In his valuable contribution, After Civil Rights, John Skrentny shows that in many sectors of the labor market, race is used in ways that were unanticipated when the 1964 Civil Rights Act was enacted. With separate chapters on the professions and business, the public sector, media and entertainment, and the low-skill market, he demonstrates that the new racial realism is widespread, generally has some justification from social scientific research, and is usually inconsistent with judicial decisions. I review the racially realistic practices (racial matching, increasing diversity, racial signaling, and racial characteristics) and discuss their implications for labor economics and for policy.
This review essay of the two-volume Cambridge History of Capitalism (2014), edited by Larry Neal and Jeffrey G. Williamson, is divided into three parts. First, I describe three chapters from the second volume that I recommend for all economists to add depth to their understanding of the world economy today. Robert C. Allen analyzes the world distribution of income; Randall Morck and Bernard Yeung discuss the history of business groups; and Peter Lindert surveys private and public programs to help the poor. In each case, they analyze historical backgrounds that illuminate current issues. Second, I criticize the definition of capitalism used in these volumes as too expansive to be useful. I argue that this definition mars the essays in first volume by stimulating a fruitless search for capitalism in the millennium before the Industrial Revolution. Third, I describe the essays in this reference work starting from the most recent and ending with those about antiquity.
Peter Schuck catalogs an overwhelming list of US government failures. He points to both structural problems (culture and institutions) and incentives. Despairing of cultural change, Schuck focuses on incentives. He relies on Charles Wolf 's theory of nonmarket failures in which “internalities” replace the heavily-studied market failure from externalities (Wolf 1979). Internalities are evidence of a discord between the public goals by which a program is defended and the private goals of its administrators. What might economists contribute? We suggest that economists have neglected internalities because they take group goals as exogenously determined and we defend an alternative tradition in which group goals are endogenously determined.
The problem of global climate change presents overwhelming factual, analytical, and normative challenges. Nordhaus surveys this terrain bravely and mostly successfully. He explains the scientific/economic consensus that the planet is warming, that people are responsible, that the consequences are bad, and that immediate action is benefit/ cost justified. He also discusses the efficient policy response, and the challenges of achieving coordinated global action. His approach is mostly that of standard neoclassical economics, and some of the limitations of that paradigm in this context are not addressed. But overall, The Climate Casino provides an excellent self-contained introduction to the subject.
How does economic science inform the study of sustainable development? In his new book, Jeffrey D. Sachs analyzes the challenges of achieving economic growth while protecting the environment and achieving an equitable distribution of resources. This review presents an overview of this ambitious book with special emphasis on the role of the objectives of local and national leaders and their incentives to pursue the sustainability agenda. Given the huge migration to cities now playing out in the developing world, special attention is paid to the role of urbanization as a cause of sustainability opportunities and challenges.
JHEN PUBLISHERS receive copies of reviews of their books, they quickly scan them for possible quotes for use in promotional materials. They are often frustrated to discover that a reviewer really liked the book, yet never managed to say so in a clear, unequivocal way. The people at Harvard University Press will experience no such frustration with this essay on James Coleman's application of rational choice theory to the classical issues of sociology. Professor Coleman's Foundations of Social Theory is a masterwork. Epic in scope, it is clear, engaging, and forcefully argued. Traditional sociologists will be unable to ignore its bold new agenda for their discipline. And the book will have a lasting impact on economics, political science, psychology, and other disciplines concerned with human behavior. Having issued this ringing endorsement of the work as a whole, I hasten to add that there are many points on which I find myself in substantial disagreement with Coleman. On some occasions, he pushes the rational choice theory too far; on others, not nearly far enough. But one of his great virtues is his remarkable willingness to articulate clear theories and commit himself to their predictions. In the process, he leaves himself open to being proved wrong, and indeed he sometimes is wrong. Yet how much more satisfying is his approach than the familiar alternative of constructing vague ad hoc explanations to fit known fact patterns. Foundations of Social Theory is organized into five parts. Part I, Elementary Actions and Relations, introduces the basic building blocks of the theory-actors, resources, interests, individual rights, and relatonships involving authority and trust. Part II's focus is the micro-tomacro transition; it applies the theory of rational individual behavior to the units developed in Part I to deduce how systems of actors will behave. Here, Coleman is concerned with social exchange, crowd behavior, and the emergence of social norms. In Part III, Coleman constructs a theory in which the principal actor is not the individual but the corporation. His aim is to explain how and why individuals empower formal organizations to act on their behalf, and the means whereby such authority can be revoked. Part IV, entitled Modern Society, employs the theories developed earlier to shed light on developments in contemporary social and economic life. Coleman devotes Part * James S. Coleman. Foundations of Social Theory. Cambridge, Mass. and London: Harvard University Press, Belknap Press, 1990. Pp. xvi, 993. ISBN 0-674-312250-2.
The role of culture in the creation and persistence of racial and ethnic inequalities has been the focus of considerable controversy in the social sciences. In The Triple Package: How Three Unlikely Traits Explain the Rise and Fall of Cultural Groups in America, a new book intended for a popular audience, “tiger mom” Amy Chua and Jed Rubenfeld argue that relatively successful ethnic, religious, and national origin groups in the United States possess a common set of culturally determined traits that drive this success: a sense of group superiority, individual insecurity, and good impulse control. The book is an unscholarly romp through fields of ethnic stereotypes and immigrant anxiety that relies on anecdote, rather than data, and that ignores the selectivity of immigrant flows. In their insistence on the need for the whole triple package, however, the authors raise issues relevant to current research on noncognitive skills—that there are important trait–environment interactions in the determinants of economic success, and that the source and impact of aspirations deserves greater attention.
This book explores the relationship between the material standard of living and health, both across countries and over time. Above all, Deaton is interested in the question of whether income growth contributes significantly to better health. His answer is no: saving lives in poor countries is not expensive, and there are many episodes of massive health improvements in the absence of income growth. As an alternative, he argues that the cross-sectional correlation between health and income is induced by variation in institutional quality, while over time, parallel improvements in income and health have been a result of advancing knowledge.
This paper is a critical review of and a reader's guide to a collection of papers by Robert E. Lucas, Jr. about fruitful ways of using general equilibrium theories to understand measured economic aggregates. These beautifully written and wisely argued papers integrated macroeconomics, microeconomics, finance, and econometrics in ways that restructured big parts of macroeconomic research.
We discuss the economics literature relevant to the design of centralized two-sided market mechanisms for environments in which both buyers and sellers have private information. The existing literature and the history of spectrum auctions, including the incentive auction currently being designed by the FCC, can be employed to analyze such mechanisms. We compare the revenue– efficiency trade-off in an environment with private information on one side of the market versus the trade-off with private information on both sides of the market; we provide an impossibility theorem for the efficient allocation of goods using a deficit-free mechanism when there is private information on both sides of the market; we discuss practical deficit-free mechanisms for various environments with two-sided private information; and we provide a synthesis to guide market design efforts and related research going forward.