Knowledge that Transforms

SHORELINE development is a growing public policy issue in many urban areas. While there is some published research on a related topic, the importance of ambient water quality, economists have not yet turned their attention to the economic significance of the existence and width of the undeveloped apron offering public use and access to bodies of water in urban areas. There are several important issues to be considered here. May we expect the urban land market to provide a solution which is Pareto efficient? Have public agencies through zoning and other building restrictions acted in a socially optimal way? What contribution can studies of the determinants of property values make to our understanding of these issues? We begin an exploration of these issues and present some empirical results that enhance our knowledge of the economics of water-related open space. More generally. this paper extends recent economic work that has produced quantitative measures of value for phenomena hitherto restricted to qualitative expression. The process of transforming qualitative into quantitative knowledge, so essential to an empirical science as to be one of its distinguishing features, is well illustrated by the work of Cobb and Douglas on production (1928); Griliches (1961) on the qualitative characteristics of automobiles; and Fogel and Engerinan's (1974) controversial piece on slavery.' With respect to hotusing, implicit prices of each attribute contained in the bundle of housing services have been estimated by hedonic price regressions in the spirit of the work by Lancaster (1971) and others.2 In the following sections we first examine the choice of housing attributes, including waterrelated open space and proximity to bodies of water, faced by a household in a metropolitan area. Next, the process of implicit price formation is examined, and, employing data on individual dwelling units in a metropolitan area with numerous bodies of water, these implicit prices are estimated. We then turn to the question of what can and cannot be inferred from these results about the demand for open space and the welfare gains or losses resulting from possible changes in the amount of water-related open space.

The distribution of income in the urban context has received relatively little attention from economists. Limited information has been employed to assert an inverse relationship between city size and income inequality (Duncan and Reiss, 1956; Richardson, 1973). This relationship can be rationalized by the fact that both city size and inequality are related to the level of income. Kuznets (1955) hypothesized a negative relationship between income and inequality, and he is supported by the findings of Aigner and Heins (1967), Conlisk (1967), and Al-Samarrie and Miller (1967) using state data and by Frech and Burns (1971) using SMSA data. Sveikauskas (1975) has documented that incomes are higher in larger cities. In this paper we analyze the relationship between city size and income inequality. After controlling for other factors that influence income inequality by using regression analysis on cross section data for 79 U.S. metropolitan areas, we find that income inequality appears to increase with city size.

TN following the mean-variance analysis developed by Markowitz (1952) and Tobin (1958), Sharpe (1964), Lintner (1965a, b) and Treynor (1961) have developed the theory for determination of asset prices under conditions of uncertainty. The equilibrium asset pricing model, and its implication for measuring ex post performance of individual securities, have been empirically tested by Lintner,1 Jensen (1968, 1972), Miller and Scholes (1972), Douglas (1969), Roll (1969) and others. The empirical results obtained by both Douglas and Lintner deviated from the theory of the model. Moreover, Miller and Scholes have run empirical tests similar to those of Douglas and Lintner and found a significant disparity between the theoretical model and the empirical evidence. They maintain that part of this discrepancy can be explained by possible statistical biases, measurement errors, and consideration of the skewness of the distribution of returns. Black, Jensen, and Scholes (1972) (hereafter B-J-S) confirm the systematic bias. Using monthly data covering a 35 year period, they discovered that, on average, high risk securities earned less than the amount predicted by the model. Similarly, earnings on low risk securities exceeded the amount predicted.2 Although these disparities clearly suggest some systematic empirical bias, we are not examining a possible statistical bias but a mathematical bias stemming from one of the assumptions underlying the capital asset pricing model (CAPM). To be more specific, the model assumes that all investors are single period, expected utility of terminal wealth maximizers. There is no particular restriction on the length of this period as long as it is identical for all investors. Clearly, the length of the true investment horizon affects asset prices under conditions of uncertainty. We claim that the disparities noted above may result from using data calculated for an investment horizon that differs from the true investment horizon. In the various empirical tests, the investment horizon has been selected arbitrarily. For example, Lintner and Miller and Scholes use annual data (i.e., they implicitly assume a one-year horizon), Douglas uses quarterly and annual data; Black, Jensen and Scholes, as well as Friend and Blume (1970), use monthly rates of return in their empirical tests, while Roll uses weekly data. It has been shown elsewhere by Levy (1972) that the Reward to Variability index (developed by Sharpe, 1966) is a function of the investment horizon assumed. Hence, there exists a systematic mathematical bias that is a function of the horizon assumed. The above theoretical findings are related to the theory of pricing capital assets, but deal only with efficient portfolios and not individual stocks. In this paper we illustrate that the assumed horizon plays a crucial role in empirical testing. Any deviation from the true horizon causes a systematic bias in the regression coefficient (i.e., in the security systematic risk). This in turn causes a systematic bias in the performance measures of each security, and hence the deviation between the theoretical model and the empirical evidence. The results of this paper are not limited to the theory of pricing capital assets; they are applicable to any econometric study in which the variables have multiplicative rather than additive properties. In such a case the regression coefficients will have a matheReceived for publication February 27, 1975. Revision accepted for publication March 8, 1976. The authors acknowledge the technical assistance of Moshe Smith and two anonymous referees. The first author has been partially financed by the Maurice Falk Foundation, and the second author has been financed by the Ford Foundation. 1 Lintner's paper Security Prices and Risk: The Theory and a Comparative Analysis of A.T.&T. and Leading Industrials was presented at the Conference on Economics of Regulated Public Utilities, June 24, 1965, Chicago. 2 Miller and Scholes show that the presence of certain biases could have accounted for the Douglas and Lintner findings. BJ-S maintain that the assumption of borrowing at riskless interest rates could have accounted for these deviations.

