Adam Smith's invisible hand had the important property that, if each individual pursued his profit in optimal fashion, the total profit of the community would be maximized. Game theory has proposed a simple situation reversing this conclusion: two prisoners, arrested for a crime, are questioned separately. Each is informed it cannot be proved they committed the crime but that if (1) A does not confess to the crime and (1') B does not confess, both will receive six months in jail on a minor charge; if (1) A does not confess and (2') B does confess, A will receive ten years in prison while B goes free. On the other hand, if (2) A confesses and (1') B does not confess, A will go free while B goes to prison for ten years; while if (2) A confesses and (2') B confesses also, both will go to jail for eight years.

This report utilizes decision theory to investigate the possible benefits of better weather information to California raisin growers. A supply curve is fitted to the raisin industry and used to evaluate the importance of various factors: weather is of overwhelming importance. Subsequent analysis focuses on the most vulnerable aspect of raisin production: its dependence on early forecasts of rain in September and October when the grapes are being dried and in danger of being damaged by rain. Section 1, in the tradition of micro-economic, partial equilibrium analysis, is concerned with the value of weather information to a single grower. Only the grower focused upon is assumed to receive the better information. This assumption implies there is high value for forecasting rain three weeks in advance. A figure of 90.95 per acre is the value of perfect three week forecasts. Were this value to be realized for each bearing acre in 1960, the total value of better weather information to the raisin industry would be 20,300,000. But merely summing across firms to get industry totals may lead to a fallacy of composition: the analysis must be extended to a wider partial equilibrium framework. Section 2 examines the value of better weather information to the raisin industry as a whole. Since costs are not greatly affected by improved weather information, profit differences are closely approximated by changes in revenue. The elasticity of demand for raisins is calculated from a demand curve fitted to industry data. The inelasticity of demand causes profit to fall under the impact of better information, at least in the short run. The scope of the analysis is then extended to other industries. Using this wider viewpoint, the Conclusion examines the possibility of a simple tax that would reallocate land and labor. The presence of released resources seems to imply a clear gain for better information. However, the basis of such a gain is positive value for these resources in other uses. But the short run inelasticity of other possible products makes it clear that, at least in the short run, better weather information results in net loss. However, some relief is offered through the possibility of regulation. An Appendix examines the question of the value of inaccurate forecasts.

Congress pursues externalities one at a time. The resulting legislation embodies the same sequential approach, instructing regulatory agencies to set and enforce standards for a single problem. Rarely, if ever, are agencies instructed or even permitted to account for contradictions with other federal legislation and rulemaking.

Few economists are aware of a wonderful problem. While climatologists claimed it first, the twists and turns make- the problem appear almost as if it were devised to show off the tools and controversies of microeconomics. Even more astounding is the fact that such an abstract, long-term problem excites the interest of the general public and media, and even politicians who desire more resources 1O be spent on research.

One externality which has received little attention from economists is that connected with congestion (a recent treatment is Strotz, 1965). An increase in the utilization of a facility can result in longer waiting time or in a less appealing service. For example, an increased number of tows on a water- way can give rise to greater delays at locks; a larger crowd at a beach can lead to a lower satisfaction for each "customer." The former case, which involves production, is particularly complex. Here, delay is caused either by the random arrival of customers or by a random service (production) rate. Serving tows at a lock is analogous to serving shoppers at a super- market checkout stand. Similar problems occur with respect to allocating docking facilities in a port, runways and terminals in an airport, land to streets in an industrial park, and machines in a job shop