The insurance industry is populated by some 2867 insurance companies each of which is the object of numerous rules promulgated and enforced by the various State Insurance Commissions.1 Some of the more important rules have to do with new company formations and mergers between existing insurers. If, as seems reasonable, the administration of these rules rests in part on the Commissioner's perceptions concerning the nature and extent of cost economies underlying insurer operations, the recent papers by Hammond, Melander and Shilling (H-M-S) (1971) and Houston and Simon (1970) provide an interesting contrast and deserve more than the usual notation in the files of those concerned with the forces shaping the structure of financial and nonfinancial markets in the American economy. An important concern of these studies has been the identification of insurer size beyond which substantial cost savings cease to accompany increases in insurance output.2 In this regard, the H-M-S study suggests that significant cost savings are realizedby stock property-liability companies up to a size of $300 to $600 million as measured by annual net premium writings.3 This contrasts sharply with the H-S study which finds significant cost savings cease to accrue to life insurers once annual premiums exceed $100 million.4 As there is nothing in the formal organization of life companies vis-a-vis property-liability companies that can account for these differing estimates, and as there is little logic to support the belief that substantial cost savings are dependent on the size of property-liability insurers,5 further research into the behavior of property-liability costs seems appropriate. Accordingly, this paper provides new estimates of the extent of cost economies in the property-liability industry based on a new sample and regression model. The rationale underlying the regression model is set forward in the first section of the paper; the regression results in the second section; and the third section of the paper concludes with summary observations on the results.

In recent years, the policy mix-defined as the contemporaneous joint state of monetary and fiscal policy-has conditioned the patterns of the business cycle, set up numerous imbalances in macroeconomic and microeconomic behavior, and is laying the groundwork for future economic performance. Restrictive monetary and fiscal policies produced back-to-back economic downturns in 1980 and 1981-82. From 1982 to 1985, massive fiscal stimulus against a backdrop of monetary growth targeting by the Federal Reserve comprised a loose fiscal-tight money policy mix. Subsequently, an actual and prospective tightening of the federal budget and suspension of monetary growth targeting suggest a shift in the policy mix to a tight fiscal-easier money combination. In this paper, the policy mix of the 1980's first half-in the context of an open economy with flexible exchange rates-is characterized. Some of the important economic and financial effects are identified. Among these are 1) higher nominal and real interest rates than otherwise would have been the case; 2) a strong domestic currency; 3) lower inflation rates; 4) a large and growing trade deficit; 5) an unbalanced composition of economic activity across sectors and industries; and 6) a depressed industrial sector. Some of the changes in economic performance to be expected as the policy mix is shifted in response to the Gramm-Rudman-Hollings balanced-budget statute also are shown. I. Policy Mix Alternatives, the 1980 to 1985 Episode, and the Analytical Framework

A relative direct cost measure of scale economies is developed to examine the hypothesis that market share increases profits through the benefits of scale economies. Minor support is found for the hypothesis. Copyright 1989 by MIT Press.

Are stock prices determined by fundamentals or can “bubbles” exist? An important issue in this debate concerns the circumstances in which deviations from fundamentals are consistent with rational behaviour. When there is asymmetric information between investors and portfolio managers, portfolio managers have an incentive to churn; their trades are not motivated by changes in information, liquidity needs or risk sharing but rather by a desire to profit at the expense of the investors that hire them. As a result, assets can trade at prices which do not reflect their fundamentals and bubbles can exist.

China is an important counterexample to the findings in the law, institutions, finance, and growth literature: Neither its legal nor financial system is well developed, yet it has one of the fastest growing economies. While the law–finance–growth nexus applies to the State Sector and the Listed Sector, with arguably poorer applicable legal and financial mechanisms, the Private Sector grows much faster than the others and provides most of the economy's growth. The imbalance among the three sectors suggests that alternative financing channels and governance mechanisms, such as those based on reputation and relationships, support the growth of the Private Sector.