Knowledge that Transforms

Specialists in labor economics and public economics at 40 leading research universities provided opinions of policy proposals, quantitative best estimates and 95-percent confidence intervals for economic parameters, and answers to values questions regarding income redistribution, efficiency versus equity, and individual versus social responsibility. Their positions on policy are more closely related to their values than to their estimates of relevant economic parameters. Average best estimates of the economic parameters agree well with the relevant literature, but individual best estimates are usually widely dispersed. The individual 95-percent confidence intervals are much narrower than the substantial cross-respondent variation in estimates would warrant.

It has now been over twenty-five years since Arnold Harberger (1971) published his open letter to the profession, in which he proposed a set of guidelines for applied welfare economics. Since then, there has been great progress in the implementation of measures of welfare that are ordinally equivalent to household utility. While welfare measurement at the micro level is of independent interest, of greater practical concern is the issue of the well-being of groups of households. In the second half of the survey, I examine the issue of the aggregation of welfare across households and describe a framework that provides a consistent ranking of social outcomes.

Wagering markets provide a natural laboratory for testing models of market prices and behavior under uncertainty. The literature on wagering, albeit contentious, has established the following. First, prices set in these markets, to a first approximation, are efficient forecasts of outcomes. Second, price changes in these markets are driven by an informed class of bettors and improve prediction. Nevertheless, there are important departures from generic notions of market efficiency. Recent models focusing on diverse information, heterogeneous agents, and transaction costs help to explain these findings.

This introduction to nonparametric regression emphasizes techniques that might be most accessible and useful to the applied economist. The paper begins with a brief overview of the class of models under study and central theoretical issues such as the curse of dimensionality, the bias-variance trade-off and rates of convergence. The paper then focuses on kernel and nonparametric least squares estimation of the nonparametric regression model, and optimal differencing estimation of the partial linear model. Constrained estimation and hypothesis testing is also discussed. Empirical examples include returns to scale in electricity distribution and hedonic pricing of housing attributes.

Nonrenewable resource theory often is summarized by Hotelling's rule. This paper reviews theoretical extensions and empirical investigations of resource extraction models. Observed data are often inconsistent with the Hotelling rule, suggesting that other characteristics of nonrenewable resource supply, including exploration, heterogeneous ore quality, technological progress, and capital investment, are important determinants of the dynamic behavior of resource prices. Given the persistent recurrence of concern about nonrenewable resource scarcity, measures of nonrenewable resource scarcity and the empirical evidence for the time trends of those measures are reviewed. Finally, the implications of nonrenewable resource scarcity for economic growth are examined.

This paper studies the origins of an import substitution strategy of development, summarizes the consequences of that strategy, and reviews the problems that led to its failure. The fundamental difficulty was its discouragement of the indigenous social learning necessary for sustained, independent development. The emergence of an outward-oriented, minimal-government strategy is due to the success of Korea and Taiwan. This strategy fails to recognize that social learning requires a strong role for national agents and that this role can be penalized by undue openness. An effective strategy must protect and induce domestic learning without penalizing exporting.

Economists and psychologists who study emotions have worked in near-total isolation from each other. The article discusses some areas in which economists might take account of emotions. After a survey of the main features of emotions as analyzed by psychologists and physiologists, the article discusses three aspects of the relation between emotion and choice. (1) Given that emotions may be intrinsically valuable or instrumentally useful, can one choose to have them? (2) Can emotions supplement rationality in cases where it yields indeterminate prescriptions for choice? (3) When an emotion and self-interest suggest different courses of action, how do they interact to produce a final decision?

After a very long hiatus, economists have begun again to study the relationship between economics and religion. This article seeks to summarize and evaluate the principal themes and empirical findings that have appeared in some 200 recent papers on the economics of religion. Although some of the research concerns the economic consequences of religiosity, most applies standard economic theory to the study of individual religious activity, the characteristics of religious groups, and the impact of regulation and competition on religious markets.

In the two years after the imposition of the Smoot-Hawley tariff in June 1930, the volume of U.S. imports fell over 40%. To what extent can this collapse of trade be attributed to the tariff itself versus other factors such as declining income or foreign retaliation? Partial and general equilibrium assessments indicate that the Smoot-Hawley tariff itself reduced imports by 4-8% (ceteris paribus), although the combination of specific duties and deflation further raised the effective tariff and reduced imports an additional 8-10%. A counterfactual simulation suggests that nearly a quarter of the observed 40% decline in imports can be attributed to the rise in the effective tariff (i.e., Smoot-Hawley plus deflation).

The actions of the novel bradycardiac agent ZD7288 [4-(N-ethyl-N-phenylamino)-1, 2-dimethyl-6-(methylamino)pyrimidinium chloride] were investigated on the hyperpolarization-activated cation current Ih and on network activity in spontaneously spindling ferret lateral geniculate (LGNd) slices in vitro using intracellular recording techniques. In voltage-clamp recordings, local application of ZD7288 (1 mM in micropipette) resulted in a complete block of Ih, whereas in current-clamp recordings, application of this agent resulted in an abolition of the depolarizing sag activated by hyperpolarization and decreased the frequency of intrinsic delta-oscillations for which Ih acts as a pacemaker current. In addition, block of Ih with ZD7288 resulted in an abolition of the afterdepolarization (ADP) that follows repetitive hyperpolarization and rebound burst firing as well as that occurring in between spindle waves. The block of the ADP was associated with a block of the spindle wave refractory period such that continuous 6- to 10-Hz oscillations were generated throughout the network. These findings give further support to the hypothesis that Ih is critically involved in the generation of slow rhythmicity in synchronized thalamic activity.