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Showing papers in "The American Economic Review in 1975"





Posted Content
TL;DR: In this article, the deterrent effect of capital punishment has been examined in both theory and practice, and the main focus of the paper is on the effect of the death penalty on crime deterrents.
Abstract: The debate over the legitimacy or propriety of the death penalty may be almost as old as the death penalty itself and, in the view of the increasing trend towards its complete abolition, perhaps as outdated. Not surprisingly, and as is generally recognized by contemporary writers on this topic, the philosophical and moral arguments for or against the death penalty have remained remarkably unchanged since the beginning of the debate. One outstanding issue has become, however, the subject of increased investigation, especially in recent years, due to its objective nature and the dominant role it has played in shaping the analytical and practical case against the death penalty. That issue is the deterrent effect of capital punishment, a reexamination of which, in both theory and practice, is the object of the paper.(This abstract was borrowed from another version of this item.)

569 citations


Posted Content
TL;DR: In this paper, the issues of cross-subsidization in public enterprises with economies of joint production are analyzed, and the relation of welfare maximizing prices to subsidy-free prices is discussed.
Abstract: Analyzes the issues of cross-subsidization in public enterprises with economies of joint production. Incentives to competitive entry and subsidy-free prices; Relation of welfare maximizing prices to subsidy-free prices; Price elasticity of demand; Costs of alternative means of supply; Choice between protected monopoly and open competition.

427 citations








Posted Content
TL;DR: Tiebout et al. as mentioned in this paper considered the problem of local choice in the provision of public education and provided a formal analysis of the full efficiency of local government provision under quite special conditions.
Abstract: A series of recent judicial decisions has focused public attention on the issue of local choice in the provision of public education. In Serrano vs. Priest, Rodriguez vs. San Antonio (1971), and similar cases in other states, the lower courts confirmed that education is a responsibility of the state government and held that local expenditures on education may not be a function of the taxable wealth of the local community.1 Although the United States Supreme Court has overturned these decisions in the appeal of Rodriguez vs. San Antonio (1973), the pressure to change the current system remains strong. The Supreme Court majority indicated that its decision reflected the limits of the federal constitutional authority and was not an approval of the status quo in educational finance. Litigation is now likely to shift to challenging the current methods as unconstitutional under state constitutions which, unlike the federal constitution, do deal specifically with education.2 Moreover, fundamental changes in the financing of local education may not require further pressure from the courts; state legislatures may seek to neutralize the effects of local wealth differences even if the current systems are not held to be unconstitutional. These judicial decisions and the ensuing legislative proposals run counter to the general economic view of local government finance. The basic presumption of economic analysis is that, because local governments can select different levels of service and because individuals can choose their area of residence, decentralized finance by local governments allows the provision of public services to reflect the variety of individual preferences for public services.3 Although the level of local spending may be nonoptimal because of intercommunity externalities and because of the method of local budget determination, fiscal decentralization still remains the only alternative to the insuperable problem of determining the optimal level of expenditure on a public service provided by a central government. In effect, autonomous decentralized financing of education provides a quasi market in which households can exercise their diverse preferences by their location decisions. This paper considers the problem of * Professor of economics, Harvard University. I am grateful to Charles Clotfelter for assistance with the statistical analysis, to Stephen Weiss for providing unpublished data on school expenditures, and to the Ford Foundation and National Science Foundation for financial support. I have benefited from discussions of an earlier version in seminars at Harvard, M.I.T., and Berkeley, and from comments by Noel Edelson, Eric Toder, and David Stern. An earlier and more complete discussion of this study was distributed as Harvard Institute of Economic Research paper no. 293, May 1973 (revised July 1973). 1 In Serrano vs. Priest, the landmark case in this area, the plaintiff and the courts were very much influenced by the line of argument and suggested remedies develope(l in John Coons et al. For a further discussion of the legal precedents, see Arthur Wise. 2 Almost immediately after the United States Supreme Court decision in Rodriguez vs. San Antonio, the New Jersey Supreme Court held that the current system of local finance violated the New Jersey state constitution. See Wise for a summary of the provisions of other state constitutions. I Charles Tiebout presented a formal analysis of the full efficiency of local government provision of public services under quite special conditions. See Wallace Oates and James Buchanan and Charles Goetz for a further discussion of these issues.

