Knowledge that Transforms

In the history of science researchers have often borrowed theories, analogies, or metaphors from other fields, usually the better-developed ones; in economic terms, they invested their human capital by acquiring new and presumably more-advanced intellectual tools.The most conspicuous borrowing in nineteenth-century social science was the unfortunately imaginary set of the developmental sequences of societies, worked out by anthropology and sociology on the basis of findings from biological evolution.It is less often that scientists in a relatively developed

University of Wisconsin

Japan experienced a precipitous decline in fertility during the decade following the postwar baby boom of 1947-49, and then her fertility rates leveled off.The rapid decline in fertility paralleled liberalization of abortion laws and an active campaign to disseminate contraceptive information.Given these developments and the apparent subordination of women in Japanese culture, one might be inclined to ascribe the fertility decline to increased availability of abortions and other means of birth control and to doubt the explanatory relevance of economic theory which emphasizes the effects of rising wages and educational attainment of women on fertility.The conclusion that emerges from this study, however, is that the basic economic forces identified by the new economic theory of household decision making have been operating to produce a considerable part of the observed differentials and trends in Japanese fertility.1Indeed, increased use of abortion and contraceptive devices appears to have been induced to some extent by economic forces.

For an analysis of the three forms of marriage recognized in Brazil, see Kogut (1972).Cheung (1972) has described the structure of property rights within marriage in Chinr. S34-'Note that a gain to marriage is not ruled out by decreasing returns to scale.

It is somewhat unusual to begin the treatment of a subject with a warning against attaching too much importance to it; but in the case of economics, such an injunction is quite as much needed as explanation and emphasis of the importance it really has.It is characteristic of the age in which we live to think too much in terms of economics, to see things too predominantly in their economic aspect... .There is no more important prerequisite to clear thinking in regard to economics itself than is recognition of its limited place among human interests at large.

Studies of the returns to education have generally investigated the relationship between individuals' investments in formal education and on-the-job training and their labor-market productivity. It is well recognized, however, that other factors besides formal education and training contribute to a person's effective stock of human capital (and hence to productivity); these factors include early childhood environment, parents' behavior (see Dugan 1969), and associations with other individuals. There is general agreement, for example, that a child's development is affected by the ability and performance of peers in school. At a later stage, a significant part of an individual's college and graduate education appears to result from association with fellow students, the more able students contributing to the education of all. After formal schooling is completed, close associates are likely to continue to affect an individual's further educational development and to influence the rate of depreciation of the individual's stock of knowledge. One of the more persuasive explanations of the observed strong positive relationship between formal education and labor-market productivity is that, in addition to providing specific skills, formal education improves the individual's ability to acquire and assimilate information, to perceive and understand changing conditions, and to respond effectively.' From

It has long been recognized that consumption behavior represents mainly joint household or family decisions rather than separate decisions of family members. Accordingly, the observational units in consumption surveys are "consumer units," that is, households in which income is largely pooled and consumption largely shared. More recent is the recognition that an individual's use of time, and particularly the allocation of time between market and nonmarket activities, is also best understood within the context of the family as a matter of interdependence with needs, activities, and characteristics of other family members. More generally, the family is viewed as an economic unit which shares consumption and allocates production at home and in the market as well as the investments in physical and human capital of its members. In this view, the behavior of the family unit implies a division of labor within it. Broadly speaking, this division of labor or "differentiation of roles" emerges because the attempts to promote family life are necessarily constrained by complementarity and substitution relations in the household production process and by comparative

Economics has long been plagued with controversies: the Keynesian-monetarist controversy, the investment function controversy (is the elasticity of substitution unity?), the liquidity preference-loanable funds controversy. Geoffrey Harcourt has extended his survey article from the Journal of Economic Literature (1969) into a book dealing with one of the latest of these so-called controversies, that between Cambridge, England, and Cambridge, Massachusetts, concerning capital theory. The book is more balanced and more complete than the original survey article and includes some good pieces of exposition. The problems that I find with the book are basically problems I find with the Cambridge (U.K.) theory of which he is a partisan on one side-as, I suppose, I am on the other--and so, rather than focus on any errors and confusions which are peculiar to Harcourt, I prefer to focus on three of the major issues involved in the dispute and to suggest, in doing so, where Harcourt (and the Cambridge [U.K.] theorists) have gone astray.

This paper extends the theory of optimal taxation and government production to open economies. Appropriate rules for project evaluation and the determination of consumption, production, and trade taxes under a variety of restrictions (e.g., less than 100 percent profit taxes, government budget constraint, foreign exchange constraint) are derived. Among the results are (a) international prices should be used for evaluating public projects, unless there is a government budgetary constraint or there is a quota (this result does not require that tariff rates be optimally chosen); (b) no tariff should be levied on intermediates and only consumption taxes should be employed if there are 100 percent profit taxes. If profits are not taxed at 100 percent, both consumption and trade taxes should be employed.

In recent years, Congress has considered a variety of work-subsidy programs designed to encourage work among welfare recipients. Many of these programs would subsidize individuals only if they work some minimum number of hours. Commonly used techniques cannot give direct answers to relevant policy questions since a tied offer is involved, and hence the offer cannot be treated as a simple wage change. The essence of the problem involves utility comparisons between two or more discrete alternatives. Such comparisons inherently require information about consumer preferences in a way not easily obtained from ordinary labor-supply functions. To make such comparisons, I present a method for directly estimating consumer indifference surfaces between money income and nonmarket time. Once these surfaces are determined, they can be used to compare a variety of alternative programs to investigate whether or not there is scope for Pareto-optimal redistribution of income transfers and time, improving the general level of welfare of the community at large without reducing the welfare of individuals receiving income transfers. Knowledge of these indifference surfaces allows us to estimate reservation wages to estimate the value of nonworking-women's time (Gronau 1973), laborforce participation functions, hours-of-work functions, and welfare losses due to income tax programs (Harberger 1964). I demonstrate that direct estimation of indifference surfaces allows us, at least in principle, to relax