The relationship between sociobiology and economics is examined with particular reference the study of population. The author attempts to illustrate by some examples involving sex ratios how unalike (and alike) are the deductive paradigms common economics (and perhaps sociology) and those of sociobiology and genetic demography. (EXCERPT)
Is advertising socially excessive? Economists have been reluctant to consider this question, for there appeared to be no rigorous method of analyzing cases in which advertising influences tastes. Some recent studies have made fundamental contributions to this debate (Avinash Dixit and Victor Norman, 1978; Yehuda Kotowitz and Frank Mathewson, 1979), but no consensus has emerged. Dixit and Norman were the first to establish a rigorous methodology. They evaluated social welfare (SW= consumer's surplus + profits) under preand post-advertising market equilibria, using pre-advertising tastes for one ranking and post-advertising tastes for another ranking. When the SW rankings were identical, Dixit and Normal claimed that unambiguous inferences could be drawn. In general, they concluded that the profitmaximizing level of advertising will be excessive under a variety of product market structures. Franklin Fisher and John McGowan (1979) criticized Dixit and Norman for including advertising in the utility function but ignoring the direct effect that advertising has on utility in their welfare analysis. Dixit and Norman (1979) courvlered that advertising merely shifts the preference ordering over goods, and that it is this preference yardstick that matters. Welfare conclusions about advertising can be generated less controversially within the framework suggested by George Stigler and Gary Becker (1977). They treat utility as if it were generated by which individuals produce with purchased goods, time, human capital, and firms' advertising. Their commodities can be interpreted similarly to what Kevin Lancaster (1966) calls a characteristic, the terminology used herein.' As an example, consider tennis. We buy racquets and balls, not to own them per se, but rather to enjoy playing the game. Playing the game actually generates utility, and this characteristic is produced by an individual's racquet, balls, human capital (skill level), and time. Thus preferences are ordered over characteristics, not over goods. Advertising can lower the shadow price of a characteristic by increasing the ability of the purchased good to produce the desired characteristic. This is accomplished by providing the consumer with different information or beliefs about the product than previously held. Suppose a perennial tennis champion states a preference for a particular brand of racquet. This enhances the self-image of amateur owners of that brand and increases their enjoyment of the game without changing their expenditures. The per unit cost of the characteristic will decline, making current owners of the racquet likely repeat customers and current shoppers more likely to choose the star's preferred brand. Observe that advertising has increased the demand for a market good that produces the now cheaper char-
The intellectual breakthroughs that mark the neoclassical revolution in economic analysis occurred in Europe around 1870. The next two decades witnessed lively debates in which the new theory more or less absorbed or was absorbed in the classical tradition that preceded and provoked it. In the 1890s, according to Joseph A. Schumpeter (1954, p. 754) there emerged "a large expanse of common ground and ... a feeling of repose, both of which created, in the superficial observer, an impression of finality -- the finality of a Greek temple that spreads its perfect lines against a cloudless sky." Of course the temple was by no means complete. Its building and decoration continue to this day, even while its faithful throngs worship within. American economists were not present at the creation. To a considerable extent they built their own edifice independently, designing some new architecture in the process. They participated actively in the international controversies and syntheses of the period 1870-1914. At least two Americans were prominent builders of the "temple, " John Bates Clark and Irving Fisher. They and others brought neoclassical theory into American journals, classrooms, and textbooks, and its analytical tools into the kits of researchers and practitioners. Eventually, for better or worse, their paradigm would dominate economic science in this country. This paper discusses their contribution.
Central to the quantity theory of money are a number of important propositions about the long-run equilibrium effects of changes in the nominal stock of money on other economic variables. A standard way of testing these propositions is to use quarterly or annual data, explicitly model the lag structure and then derive the long-run solution of the model from the empirical estimates. An alternative is to use some type of smoothing procedure to approximate positions of equilibrium and then to use these transformed data directly in testing hypotheses. The National Bureau technique of averaging data over reference cycle phases is one such method; Robert Lucas's application of Fourier transforms in Two Illustrations of the Quantity Theory of Money (1980) is another; and John Geweke's method (1982) of frequency decomposition is a third. An entirely different way of approaching the problem is to use cross-country-average rather than time-series data as the basic units of observation. The advantage, according to Lucas, is that, Since the two quantity-theoretic laws [that he examines] are obtained as characteristics of steady states, or limiting distributions, of theoretical models, the ideal experiment for testing them would be a comparison of long-term average behavior across economies with different monetary policies but similar in other respects (p. 1006). In this paper I conduct such an experiment. The data that I use are for 20 OECD countries over the period 1956-80. The specific relationships that I examine are those between money and the price level, money and real income, money and interest rates, and money and exchange rates. In the main the data accord well with the quantity-theoretic model. Classical neutrality holds. There is evidence of a Fisher effect, albeit a less than complete effect, on interest rates. Finally, the data are consistent with long-run purchasing power parity and, hence, correspondingly with a long-run monetary approach to exchange rate determination.
In an article in this Review, Arthur Raviv (1979) examines Pareto optimal insurance policies when an insurer incurs settlement costs C induced by indemnity for loss x. Raviv's main result is that a necessary and sufficient condition for the Pareto optimal deductible to equal zero is C'(I) = 0. This implies that deductible policies give the best tradeoff between risk sharing and economizing on costly claim settlements. Since in practice these costs are significant, the theorem is of considerable importance. Among others, this has been recognized by Robert Townsend (1979), Michael Brennan and Ray Solanki (1981), David Mayers and Clifford Smith (1981), Gur Huberman, Mayers, and Smith (1983), Harris Schlesinger (1981), and Stuart Turnbull (1983). The theorem is correct, but Raviv's proof is not. In this note a corrected proof for the theorem is given. The corrected proof is important in itself because it allows for a generalization to a greater variety of transactions costs than has previously been considered (see my 1984 paper for details). Section I develops the setting for the problem and the notation to be subsequently used. Raviv's error and the corrected proof are presented in Section II.
Arguing that the beliefs that there were no energy shortages in the US before the 1970s and that large-scale rationing requires government price controls are clearly wrong, the authors analyze the extent of the shortage, the nature of the rationing program, and the structure of the petroleum industry. They argue that regional isolation, industry concentration, and the vertical integration of the larger firms made rationing possible. In the absence of laws requiring rationing or setting prices, they focus on the hypothesis that the oil companies held prices down because they were afraid of hostile government actions. 22 references, 2 figures, 1 table.