Showing papers in "The American Economic Review in 1971"

The Private and Social Value of Information and the Reward to Inventive Activity

Abstract: Publisher Summary This chapter discusses the private and social value of information along with the reward of inventive activity. The individual is always fully acquainted with the supply–demand offers of all potential traders, and an equilibrium integrating all individuals' supply-demand offers is attained instantaneously. Individuals are unsure only about the size of their own commodity endowments and/or about the returns attainable from their own productive investments. They are subject to technological uncertainty rather than market uncertainty. The main reason is that information, viewed as a product, is only imperfectly appropriable by its discoverer. The standard literature on the economics of research and invention argues that there tends to be private underinvestment in inventive activity mainly because of the imperfect appropriability of knowledge. The contention made is that even with a patent system, the inventor can only hope to capture some fraction of the technological benefits because of his discovery. Even though practical considerations limit the effective scale and consequent impact of speculation and/or resale, the gains thus achievable eliminate any a priori anticipation of underinvestment in the generation of new technological knowledge.

Optimization and scale economies in urban bus transportation

Abstract: THIS PAPER SHOWS THAT DECLINING MASS TRANSIT QUALITY IS AN EXAMPLE OF WHAT HAPPENS WHEN DEMAND DECLINES FOR A COMMODITY WHOSE PRODUCTION INVOLVES INCREASING RETURNS TO SCALE, AND SUGGESTS THE MAGNITUDE OF MASS TRANSIT SCALE ECONOMIES AND HENCE THE LOWER BOUND FOR AN OPTIMAL TRANSIT SUBSIDY POLICY. THE INTERRELATIONSHIPS AMONG SHORT- AND LONG-RUN COST SCHEDULES, THE NATURE OF THE SUBSIDY REQUIRED IF SHORT-RUN MARGINAL COST PRICING IS TO BE PRACTICED BY AN INCREASING RETURNS ACTIVITY, AND THE NATURE OF INCREASING RETURNS IN BUS OPERATIONS ARE DISCUSSED. THIS DEVELOPMENT IS USED AS A BASE TO PRESENT COST MODELS FOR "STEADY STATE" AND "FEEDER" BUS ROUTES. A SUBSIDY TO URBAN MASS TRANSPORTATION SYSTEMS REFLECTING THE DIFFERENCES BETWEEN AVERAGE AND MARGINAL COSTS WOULD PROBABLY NOT ELIMINATE THE DECLINE IN MASS TRANSIT USAGE THAT HAS BEEN EXPERIENCED IN VIRTUALLY ALL URBAN AREAS. STILL, A WELFARE MAXIMIZING SUBSIDY POLICY WOULD UNDOUBTEDLY SLOW THIS MOVEMENT AND MIGHT EVEN HASTEN THE ADOPTION OF NEW TECHNOLOGIES THAT PROMISE VASTLY IMPROVED SERVICE CHARACTERISTICS.

Teacher Characteristics and Gains in Student Achievement: Estimation Using Micro Data.

Abstract: Recent attention to education in the United States represents the merger of concern about efficiency of the educational system and concern about the distribution of educational services, particularly along racial and ethnic lines. However, there is very little guidance on how to satisfy any efficiency or distributional goals through public policy because extremely little is known about the relationship between inputs-particularly inputs available for public policy--and outputs of the educational process. Educational research has been slow in providing definitive answers to public policy questions for several understandable reasons: the subject of the educational process is extremely complex, especially as regards the physiological and psychological aspects; any theoretical development of a learning theory amenable to analysis for policy purposes is absent; and the required data traditionally have not been collected. Previous analyses have yielded some suggestive beginnings, and have provided insights into how the analysis should proceed. This analysis represents a next step of statistical inquiry into the educational process from a public policy point of view. Three fundamental educational policy questions are addressed: (1) do teachers count? (2) are schools operated efficiently now? (3) what characteristics of teachers and classrooms are important? Past studies have given ambiguous answers to these questions, largely due to inadequate data. Specifically, no data set which supplies accurate historical information on educational inputs at an individual level has been available. This study attempts to provide more conclusive answers by remedying the most glaring data problems for a set of students (third graders) in one school district.

