hierarchies. It considers the transaction to be the ultimate unit of microeconomic analysis, and defines hierarchical transactions as ones for which a single administrative entity spans both sides of the transaction, some form of subordination prevails and, typically, consolidated ownership obtains. Discusses the advantages of the transactional approach by examining three issues: price discrimination, insurance, and vertical integration. Develops the concept of the organizational failure framework, and demonstrates why it is always the combination of human with environmental factors, not either taken by itself, that causes transactional problems. The study also describes each of the transactional relations of interest, and presents the advantages of internal organization with respect to the transactional condition. The analysis explains why primary work groups of the peer group and simple hierarchy types arise. The same transactional factor which impede autonomous contracting between individuals also impede market exchange between technologically separable work groups. Peer groups can be understood as an internal organizational response to the frictions of intermediate product markets, while conglomerate organization can be seen as a response to failures in the capital market. In both contexts, the same human factors, such as bounded rationality and opportunism, occur. Examines the reasons for and properties of the employment relation, which is commonly associated with voluntary subordination. The analysis attempts better to assess the employment relation in circumstances where workers acquire, during the course of the employment, significant job-specific skills and knowledge. The study compares alternative labor-contracting modes and demonstrates that collective organization is helpful in enhancing the acquisition of idiosyncratic knowledge and skills by the work force. The study then examines more complex structures -- the movement from simple hierarchies to the vertical integration of firms, then multidivisional structures, conglomerates, monopolies and oligopolies. Discusses the market structure in relation to technical and organizational innovation. The study proposes a systems approach to the innovation process. Its purpose is to permit the realization of the distinctive advantages of both small and large firms which apply at different stages of the innovation process. The analysis also examines the relation of organizational innovation to technological innovation. (AT)

Specification Errors in Limited Dependent Variable Models

Abstract: A preliminary investigation of two specification error problems in truncated dependent variable models is reported. It is shown that heteroscedasticity in a tobit model results in biased estimates when the model is misspecified. This differs from the OLS model where estimates are still consistent though inefficient. The second problem examined is aggregation. An appropriate nonlinear least squares regression model is derived for situations when the micro-level model fits a tobit framework but only aggregate data are available.

Factors Affecting College Attendance

Abstract: Three factors that may influence a high school graduate's decision to attend college are considered: (1) his ability, (2) the cost of attending college, and (3) the socioeconomic status of his parents. The results, based on a probit analysis, indicate that factors (1) and (3) are strong influences on the probability of attending college. Among the socioeconomic variables, however, family income is the least important influence on college attendance. The low income elasticity of demand for college implies that unrestricted income transfers to the low income population would not be an effective way of increasing their rate of college attendance.

Protest or Work: Dilemmas of the Tourist Industry in American Chinatowns

Abstract: American Chinatowns faced a dilemma. To attract tourists, their major industry, they needed to promote a wholesome public image. Protests of sub-standard working conditions in Chinatown restaurants and garment factories contradicted that public image.

A Theory of Justification: Societal Harm as a Prerequisite for Criminal Liability

Abstract: All would agree that the criminal law seeks to prevent harmful results rather than to punish evil intent that produces no harm. If one views deterrence as the proper function of the criminal law, a harm requirement is appropriate. To the extent that the criminal law punishes nonharmful conduct, it weakens the stigma and deterrent effect of criminal conviction for harmful conduct. If a defendant who has caused no harm feels that he is punished unjustifiably, rehabilitative efforts will be hampered. Indeed, one may ask: If no harm has been caused, what harm will be deterred by punishment, and what harm-causing characteristic will be rehabilitated? If one believes that the role of the criminal law is to provide retribution, a harm requirement is also proper; in the absence of harm there is nothing for which to seek retribution. The consistency of a requirement of harm with these fundamental purposes of the criminal law is reflected in the fact that harm has, from the earliest of civilized times, been treated as a de facto requirement. If the criminal law is limited in operation to situations involving a harm of some sort, then an act found to be beneficial, or at least not harmful, should be of no concern to the criminal law.