N OTWITHSTANDING this early statement by Ravenstein (1885, p. 196), the separate study of geographic mobility among women has been virtually ignored by students of migration.' The reason is obvious: women are assumed to migrate because their husbands do.2 While it is undoubtedly true that most migration involves family units (the migration of husband and wife occurring jointly), the possibility that the wife's welfare is considered in the family's decision to migrate should not be ruled out. It is at least desirable to test the hypothesis that the wife's employment is considered in the migration decision and to examine the effect of that decision on women's earnings. In this paper an economic model is developed to explain the family's decision to migrate and the effect of migration on the labor market earnings of men and women. It is based on the tenet that family utility, defined operationally as the husband's and wife's labor market earnings and leisure, is maximized. The model suggests that the wife's labor market involvement is a significant consideration in a (husband-wife) family's decision to migrate. The data from the National Longitudinal Surveys (NLS) are well suited for empirical testing of this model.3 The surveys provide the opportunity to examine the change in labor market earnings of families and individuals over a five-year period. Availability of data on migratory status as well as on other personal characteristics of women and their families permits the direct testing of the model. In section I a family utility maximization model is used to derive implications with regard to the probability of migration by the family and the effect of migration on individual and family earnings. These implications are tested in section II using multiple regression analysis and the NLS data for white women who were 35 to 49 years of age in 1972. The implications of the empirical estimates for the economic welfare of women and for interpreting the observed earnings distribution are discussed in section III.

D. Levhari, T. N. Srinivasan; Optimum Savings Under Uncertainty: A Correction, The Review of Economic Studies, Volume 44, Issue 1, 1 February 1977, Pages 1

Journal Article Public Goods and Technology of Consumption: A Comment Get access A. Zabalza A. Zabalza London School of Economics Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 44, Issue 1, February 1977, Pages 193–194, https://doi.org/10.2307/2296987 Published: 01 February 1977 Article history Received: 01 October 1975 Accepted: 01 May 1976 Published: 01 February 1977

Journal Article Interest Payments on Money and the Efficiency of Monetary Equilibrium: A Comment on Grandmont and Younes Get access Gerhard O. Orosel Gerhard O. Orosel University of Bonn Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 44, Issue 1, February 1977, Pages 195–196, https://doi.org/10.2307/2296988 Published: 01 February 1977 Article history Received: 01 December 1975 Accepted: 01 July 1976 Published: 01 February 1977

Journal Article Reserve Stocks as External Targets and the Stability of Alternative Exchange Rate Systems Get access Jay H. Levin Jay H. Levin Wayne State University Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 44, Issue 1, February 1977, Pages 59–69, https://doi.org/10.2307/2296973 Published: 01 February 1977 Article history Received: 01 November 1975 Accepted: 01 August 1976 Published: 01 February 1977

Journal Article A Note on Aoki's Perfect Controllability of a Linear Macro-economic Model Get access G. Uebe G. Uebe Technische Universität München Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 44, Issue 1, February 1977, Pages 191–192, https://doi.org/10.2307/2296986 Published: 01 February 1977 Article history Received: 01 July 1975 Accepted: 01 April 1976 Published: 01 February 1977

Journal Article Rate of Growth Effects on Aggregate Savings: Further Analysis Get access Thomas Russell Thomas Russell University of Rochester Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 44, Issue 1, February 1977, Pages 153–168, https://doi.org/10.2307/2296979 Published: 01 February 1977 Article history Received: 01 November 1974 Accepted: 01 December 1975 Published: 01 February 1977