Knowledge that Transforms

I NDUSTRIAL POLICY has turned out to be an idea with a brief career. In the summer of 1984, after Rhode Island's electorate voted 4-1 against a bond issue to give the state its own policy, Robert Reich observed that industrial policy is one of those rare ideas that has moved swiftly from obscurity to meaninglessness without any intervening period of coherence (Reich 1984, p. 32). This from perhaps its chief advocate. In the fall, the Reagan reelection sealed the issue, ruling out a U.S. policy for years to come. Still, the policy debate raised two central questions about economic change. (1) Why do older industries tend to show a retardation in output and employment growth? (2) Has industry aging eroded American competitiveness, so that the U.S. is in some sense losing the economic race? (Lester Thurow 1984). To get at answers to the two questions, this paper offers a review of what economists have had to say about industry aging, economic maturity, and market-generated renewal. Because the subject matter is so vast, it will prove useful to begin with a guide to the territory, a roadmap. I. Preliminaries

N RECENT YEARS, public and professional interest in schools has been heightened by a spate of reports, many of them critical of current school policy.' These policy documents have added to persistent and long-standing concerns about the cost, effectiveness, and fairness of the current school structure, and have made schooling once again a serious public issue. As in the past, however, any renewed interest in education is likely to be short-lived, doomed to dissipate as frustration over the inability of policy to improve school practice sets in. This frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools. Although the educational process has been extensively researched, clear policy prescriptions flowing from this research have been difficult to derive.2 There exists, however, a consistency to the research findings that does have an immediate application to school policy: Schools differ dramatically in quality,

The purpose of this paper is to characte rize a portfoli o strategy that exploits the informat ion conveyed by empirica l rejectio ns of the termstructur e Expectat ions Hypothes is.After providin g new evidence on such rejectio ns, the analysis derives optimal portfoli o position s across Treasury bills of 1 through 6 months maturiti es and gives a quantita tive assessme nt of the implied risk/ret urn tradeoff s.

A bstract-A statistical model of household automotive transportation demand is developed which nests the Koyck distributed lag model and four alternatives as special cases. These various specifications are tested with data from the Panel Study of Income Dynamics. For households who changed residence during the observation period 1973-1978, the Koyck model is rejected in favor of a model which allows price and income effects to vary freely for two years prior to settling into a geometric declining pattern. The maximum single year income impact, for these households, is in the year following the income change. Prices appear to have an initial negative impact on miles driven followed by a strong positive impact in the third year. This latter effect may be related to the acquisition of a more fuel efficient vehicle stock.