The Myth of independence : middle class politics and non-mobilization in Jamaica

Abstract: This is a reprint of a seminal essay first written in the early 1970s and published in 1975 by the University of the West Indies, Mona campus, Jamaica. “Myth of Independence” is the first among a series of “Myth” essays which sought to address the mythological aspects of the foundation of the Jamaican political process and by extension, its version of Westminster democracy. Myth of independence gives a biting critique of the unfolding of independence of this former British colony by looking at its major political elites at that time, Norman Manley, Alexander Bustamante, among others. The article’s major concern is the nature of elite co-optation of the movement which in the end did not remove the psychological scars of colonialism, rather it further embedded notions of black inferior and white/imperial superiority into the value systems of the newly independent nation.

Federal Financial Exposure to Natural Catastrophe Risk

Abstract: The objective of this paper is to estimate the expected annual costs to taxpayers of federal disaster-related expenditures to provide guidance to federal policymakers in budgeting and formulating disaster relief policy. Our estimates take into account recent trends in the generosity of federal disaster policy as well as statistical data on the frequency and severity of losses from natural catastrophes. Our estimates of the costs of disasters are based on two sources: (1) simulation analysis by Applied Insurance Research, a leading catastrophe modeling firm, and (2) historical data on insured catastrophe losses from Property Claims Services, an insurance industry statistical firm. We estimate the average expected federal expenditures for disaster assistance related to hurricanes, earthquakes, thunderstorms, and winter storms to be about $20 billion a year. In a bad year, corresponding to a catastrophic event of severity expected only once every century, the bill could exceed $100 billion. Given the current approach to disaster relief funding, we project an unfunded liability for disaster assistance over the next 75 years comparable to that of Social Security. The magnitude of the projected liability strongly suggests that government should adopt a proactive, ex ante approach to disaster relief policy rather than the current ad hoc reactive approach.

FIML Estimation of Rational Distributed Lag Structural Form Models

Abstract: The Rational Distributed Lag Structural Form (RSF) representation of an econometric model is introduced and its relationship to several standard forms of representation is discussed The FIML estimation problem for the RSF is then considered and formulated as a nonlinear, unconstrained optimization problem A solution to the relation optimization problem is then obtained by an application of the Davidon-Fletcher-Powell variable metric method using simple first difference approximations for the necessary gradients This approach requires a minimum of effort on the part of the model builder since there is no longer any need to analytically determine, and then program, the gradient expressions The feasibility of the method is demonstrated with several examples

The Settlement of Disputes in the Field of the International Law of the Environment

Abstract: This series of five lectures (1) examines the nature of international environmental disputes and their significance for international order; ( 2) surveys and analyzes relevant experience in the settlement of international environmental disputes, with particular attention to environmental problems relating to international rivers and lakes, the oceans and the atmosphere; and (3) suggests some of the principles, approaches and techniques through which international law and institutions may be able most effectively to contribute to the avoidance and adjustment of international environmental disputes and the protection of the international community’s interest in the environment. The five lectures deal, respectively, with: (1) preliminary questions, including the characteristics of international environmental disputes, obligations concerning the avoidance and settlement of disputes, and methods of dispute avoidance and settlement; (2) disputes concerning international rivers and lakes; (3) disputes concerning the marine environment; (4) disputes concerning air pollution and in other environmental contexts, such as outer space, Antarctica, nuclear testing, weather and climate issues, international trade and investment, and other problem areas; and (5) a conclusion which proposes a number of principles of environmental dispute settlement, discusses the usefulness of various institutional means, emphasizes the importance of protecting the international community’s interests, and suggests prospects for the future.The proposed principles on environmental dispute settlement, explicated and discussed in the conclusion, are: (1) the principle of environmental responsibility; (2) the principle of diverse approaches; (3) the principle of factual knowledge; (4) the principle of dispute avoidance; (5) the principle of predictability; (6) the principle of flexibility; (7) the principle of lowest-level solutions; (8) the principle of non-legalistic solutions; and 9) the principle of co-ordination.The five lectures were presented as an integrated course at the summer 1975 session of the Hague Academy of International Law in the Hague, the Netherlands and published in the Academy’s Recueil de Cours, Vol. I –1975.

