It has become customary to look back with nostalgia at the golden age when the Bretton Woods system held sway, from the early 1950's to around 1970. It also seems to be the conventional wisdom, however, that the rules of Bretton Woods contributed little to the impressive performance of the world economy over that period-a performance characterized not merely by the fastest and most widely distributed growth in history, but also by notable stability, including near price stability except at the beginning and end of the period. The deterioration in the performance of the world economy since the early 1970's is viewed as a coincidence, or a response to common causes, rather than as a consequence of the breakdown of Bretton Woods. My purpose in selecting the title to this session was to induce critical scrutiny of these conventional attitudes. My own contribution to this task will start by describing what I conceive to have been the three essential rules of the Bretton Woods system. I shall proceed to examine the logic of those three rules in terms of recent contributions to the literature, in particular the emergent literature on policy coordination, and of recent historical experience.

[This paper examines the effect of cash transfers and food stamp benefits on family labor supply and welfare participation among two-parent families. The Aid to Families with Dependent Children--Unemployed Parent Program has provided cash benefits to two-parent households since 1961. Despite recent expansions, little is known about the program's effect on labor supply and welfare participation. I develop a model of family labor supply in which hours of work for the husband and wife are chosen to maximize family utility subject to a family budget constraint accounting for AFDC-UP benefits and other tax and transfer programs. The husband's and wife's labor supply decisions are restricted to no work, part-time work, and full-time work. Maximum likelihood techniques are used to estimate parameters of the underlying hours of work and welfare participation equations. The estimates are used to determine the magnitude of the work disincentive effects of the AFDC-UP program, and to simulate the effects of changes in AFDC-UP benefit and eligibility rules on family labor supply and welfare participation. The results suggest that labor supply and welfare participation among two-parent families are highly responsive to changes in the benefit structure under the AFDC-UP program.]

This paper examines the impact of changes in labor market conditions on participation in the Aid to Families with Dependent Children (AFDC) program in California. Transitions off welfare and transitions back onto welfare are estimated using discrete duration models that control for local labor market conditions, demographic and neighborhood characteristics, duration effects, county-fixed effects, time effects, and county- specific time trends. The results show that higher unemployment rates, lower employment growth, lower employment-to-population ratios, and lower wage growth are associated with longer welfare spells and higher recidivism rates. Hispanics, blacks, and two-parent families are the groups that are most sensitive to changes in local labor market conditions.

A model with private information that supports conventional arguments for a government monopoly in supplying circulating media of exchange is constructed. The model also yields rate-of-return and velocity predictions which are consistent with observations from free banking regimes and fiat money regimes. In a laissezfaire banking equilibrium, fiat money is (essentially) not valued, and the resulting allocation is not Pareto optimal. However, if private agents are restricted from issuing circulating notes, there exists an equilibrium with valued fiat money that Pareto dominates the laissez-faire equilibrium and is Pareto optimal within a restricted class of allocations. Journal of Economic Literature Classification Numbers: 020, 310.

Using industrial firms from the United States, Germany, and Japan, we examine the effect of bank power on cash holdings. We show that Japanese firms hold more cash than U.S. or German firms. We also document that Japanese cash balances are affected by the monopoly power of banks. During periods with powerful banks, firms' high cash holdings are consistent with banks extracting rents. When banks weakened, Japanese cash levels became more like U.S. firms. We conclude that strong Japanese banks persuade firms to hold large cash balances. This is contrary to widely held beliefs about the Japanese governance system.

Abstract ABSTRACT: The annual reports of 141 Fortune 500 Industrial companies were reviewed to determine which financial ratios are reported. The values for 11 selected ratios are computed for all companies using a standardized computational rule. Three of the 11 ratios are significantly more favorable for reporting than for nonreporting firms, suggesting that Fortune 500 firms may selectively report these ratios.

Abstract ABSTRACT: The expected value of information is an important concept in cost and managerial accounting. Quite often students have difficulty integrating and applying statistical techniques to accounting problems. Contributing to this difficulty is the occasional lack of standardization of terms in the two disciplines. This article describes an approach which introduces information economics to managerial and cost accounting classes, Included is an Appendix which can serve as the basis for a classroom presentation by the instructor or which can be reproduced and distributed to students.