The Keynesian Revolution and the Monetarist Counter-Revolution

Abstract: When James Tobin and I agreed on the subject of this lecture last spring, it appeared to be a highly topical subject that would command widespread interest among the membership of this Association. Unfortunately, as so often happens with forward planning for acadenlic purposes, others have also been alert to topicality, and have undermined our forward planning by getting in earlier with their version of the theme. Thus Milton Friedman himself gave a widely publicized lecture on "The Counter-Revolution in Monetary Theory" last September in London, which lecture has recently been published by the Institute ol Economic Affairs, [4]; Karl Brunner has recently circulated a typically scholarly paper on "The 'Monetarist Revolution' In Monetary Theory" [1]; and undoubtedly many others have been writing and publishing on the same subject. My treatment of this beginningto-be-well-worn theme today will, I hope, still retain some novelty, inasmuch as I shall be primarily concerned, not with the scientific issues in dispute in the monetarist counter-revolution against the Keynesian revolution, but with the social and intellectual conditions that make a revolution or counter-revolution possible in our profession. This lecture is therefore an excursion--amateurish, I must confessinto the economics and sociology of intellectual change. As is well known from the field of economic history, the concept of revolution is difficult to transfer from its origins in politics to other fields of social science. Its essence is unexpected speed of change, and this requires a judgment of speed in the context of a longer perspective of historical change, the choice of which is likely to be debatable in the extreme. Leaving the judgmental issue aside for the moment, one could characterize the history of our subject in terms of a series of "revolutions," very broadly defined, as follows. Economics as we know it began with what might be called the "Smithian Revolution" against the established body of doctrines generically described as "mercantilism," a revolution which changed ideas on the nature and sources of the wealth of nations and the policies required to promote the growth of what we now call "affluence." The Ricardian revolution turned the attention of economists from concern with national wealth and its growth to the distribution of income among social classes and the interactions of growth and income distribution. The marginalist revolution of the 1870's essentially introduced a new and superior analytical technology for dealing with Ricardo's distribution problem, in the process gradually depriving Ricardian economics of its social content; hence, the results of that revolution have been described as neo-Ricardian or more commonly neoclassical economics. Contemporary economics is based on this development and on at least four dis-

Jurisdictional Fragmentation and Residential Choice

Abstract: completely from the question of why households decide to live within a particular jurisdiction. Although we have no satisfactory thleory of urban local government, economists have not been reluctant to propose reforms in existing institutions. Advocates of metropolitan government suggest that decisions must be made at the metropolitan level if externalities are to be internalized and economies of scale realized. Tn contrast, the proponents of decentralization argue that further political fragmentation is required in order to provide greater variety in local public services. The only consensus, if any exists at all, is that present institutions of local government are inefficient. However, nowhere in the literature do we find an explanation of why, in view of this inefficiency, change is so rare. Annexations to the cen-tral city, relatively common at the turn of the century, ceased rather abruptly in most metropolitan areas after 1918. Subdivision of the larger political jurisdictions in our metropolitan areas does not appear at all likely. Thus, it seeins reasonab)le to ask of an adequate theory of metropolitan political economy an answer to the question: why are existing jurisdictional bourndaries so impervious to change? To answer this question we must investigate the impact of local governmental structure not only on allocative efficiency but on the extent of redistribution from rich to poor as well. In a recent study of suburbs in the Philadelphia metropolitan area, Williams, et al. [5] report that, when heavy expenditures were involved, wealthy communities were unwilling to enter into cooperative agreements with less wealthy communities. Only when their wealth was about the same would cities agree to engage in a jointly financed program. Across the United States, proposals for nietro-

