Dale Jorgenson has bestowed a great honor and no small challenge by inviting me to give this lecture: a great honor because of the distinguished list of economists who have preceded me; a challenge because of the standard they have set, and because there is no greater challenge for any economist than providing a coherent account of significant events to his scientific peers. I am sometimes asked by friends about the differences between academic life and life as a public official. There are many. Two stand out. First, as an academic, the gravest sin one can commit is to sign one’s name to something one did not write. As a public official it is a mark of effectiveness to do so as often as possible. Second, as an academic, if a problem is too hard and does not admit of a satisfactory solution, there is an obvious response: work on a different problem. That is not a luxury that one has in government. I have been reminded of this often in recent years as we have grappled with financial crises in a number of what had previously been considered emerging markets with unrestrained futures. Anyone who doubts the social importance of what economists do should consider the debates surrounding these crises. Hundreds of millions of people who expected rapidly rising standards of living have seen their living standards fall; hundreds of thousands if not millions of children have been forced to drop out of school and go to work; hundreds of billions of dollars of apparent wealth has been lost; the stability of large nations as nations has been called into question; and the United States has made its largest nonmilitary foreign-policyrelated financial commitments since the Marshall Plan. Almost all the issues involved in understanding, preventing, and mitigating these crises are the stuff of economics courses and research: fixed versus flexible exchange rates, moral hazard and multiple equilibria, speculation and liquidity, fiscal and monetary policies, regulation and competition. What economists think, say, and do has profound implications for the lives of literally billions of their fellow citizens. Whether it is discussing the role of derivatives in signaling exchange-rate commitments with Chinese Premier Zhu Rongji, or discussing an NBER working paper on inflation targeting with the Brazilian central bank governor Arminio Fraga, or discussing alternative approaches to bankruptcy law with Indonesia’s economic team, or optimal debt durations with the Mexican authorities, I am consistently struck by the impact of the kind of research discussed at the AEA meetings. The future well-being of the world’s people in large part will depend on how the ongoing process of global integration works out. This is a strong statement, but one that is supported by the global economy’s post-World War I failure and its post-World War II success. Central to global integration is financial integration: the flow of funds and of capital across international borders. And as the events of the late 1920’s and early 1930’s remind us, central to global disintegration can be international financial breakdowns. Today, I want to reflect on the issue of global financial integration in light of the dramatic and largely unpredicted events of recent years. It is perhaps a good time for reflection: there has been enough repair that priority can shift from * U.S. Department of the Treasury, 1500 Pennsylvania Avenue, Washington, DC 20005. This lecture reflects many things I have learned from experiences I have shared with colleagues in the United States government and governments around the world. I thank Brad DeLong, Marty Feldstein, Stephanie Flanders, Ken Rogoff, Andrei Shleifer, and Ted Truman for useful comments and suggestions. I am especially grateful to Nouriel Roubini and Stephanie Flanders for valuable discussions and assistance in the preparation of this lecture. The usual disclaimer applies.

131 enroll. While membership is an entitlement that can be activated, the entitlement is restricted by family membership. As in other developing regions, formal institutions are weak in modern Africa, and persons therefore tend to organize economic relationships through social institutions. One way of augmenting the stock of capital is through education; another is through migration to the city. To a great degree, it is families who organize the flow of resources that promote both urban migration and the acquisition of skills. Recognizing the central role of families in the formation of capital, one can achieve a better grasp of the relationship between modernization and ethnicity. To a significant degree, modernization is achieved through the process of human-capital formation. This process is privately organized; that is to say, it is organized by families. Families organize the flow of resources between generations and sectors, thus promoting the acquisition of skills and urban migration, and thus the modernization of societies. It is by stabilizing the contract between generations within family units that ethnic groups facilitate the process of investment. To illustrate, I use data collected from a village in Luapula Province, Zambia, which supplies labor to the mining centers of Zambia and Congo. When conducting my field work, I focused on links between town and country and found that the income rural dwellers derived from town varied systematically with the structure (size, age composition, and education) of their families. The coefficients in the “remittance” function suggested that an additional child yields, on average, 3.23 kwacha in the form of financial Those who study modern Africa commonly highlight three features: its poverty, its instability, and its ethnic diversity. Whether in lurid popularizations (e.g., Robert Kaplan, 1994) or in social scientific research (e.g., William Easterly and Ross Levine, 1997; but see also Paul Collier and A. Hoeffler [1998]) scholars reason that Africa is poor because it is unstable and that its instability derives from its ethnic complexity. Ethnicity thus lies, it is held, at the root of Africa’s development crisis. This essay critiques the conventional wisdom by mounting an alternative interpretation. Using both qualitative and quantitative data from Africa, this article argues that:

