The prevalence of labor contracts with fixed duration seems surprising. Why is a fixed duration preferred to a stochastic duration that depends on the consumer price index? In this paper, the specification of the contract duration is determined endogenously. The wage rate can be indexed to the consumer price index, but there is a loss since the indexation must be the same for different types of shocks. This loss increases with the variability of the contract duration. Since the loss due to the contracting cost depends on the expected discounted duration only, a fixed duration is chosen. Copyright 1992 by American Economic Association.
This paper critically evaluates the scope and content of undergraduate courses on the economic status of women. It responds critics who question whether these courses are too interdisciplinary, too laden with ideology, and too soft qualify as economics courses. It details the content of existing courses and investigates how well they meet the following objectives: (1) familiarize students with the economists' toolbox (supply and demand curves, the concept of constrained optimization, etc.); (2) expose students topics of empirical importance in understanding the status of women and topics that pose particular challenges economic orthodoxy; (3) investigate how considerations of gender may lead a restructuring of research questions and economic models; and (4) stimulate and nurture constructive debate on the determinants of the economic status of women by demanding that assertions be backed by analysis and facts. The first objective is a goal of any undergraduate course in economics: teach students to think like economists (John J. Siegfried et al. 1991 p. 199). The second and third objectives serve differentiate this course from other undergraduate courses in economics and acknowledge its feminist perspective. A standard undergraduate course in labor economics has as its organizing theme the study of decisions and constraints faced by individuals engaged in market work. Gender is one of many factors studied. The organizing theme of a course on gender and the sexual division of labor is the study of decisions and constraints faced by women, in some cases as compared with men. With gender as its primary focus, a course on women in the economy devotes more time nonmarket production than does a standard course in labor economics. The fourth objective is protect against the excesses of political correctness from the right or from the left. Every participant in a course on the sexual division of labor has a financial and emotional stake in the issues covered. This has advantages (it is not difficult generate discussion) and disadvantages (biases, prejudices and self interest can easily permeate the discussion). Demanding that students provide facts and analysis support their assertions minimizes this disadvantage, both in classroom discussions and in term papers. To back up assertions with facts, students must learn how access, read, and interpret data on the economic status of women. Information is drawn from two sources: syllabi collected by the author in the fall of 1990 and syllabi compiled by Barbara Bergmann (1991). Twelve undergraduate courses are represented in the sample.' All but one focus on the economic status of women in the United States, and only two are explicitly interdisciplinary. The typical prerequisite is one introductory course in economics.
In the decade of the 1980's the banking systems of a number of economies-including those of Argentina, Chile, Costa Rica, Malaysia, Norway, Texas, and Venezuela-collapsed in the face of external shocks. However, the collapses did not occur immediately following the external shocks. In general, macroeconomic stabilization efforts were followed by investment booms before the collapses (Brock, 1992). The investment booms were made possible by government guarantees on foreign loans extended to the economies. Government foreign-loan guarantees potentially are useful instruments for the fiscal management of financial losses suffered by banks and firms. If financial claims against domestic assets increase in riskiness as a result of an external shock, a problem of underinvestment in an economy may occur. Foreigners who might otherwise lend to the economy will not do so if their financial claims are placed in the same risk category as other existing claims.' Foreign loan guarantees permit the financing of new projects while failed banks and firms are being recapitalized or liquidated. Although foreign-loan guarantees in the aftermath of an external shock encourage foreigners to lend to financially distressed banks and firms, this paper will explore the possibility that these loan guarantees may also distort an economy's macroeconomic adjustment by permitting a postponement of the liquidation process. For example, the failure to close banks quickly has been singled out by Sergio De la Cuadra and Salvador Valdes (1992) as the dominant macroeconomic problem distorting the adjustment of the Chilean economy in 1981 and 1982. Paul Horvitz (1992) has also emphasized political unwillingness to shut down insolvent savings and loans as a major element in the magnificantion of the costs of the financial collapse in Texas. This paper first develops an analytical model in which a government's delay in the payment of loan guarantees produces an intertemporal shifting of investment expenditure into the period preceding the termination of the guarantees. The paper then examines case studies of Chile (1981-1985) and Texas (1984-1988) to illustrate the macroeconomic consequences of delays in the closure of insolvent financial institutions.
In 1940 Britain saved herself from tyranny by her endeavors; in the long run she saved the world from tyranny by her example. In that fateful year, a splendid few rose up into the skies over Britain to do battle against the forces of despotism and evil. An analogously small number took up the pen rather than the sword. Preeminent among these was Friedrich August von Hayek. The fourth generation of Austrian economists worked mostly abroad. It was England's good fortune to be the safe haven of Hayek from 1932 to 1950 where he was Tooke Professor of Economic Science and Statistics at the London School of Economics. With the inevitable delays imposed by the uncertainties of war, The Road to Serfdom was eventually published in England in the spring of 1944. Deservedly, it became an instant success and Hayek found out immediately what a tiny minority he was in. One is reminded of the English bowman before the battle of Agincourt who laments to King Henry that the odds appear to be five-to-one against the English; to which Henry replies, If fewer men, the greater share of honor. It is a wonderful thing that Hayek has lived to see the good that he espoused triumph over the evil that he despised and the forces of tyranny put to flight on a global scale. No one could be more deserving of the share of honors that have been bestowed upon him.
In the 1990's and beyond, the search for an optimum framework for studies in international economics is in order. The dynamics of two sets of economic events, one in Europe, (the emergence of a single economic region, the European Community [EC] and the other in Asia (Japan's economic achievement plus the industrialization and economic growth of certain Asia-Pacific economies) suggests that a new multipolar world economy is emerging. In this global context the EC paradigm of economic regionalization, providing a macroeconomic core for microeconomic optimization, warrants attention.