Knowledge that Transforms

CORRIGENDA Volume 37, June 1999 In "The Numerical Reliability of Econometric Software", by B. D. McCullough and H. D. Vinod, there are misprints in some equations on page 647 in the upper part of the left-hand column. The passage should read as follows: The normal equations are 6?^ + 61.5? ^ = 7.261 61.5?^ + 630.55? ^ = 74.5053 which yields a regression line of Y^ = ?3.478 + 0.457X. Suppose that the normal equations had been computed only to four significant digits as 6?^ + 61.5? ^ = 7.261 61.5?^ + 630.6? ^ = 74.50.

I formulate recommendations to young authors for writing economic theory well. I state general principles of good writing, and emphasize the role of the different components of a paper and the importance of the structure of one's work being clear. I explain how to choose notation and language, and how to present and illustrate proofs.

The bicentenary of Adam Smith's Wealth of Nations in 1976 was marked by the publication of a new complete edition of his works and correspondence, bringing together for the first time all extant published and unpublished writings. A basis was thereby provided for serious reconsideration of Adam Smith's work, and since the early 1980s many conventional assumptions concerning Smith's work and contemporary significance have been challenged. This paper surveys the foundations upon which this new, “historical” Adam Smith has been constructed, and assesses the merits of the principal claims which have recently been made for his work.

Numerous examples show that some econometric software packages contain serious flaws, and that users cannot safely assume that their software is accurate. A brief survey of the fundamentals of computer arithmetic discusses the sources of numerical error and emphasizes that computer arithmetic is not at all like pencil-and-paper arithmetic. Both users and developers of econometrics software should first pay attention to accuracy, and only later consider user-friendliness. Details are provided for assessing the accuracy of basic estimation routines, statistical distributions, and random number generators. More accuracy benchmarks are needed, especially for specialized econometric procedures.

John Nash's formulation of noncooperative game theory was one of the great breakthroughs in the history of social science. Nash's work in this area is reviewed in its historical context to better understand how the fundamental ideas of noncooperative game theory were developed and how they changed the course of economic theory.

This paper critically reviews the research on how collective bargaining systems influence macroeconomic performance in industrialized countries. The review considers effects of bargaining level, coordination, and corporatist institutional arrangements. Key empirical results turn out to be quite fragile, and much of the paper explores issues of measurement and specification that account for the fragility. The paper concludes that complementarities between key institutions and between institutions and the economic environment may be more important for macroeconomic performance than the effects of individual institutions, and it suggests research strategies.

The paper brings together the abundant and somewhat anarchic literature on child labor, isolating its central findings and analytical insights. The investigation is especially directed at the micro economics of why child labor occurs and the sort of policy that is likely to succeed in eradicating it. The paper also outlines new directions for analyzing the dynamics of child labor, the possibility of “child-labor traps” and the circumstances in which voluntary contracts should be banned. Various arguments for and against declaring child labor illegal are examined. A final section explores the economics of international child labor standards.