Journal Article
TL;DR: In this article, the authors examined and compared structuralist methodology and development policy and compared to other major development policy approaches, and concluded that changes in the world economy have complicated the task of development, and most economies are suffering from serious structural disequilibria.
Abstract: Structuralist methodology and development policy are examined and compared to other major development policy approaches. The structuralist approach focuses on various types of structural disequilibria. In domestic policy, this approach can be used to examine the effects of surplus labor on resource allocation; in international policy, it focuses on the balance of payments. One problem with structuralist policy is that, in ignoring the advantages of market adjustments, policy prescriptions place too much weight on the limited administrative apparatus of developing countries. This is a major limitation to development that could be countered by not attempting excessive fine tuning of development policy. Complex policies may prove more costly to implement than less efficient but simpler programs. It is concluded that changes in the world economy have complicated the task of development, and that most economies are suffering from serious structural disequilibria. Finally, the goal of giving greater weight in development policy to distributional considerations cannot be achieved without giving equal priority to adjustments in external trade and capital flows.




Posted Content
TL;DR: This paper pointed out that there is no single person, no single chooser, who maximizes for the economy, for the polity, and that the ultimate object of economics is not itself a choosing, maximizing entity.
Abstract: The object for economists' research is "the economy," which is, by definition, a social organization, an interaction among separate choosing entities. I return deliberately to this element in our primer, because I think that it has been too often overlooked. By direct implication, the ultimate object of our study is not itself a choosing, maximizing entity. "The economy" does not maximize, and we may substitute "the polity" here without change in my emphasis. No one could quarrel with these simplistic statements. The inference must be, however, that there exists no one person, no single chooser, who maximizes for the economy, for the polity. To impose a maximizing construction on the models that are designed to be helpful in policy is to insure sterility in results. Where did economics, as a discipline, take the wrong turn? My own suggestion is that Lionel Robbins marks a turning point. His book defined "the economic problem" as the location of maxima and minima. Almost simultaneously with this, the Edward H. Chamberlin and Joan Robinson books marked a turning inward, so to speak, a shift toward the maximizing problem of a specific decision-making entity. The economics of the firm was born, to be followed by the Hicksian elaboration of the economics of consumer choice. Paul Samuelson put this all together in his Foundations of Economic Analysis. Importantly, he extended the maximizing construction to welfare economics, extolling the virtues of A. Bergson's social welfare function as the tool through which such extension was made possible. For a quarter of a century, we have witnessed many variations on this theme, with economists hither and yon maximizing objective functions subject to specific constraints. I should not imply that the maximizing models have held monolithic dominance. The institutional economists, and their successors, have continued their sometimes inarticulate critique of economic theory. Frank Knight, and some of his students, continued to lay stress on the social-organization aspects of the discipline. Game theory, in its solution rather than its strategy search, offered partial redirection of emphasis. More importantly for my purposes, public choice theory emerged as the positive theory of politics, a theory that necessarily treats individual decision takers as participants in a complex interaction that generates political outcomes. But let me return to mainstream efforts of economists in the years since World * University Professor and General Director, Center for Study of Public Choice, Virginia Polytechnic Institute and State University. The author is indebted to Amoz Kats and Gordon Tullock for helpful comments.






Posted Content
TL;DR: In this article, it is shown that when there is no significant competition for the firm's market area, spatial price discrimination results in firms producing larger output, serving larger market areas, and promoting greater net benefits than under a mill price policy.
Abstract: In a recent article in this Review, M. L. Greenhut and H. Ohta (G-O) demonstrated that a spatial monopolist who adopts a spatially discriminating price would produce a larger output than under a mill price policy. They raise, without elaboration, the possibility that this larger output corresponds to a greater level of net benefits. The purpose of this paper is to examine a model in which the net benefits of both price policies can be measured and to extend the discussion to the case of competition for market areas-called spatial monopolistic competition in location theory (see Martin Beckmann 1968, 1970, 1971). Section I introduces a model, somewhat simpler than that of G-O, in which the basic result of G-O can be derived and the welfare effects of the two policies can be measured. Here it is found that when there is no significant competition for the firm's market area, spatial price discrimination results in firms producing larger output, serving larger market areas, and promoting greater net benefits than under a mill price policy. Section II then considers spatial monopolistic competition in which extra normal profits invite invasion of market areas. It is shown that the equilibrium firm output and market area will be smaller under spatial price discrimination than under mill pricing and that if price discrimination is allowed, firms will be forced by free entry to adopt that policy. It is also shown that customers buy more when spatial price discrimination is imposed than under mill pricing, but that they are worse off-greater net benefits are derived under mill pricing.