Since Gary S. Becker's (1968) groundbreaking work on the economics of crime, economists have expanded upon both the theory and the empirical analysis of crime (e.g., Isaac Ehrlich, 1973; M. K. Block and J. M. Heineke, 1975; Ehrlich, 1975; Ann Dryden Witte, 1980). According to the standard theoretical framework, optimizing individuals engage in criminal activities depending upon the expected payoffs of the criminal activity, the return to legal labormarket activity, tastes, and the costs of criminal activity, such as those associated with apprehension, conviction, and punishment. Excellent reviews of the literature appear in Daniel Nagin (1978), Sharon Long and Witte (1981), Richard Freeman (1983), and Theodore G. Chiricos (1987). While some studies reported evidence that increases in criminal-justice sanctions reduce criminal activity (Ehrlich, 1975; Witte, 1980; Stephen K. Layson, 1985; Jeffrey Grogger, 1991; Steven D. Levitt, 1997), others found either a weak relationship, or none at all between the two (Samuel L. Myers, Jr., 1983; James Peery Cover and Paul D. Thistle, 1988; Christopher Cornwell and William N. Trumbull, 1994). Contradictory results can be explained, at least in part, by the empirical problems inherent in crime research, the most significant being the simultaneity between crime and criminal-justice sanctions.' Thus, after 30 years of empirical research there is no consensus on the impact of police and arrests on criminal activity. The purpose of this study is to provide new, and potentially more refined, evidence on the crime-deterrence relationship using a unique data set, which consists of monthly observations in New York City for nearly 30 years. This is the only data set of its kind, based on highfrequency observations of five different crimes, the corresponding arrests, the size of the police force, and a poverty indicator, spanning decades of experience in one city.2 Consequently, this is the first paper that employs high-frequency time series of individual crime categories to circumvent many problems found in studies that employ cross-sectional or low-frequency (e.g., annual) time-series data sets. We also use recent advances in time-series econometrics to test and correct for problems that may have contaminated the results of previous time-series analyses of crime. We find robust evidence for the deterrent effects of arrests and police on most categories of serious felony offenses. Another unique feature of the study is the addition of drug-use proxies. In the 1980's and into 1990 the media focused much attention on drug abuse, crime control, and the criminaljustice system. It had been claimed that in* Corman: Department of Economics, Rider University 2083 Lawrenceville Road, Lawrenceville, NJ 08648, and National Bureau of Economic Research; Mocan: Department of Economics, University of Colorado-Denver, Campus Box 181, P.O. Box 173364, Denver, CO 80217, and National Bureau of Economic Research. This research is supported by a grant from the National Institute of Drug Abuse to the National Bureau of Economic Research (Grant No. 1-R03-DA06764). An earlier version of this paper was presented at the 1996 American Economic Association Meetings in San Francisco, CA. Ofira Schwartz, Keith Amadio, Joseph Bucs, and Ronald Teodoro helped in data collection. Timothy Potter, Jennifer Giellis, Erdal Tekin, Melissa Anderson, Paul Niemann, and Danny Rees provided assistance in data analysis. John Lott, Jody Overland, and especially Michael Grossman provided very valuable suggestions. We thank two anonymous referees for helpful comments. Any opinions expressed here are those of the authors, and should not be assumed to be those of the granting agency, Rider University, University of ColoradoDenver, or NBER. ' Franklin Fisher and Daniel Nagin's (1978) article describing the problem is a classic in the field. Recent literature suggests several new approaches to the simultaneity problem: using careful empirical analyses of individual rather than aggregate data (Grogger, 1991; Helen Tauchen et al., 1994), and finding better exogenous instruments for identification (Levitt, 1996, 1997). 2 Among the advantages of using just one city is the fact that there is one unit defining and collecting crime and deterrence data, which prevents inconsistencies across observations.

This paper tests for the existence of asymmetric information between the Federal Reserve and the public by examining Federal Reserve and commercial inflation forecasts. It demonstrates that the Federal Reserve has considerable information about inflation beyond what is known to commercial forecasters. It also shows that monetary-policy actions provide signals of the Federal Reserve's information and that commercial forecasters modify their forecasts in response to those signals. These findings may explain why long-term interest rates typically rise in response to shifts to tighter monetary policy.

Aggregation Bias in the Factor Content of Trade: Evidence from U.S. Manufacturing by Robert C. Feenstra and Gordon H. Hanson. Published in volume 90, issue 2, pages 155-160 of American Economic Review, May 2000