A dynamic general equilibrium model is developed in which goods are valued according to the characteristics they contain; the set of goods produced in any period is endogenously determined; and learning by doing is the force behind sustained growth. It is shown that the set of produced goods changes in a systematic way over time, with goods of higher quality entering each period and those of lower quality dropping out. The model is then used to study the effect of introducing a "traditional" sector in which there is no learning.

If an increase in the rate at which a criminal commits crimes lowers the expected time until detection, the income from crime (net of expected fines) must be discounted at a rate that varies with the crime rate. This paper models the criminal's choice of the optimal crime rate under such conditions. It is shown that, irrespective of the criminal's attitude toward risk, an increase in the probability of detection is more likely to deter crime than a comparable increase in penalties. Other implications of the model for the optimal enforcement of laws are also explored.

If an increase in the rate at which a criminal commits crimes lowers the expected time until detection, the income from crime (net of expected fines) must be discounted at a rate that varies with the crime rate. This paper models the criminal's choice of the optimal crime rate under such conditions. It is shown that, irrespective of the criminal's attitude toward risk, an increase in the probability of detection is more likely to deter crime than a comparable increase in penalties. Other implications of the model for the optimal enforcement of laws are also explored.

A dynamic general equilibrium model is developed in which goods are valued according to the characteristics they contain, the set of goods produced in any period is endogenously determined, and learning by doing is the force behind sustained growth. It is shown that the set of produced goods changes in a systematic way over time, with goods of higher quality entering each period and those of lower quality dropping out. The model is then used to study the effect of introducing a "traditional" sector in which there is no learning.

Many but not all firms have the freedom to choose liability rules. In some countries, service professions have unlimited liability rules imposed by government; historically, banks in some countries faced unlimited liability. Why do governments impose unlimited liability? This is the question we address. With a simple model, we illustrate the agency conflicts in firms. Limited liability solves these conflicts efficiently. Unlimited liability raises the cost of capital; inefficiently small firms result. But under some conditions, selectively applied unlimited liability rules protect rents. We test several propositions with data on Scottish banking and U.S. law firms

Many, but not all, firms have the freedom to choose liability rules. In some countries, service professions have unlimited liability rules imposed by government; historically, banks in some countries faced unlimited liability. Why do governments impose unlimited liability? This is the question the authors address. With a simple model, they illustrate the agency conflicts in firms. Limited liability solves these conflicts efficiently. Unlimited liability raises the cost of capital; inefficiently small firms result. But under some conditions, selectively-applied unlimited liability rules protect rents. The authors test several propositions with data on Scottish banking and U.S. law firms.