Journal Article
TL;DR: In this article, three topics are discussed which do not represent a comprehensive view, but are each part of the overall question of income distributions and have each absorbed the attention of those working with human capital theory.
Abstract: : Three topics are discussed which do not represent a comprehensive view, but are each part of the overall question of income distributions and have each absorbed the attention of those working with human capital theory. the topics are: (1) Wealth distributions and lifecycle earnings profiles; (2) sources of income returns to schooling; and, (3) race differences in income.



Posted Content
TL;DR: In this paper, a random visit of firms by the job searcher to locate an employment opening is introduced, and the expected length of unemployment depends solely on the individual's acceptance (or reservation) wage, optimally chosen and the existing wage offer distribution, and this approach allows explicit consideration of an "involuntary" aspect of search not present in the existing literature.
Abstract: Recently several writers have examined job search behavior by an unemployed worker.' In the analysis, the period of time between successive wage offers to an individual has commonly been taken as constant. John McCall, for instance, assumed that an individual invariably obtained one job offer per period. Dale Mortensen (1970b) equivalently assumed a constant probability of receiving a wage offer each period. In this context, job search has been characterized as search for an acceptable wage.2 The implication is that the expected length of unemployment depends solely on the individual's acceptance (or reservation) wage, optimally chosen, and the existing wage offer distribution. One aspect of job search heretofore not emphasized is the individual locating a vacancy (wage offer). This element of search is captured below by introducing a random visiting of firms by the job searcher to locate an employment opening.3 This extension permits presentation of a more complete job search theory which, as Charles Holt (1975) suggests, makes allowance for the time it takes to search firms for vacancies as well as the time it takes to search vacancies for suitable wages. The approach allows explicit consideration of an "involuntary" aspect of search not present in the existing literature. Section I develops a model of job search by an individual that incorporates the above aspects of search. This model then allows in Section II a fruitful discussion of the elements affecting an individual's acceptance wage and the duration of unemployment. It becomes clear that the expected duration of unemployment entails more than a comparison of an acceptance wage and the wage offer distribution. Indeed, the model makes possible computation of a proxy for the probability that the typical individual engaged in job search will accent a wape offer. It is found that * Assistant professor, Purdue University. This research was partially supported by a Baker-Weeks Fellowship provided through the Brookings Institution and a doctoral dissertation grant (No. 91-44-74-39) from the U.S. Department of Labor, Manpower Administration. I am indebted to Herschel Grossman and John Kennan for helpful comments on earlier drafts of this paper. In addition, I benefitted from comments by an anonymous referee. However, the usual disclaimers hold. I For example, see articles by McCall, Mortensen (1970a,b, 1974), Reuben Gronau, Michael Rothschild (1974), and Robert Lucas, Jr. and Edward Prescott. Kenneth Burdett offers an excellent review of several results of such efforts. In addition, Rothschild (1973), focusing on market equilibrium, has provided a survey of ". . . recent theoretical work characterizing markets whose participants act on the basis of sketchy and incomplete information" (p. 1283). 2 The analysis considers expected income maximizing behavior by the unemployed job searcher. Some recent models of job search have replaced expected income maximizing behavior with expected utility maximizing behavior in a nontrivial manner (see John Seater or John Danforth). This alternative approach suggests inclusion of such factors as the nonpecuniary aspects of job offers, leisure, consumption, and risk in the individual's optimal search policy. I This job search method of going directly to an employer is the predominant method of job search according to recent surveys (see Employment and Earnings).