Democratising the Wealth of Nations

Abstract: This book introduces three techniques for democratising the wealth of nations. The three techniques: Ownership Transfer Corporations (OTCs), Cooperative Land Banks (CLBs) and Producer-Consumer Cooperatives (PCCs), like Employee Share Ownership Plans (ESOPs), transfer wealth without taxes or welfare to allow the extent of taxes, welfare and the size of government to be reduced. Unlike ESOPs, the three techniques systemically democratise wealth by replacing static, exclusive and perpetual property rights with dynamic, inclusive and time limited rules of ownership. In this way a more efficient, equitable and participatory economic system can be created described as Social Capitalism. The Credo of Social Capitalism being: From each according to their interest; To each according to their contribution; Provided the basic needs of all are fulfilled. Differences between economists and business people in describing the nature and meaning of wealth are explained along with the non monetary value wealth. Also explained is why employees and professionals stay poor and how corporations concentrate wealth in a manner that is not reported by accountants. The book explains how wealth can be gained from inflation but this is limited by the ability of society to create wealth from production. The introduction of dynamic property rights could be used to create a community dividend to replace welfare to allow governments to replace full employment policies with a policy of fulfilment from work and/or leisure.

Live Organ and Tissue Transplants from Minor Donors in Massachusetts

Abstract: This article examines the system of providing court approval for organ and tissue transplants from minor donors as it operates in Massachusetts. It focuses principally on the substantive interests of prospective donors and on the extent to which the current procedures afford them adequate protection. It begins by examining the requirement of consent and demonstrates the necessity of judicial authorization of minor donors' participation in transplant procedures. Next, it analyzes the current Massachusetts practice and assess its capacity to afford minor donors adequate protection from the possible dangers of serving as an organ or tissue donor. It suggests that the Massachusetts system has not adequately protected minor transplant donors.This article concludes by proposing a number of reforms in the present practice to increase its capacity to protect minor donors.

The strategy of monetary policy

Abstract: While much has been written over the years concerning monetary policy, there is apparently a discontinuity in the flow of information between policymakers, on the one hand, and academic researchers and participants in financial markets, on the other.

A Note on Modeling the Criminal Choice Problem

Abstract: In this paper we show that neither Becker nor Brown and Reynolds provide a proper description of the failure state in the criminal choice problem. A more satisfactory specification is provided which yields the Becker and Brown and Reynolds formulations as special cases.

Social Security and Retirement Decisions

Abstract: One of the most striking features of the postwar U.S. economy has been the rapid decrease in the labor force participation of the elderly at a time when the health of this group has been improving. In spite of this, previous research, based on retrospective interviews with the retired population, usually concludes that poor health accounts for the overwhelming majority of retirements. The current results suggest that nothing could be further from the truth. Using data from the Panel Study of Income Dynamics, we follow a cohort of white married males through their sixties to estimate a model of retirement behavior. Using several definitions of retirement suggested in the literature, the results suggest that the two key policy parameters of the social security system â€" the income guarantee and the implicit tax on earnings â€" exert an enormous influence on retirement decisions. For example, our results suggest that a decrease in the implicit tax rate on earnings from one-half to one-third would reduce the annual probability of retirement by almost sixty percent! Applying the coefficient estimates to time series data on the labor force participation of the elderly implies that the social security sys-tem has been the major factor in the explosion in earlier retirement.

Three-and-A-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934-1941

Abstract: A major conceptual error in the standard BLS and Lebergott unemployment estimates for 1933-1943 is reported. Emergency workers (employees of federal contracyclical programs such as WPA) were counted as unemployed on a normal-jobs-to-be-created instead of job-seekers unemployment definition. For 1934-1941, the corrected unemployment levels are reduced by two to three-and-a half million people and the rates by 4 to 7 percentage points. The corrected data show strong movement toward the natural unemployment rate after 1933 and are very well explained by an anticipations-search model using annual full-time earnings.

The Theory of Agency: A Framework

Abstract: This paper presented the core part of the then newly-developed theory of agency, which had been independently proposed by Stephen Ross and Barry Mitnick. The paper described a typology of agency relationships based on the nature of the consent between agent and principal, the source of specification of the agent's acts, and the degree of discretion possessed by the agent. Common behaviors and norms of agency are described, including the fiduciary norm. Problems of agency are reviewed, and the policing process examined. Applications are made to the legislative representative and to the ambassadorial relation. This paper reflects continued development of the approach over what appeared in Mitnick's original 1973 paper.