Towards a Predictive Theory of Intergovernmental Grants

Abstract: Until quite recently, theoretical analyses of the impact of intergovernmental grants on public expenditures have run either implicitly or explicitly in terms of the familiar theory of indiv-idual choice' The recipient of the grant is typically viewed in effect as an individual decision maker with preference patterns of the usual sort defined over private and public goods Within this theoretical structure, a number of propositions have been developed including, for example, the conclusion that, dollar-for-dollar, a matching grant will induce a greater expansion in spending on the public good than will a lump-sum, unconditional grant The difficulty with this analysis, as we all have been well aware, is that this is not the appropriate theoretical framework for the study of intergovernmental grants Such grants are not grants to individuals; they are grants to groups of people This means that the effects of these grants depend upon the process by which the group makes collective decisionis A real theory of intergovernmental grants must, for this reason, be one which takes explicitly into account the political process through which the collectivity determines its levels of spending upon public goods In one recent paper, Goetz and McKnew have shown for a special case that it is con-ceivable that lump-sum grants can have a greater stimulative impact on public spending than an equal-dollar matching grant Using a rather complicated model in which the collectivity decides separately on the aggregate level of public spending and on the mix of public programs, they show that, if individual preferences bear a particular kind of relation to one another, simple majority voting will lead to greater public expenditure in response to a lump-sum grant than to a matching grant of the same amount Whether this special case is likely to occur with any frequency is another matter, but, at any rate, it is clear that one can concoct particular instances in which a process of collective decision making will lead to results which are at variance with the conclusions which follow from the rnodel of individual choice Our purpose in this paper is to try to explore somewhat more systematically the effects of these two types of intergovernmental grants The question arises whether there are interesting classes of collective decision processes for which the comparative effects of the two types of intergovernmental grants can be predicted In an earlier paper on revenue-sharing (Bradford and Oates), we have constructed a framework for conceptualizing collective budget determination which offers the possibility of dealing systematically with the effects of * The authors are grateful for a number of helpful comnments to the participants in economics seminars at McMaster University and at Rutgers University In addition, they are indebted to the F'ord Foundation whose support has greatly facilitated this study 1 For an excellent presentation using this approach, see James Wilde

Education, Technology, and the Characteristics of Worker Productivity.

Abstract: Economists have long noted the relationship between the level of schooling in workers and their earnings. The relationship has been formalized in numerous recent studies of the rate of return to schooling and the contribution of education to worker productivity. Almost no attempt has been made, however, to determine the mechanism by which education affects earnings or productivity. In the absence of any direct evidence, it is commonly assumed that the main effect of schooling is to raise the level of cognitive development of students and that it is this increase which explains the relationship between schooling and earnings. This view of the schooling-earnings linkage has provided the conceptual framework for studies which seek to "control" for the quality of schooling through the use of variables such as scores on achievement tests and IQ. [26, 46] The objective of this paper is to demonstrate that this interpretation is fundamentally incorrect. It will be seen that rejection of the putative central role of cognitive development in the schoolingearnings relationship requires a reformulation of much of the extant economic research on education, as well as a radical rethinking of the normative bases of the economics of education in particular, and neo-classical welfare economics in general. In Section I, I will present data to suggest that the contribution of schooling to worker earnings or occupational status cannot be explained by the relationship between schooling and the level of cognitive achievement. Indeed, the data there introduced strongly suggest the importance of noncognitive personality characteristics which have direct bearing on worker earnings and productivity. In Section II, I will give substantive content to the relevant personality variables operative in the relationship between education and earnnings. With the theoretical literature on the personality requisites of adequate roleperformance in a bureaucratic and hierarchical work-enrivonment as a frame of reference, I will sketch some mechanisms through which schools affect earnings. This involves scrutinizing the social relations of education and the pattern of rewards and penalties revealed in grading practices. I will argue that the authority, motivational, and interpersonal relations codified * This research was supported by a grant from the Carnegie Foundation of New York to the Center for Educational Policy Research, Harvard Graduate School of Education, and a separate grant from the Social and Rehabilitation Service, U. S. Dept. of Health, Education, and Welfare. Special thanks are due to Stephan Michelson, Christopher Jencks and Samuel Bowles, who aided the research through its various stages, and the Union for Radical Political Economics collective at Harvard, whose members helped broaden its scope. This work is part of a larger project in process jointly with Samuel Bowles, on the political economy of education. The arguments presented herein have been significantly abridged, in conformance with stringent space limitations. Requests for amplification of the material should be addressed to the author.

Competition and unanimity

Abstract: Focuses on competition and unanimity. Unanimity in general collective choice settings; Value maximization's support for corporate policy; Partial-equilibrium notion of competition. (Из Ebsco)

Does human fertility adjust to the environment

Abstract: Both theory and empirical research on historical American fertility suggest that human fertility responds of voluntarily to environmental co nditions. In the economic theory of fertility tastes prices and inco me determine the optimal number of children. These influences lead to the expectation of the following ordering of areas from high to low fertility at any given time: frontier settled agricultural new urban areas and old urban areas. Over time it can be expected that fertility would decline as new areas "age" e.g. frontier areas become settled agriculture and new urban areas become old urban areas. These expectations are supported by the available evidence. In the early 1800s fertility was lower in the older settled areas of the East than in those undergoing settlement; and within every division urban fertility is lower than rural fertility. The American fertility decline reflects not only the processes of urbanization and industrialization but that of settlement as well. The problem is whether the voluntary response of fertility to environmental pressures results in a socially optimal adjustment.