Everyone recognizes substantial discrepancies between the public's rankings of hazards and those of the experts. For example, experts at the Environmental Protection Agency think that hazardous-waste sites pose mediumto-low risks to the public, while indoor air pollution poses a high risk; yet public perceptions have driven policy to focus on hazardous-waste sites rather than on indoor air quality (Stephen Breyer, 1993 pp. 19-20). beliefs should determine government policy when the public's beliefs differ from those of the experts? The problem evaporates if the public, perhaps recognizing its inability to deal with complex technical issues, entrusts risk assessment to the government and its experts. But what if the public, perhaps distrusting government and experts, is unwilling to leave risk assessment to the experts?' Paul Portney (1992 p. 131) posed a version of this Whose beliefs? question succinctly in his fable, Trouble in Happyville:

The Cold War’s ending has brought mounting pressures to recognize national science and technology research systems. Yet, by comparison with what has been learned already concerning institutional arrangements and business strategies affecting corporate RD investments, surprisingly little is known about the economic origins and effects of the corresponding institutional infrastructures shaping the world of “academic” science, and the organization and conduct of publicly supported RD more generally. The desirability of closing this particular lacuna in the economics and economic-history literatures has been just as evident to economists concerned with extending the analysis of modern institutions as to those who have begun to approach the whole area of science and technology studies from the perspectives and methods of industrial-organization economics. [1] Even before the “new economics of science” had begun to direct attention to such a program, Douglass North (1990 p. 75) saw a significant challenge and a promising opportunity in explicit exploration of “the connecting links between institutional structures... and incentives to acquire pure knowledge.” The research reported here has accepted that challenge (see also the other papers in this session: Timothy Lenoir [1998], Christophe Lecuyer [1998], and Marjory S. Blumenthal [1998]). It is focused upon key episodes in the institutional evolution of “public science,” and its complex and changing relationship to the other organizational spheres of contemporaneous scientific activity: those in which research was conducted under “proprietary rules” for industrial profit-goals, and “defense-related” science and engineering knowledge was sought under conditions of restricted access to information concerning methods, findings, and their actual and potential applications.

Using the Mirrlees optimal income tax model with quasi-linear preferences, the paper examines conditions for marginal tax rates to be rising at high income levels and declining in an interval containing the modal skill. It examines conditions for the marginal tax rate to be higher at a low skill level than at the high skill level with the same density--an argument only holding for skill levels above a cutoff where resources of a worker are marginally of the same value as resources of the government. Data on earnings rates are presented.

Foreign direct investment (FDI) theory and empirical studies have generated mixed support for a link between exchange rates and FDI. This paper argues that exchange rate movements may affect acquisition FDI because acquisitions involve firm-specific assets which can generate returns in currencies other than that used for purchase. Using data on Japanese acquisitions in the United States across 3-digit SIC industries from 1975-1992, maximum-likelihood estimates from discrete dependent variable models support the hypothesis that real dollar depreciations make Japanese acquisitions more likely in U.S. industries, particularly those which more likely have firm-specific assets.