This paper addresses the question, What happens to the arrest rate when the number of law enforcers increases? One implication of the analysis is that arrest statistics are a poor instrumental variable for judging the quality of law enforcement. Increasing the number of police can increase of decrease the number of arrests. An increased probability of arrest induces fewer criminal acts; hence the ambiguity. Because of this result, we apply the theory in the setting of college basketball. We find a large reduction, 34 percent, in the number of fouls committed during a basketball game when the number of referees increases from two to three. Additional empirical evidence is presented which suggests that this elastic supply of basketball crime is due to more competent officiating and cleaner play.

This paper addresses the question, What happens to the arrest rate when the number of law enforcers increases? One implication of the analysis is that arrest statistics are a poor instrumental variable for judging the quality of law enforcement. Increasing the number of police can increase of decrease the number of arrests. An increased probability of arrest induces fewer criminal acts; hence the ambiguity. Because of this result, we apply the theory in the setting of college basketball. We find a large reduction, 34 percent, in the number of fouls committed during a basketball game when the number of referees increases from two to three. Additional empirical evidence is presented which suggests that this elastic supply of basketball crime is due to more competent officiating and cleaner play.

[We defend Adam Smith's theory of the firm from the standpoint of positive economics. We argue that his evaluation of the joint-stock firm was not moralistic but instead based on available empirical evidence. The record showed that joint-stock companies had a poor survivorship record, even when granted legal monopoly status. His analysis contained an explanation of the role of agency costs within the firm. Finally, he did not discuss the East India Company as an ordinary joint-stock firm but rather as an aberrant form created by government.]

We defend Adam Smith's theory of the firm from the standpoint of positive economics. We argue that his evaluation of the joint-stock firm was not moralistic but instead based on available empirical evidence. The record showed that joint-stock companies had a poor survivorship record, even when granted legal monopoly status. His analysis contained an explanation of the role of agency costs within the firm. Finally, he did not discuss the East India Company as an ordinary joint-stock firm but rather as an aberrant form created by government.

We present a model of the legislature as a union, where in some states the legislative wage is set in the constitution (the analogue to competition) and in others it is set by the legislators (monopoly). We test the implications of the model with respect to relative legislator wages in the two types of states and with respect to other aspects of the legislature as a union. All of the implications hold up quite well in empirical tests. Indeed, as expected, we find an astonishingly large impact of the legislative union on relative wages, that is, on the order of a 225 percent increase.

We present a model of the legislature as a union, where in some states the legislative wage is set in the constitution (the analogue to competition) and in others it is set by the legislators (monopoly). We test the implications of the model with respect to relative legislator wages in the two types of states and with respect to other aspects of the legislature as a union. All of the implications hold up quite well in empirical tests. Indeed, as expected, we find an astonishingly large impact of the legislative union on relative wages, that is, on the order of a 225 percent increase.

In the analysis of the costs of monopoly power, the usual experiment is to convert a competitive industry into a monopoly and observe the consequent change in consumer's surplus. Modern contributions have emphasized the deadweight cost of monopoly (Arnold Harberger, 1954) and the possibility of an associated rent-seeking cost of monopoly (Gordon Tullock, 1967). The Harberger cost, of course, refers to the lost consumer's surplus triangle; the Tullock cost concerns the role of competition for monopoly returns. Taken together and assuming that the competition for monopoly rents is perfect, the total cost of monopoly power is a trapezoid, the rectangle of monopoly profits plus the triangle of lost consumer's surplus (Richard Posner, 1975). In this paper we approach the monopoly problem in a different spirit. We compare three states of the world-competition, regulation, and deregulation. In this setting we ask, what happens if a monopoly is eliminated through deregulation? Our analysis suggests that because under most conditions Tullock costs cannot be recouped, the returns to deregulation are lower than previously thought. Rent-seeking expenditures in the past leave the economy permanently poorer even if competition is restored to the industry. In contrast, the returns to preventing monopoly in the first place are relatively high in our model. An insight afforded by the analysis is an explanation of the persistence of laws and regulations which appear to serve no interest. In this regard the example of railroad regulation in the United States comes to mind. The standard explanation for such regulation is either that voters and government decision makers are ignorant of basic economics or that a small interest group like railroad firms wins rents at the expense of uninformed or economically rational consumers of rail services who do not find it cost effective to seek deregulation. We offer another and perhaps more plausible explanation for the persistence of regulation and the apathy of consumers about the costs of regulation. Namely, the costs of such regulations are, for the most part, the original rent-seeking expenditures that lead to the regulation in the first place, and these costs are sunk. Abolishing so-called uneconomic laws does nothing to recover these losses. Hence, there is little political support from any quarter to return to the status quo ante. In fact, as we shall show, such a deregulatory program can easily impose more costs than it is worth. There are numerous examples of this point, including tariffs and quotas of all sorts, subsidies to farmers, the postal monopoly, organized labor's antitrust exemption, the licensing of doctors, and so forth. The traditional explanations of these monopoly rights, namely ignorance of economic common sense and special-interest groups, are neither sufficient nor necessary. Since the primary costs of these laws are rent-seeking expenditures which are made prior to their passage, there is simply little to be gained by changing them now. Gains would accrue in the form of reduced Harberger costs; costs would be borne in passing and implementing the deregulatory program. It is not that the potential gainers from deregulation are large in number, diffuse, heterogeneous, and face high organizational costs, rather, they do not exist to any degree. Interpreted in this light, efforts by political action groups, such as the Right-to-Work Foundation, stand to be a drain on society's resources. They cannot produce anything unless they prevent further monopolization through regulation. We do not, of course, *McCormick and Shughart: Clemson University, Clemson, SC 29631; Tollison: Center for the Study of Public Choice, George Mason University, Fairfax, VA 22030. Thanks go to James Buchanan, Rex Cottle, and Gordon Tullock for helpful comments. The usual caveat applies.

Our paper in this Review (1984) aroused a controversy we did not anticipate, but no one has yet convinced us that our basic point is wrong. Joe Bell (1988, p. 282) now makes the assertion that our conclusion rests entirely upon unexplained asymmetries in mobility. This seems to us a very curious assertion indeed. The main problem with Bell's analysis is that he treats investment in capital assets as perfectly malleable. A lawyer trained to argue rate cases is not perfectly suited for other jobs when electric utility deregulation occurs. The time and effort spent by the lawyer to acquire the requisite skills are irretrievably lost. This is the point of our paper. Even though future labor can be supplied by this lawyer after deregulation, it definitionally has a lower value. Lawyering before a regulatory commission is a specialized input. When the demand for these services falls, the capital value of the intensive and extensive investments vanish. No asymmetry is implied or required. More generally, capital consumed in using the political process to secure a wealth transfer-the resources devoted to organizing coalitions, investing in lobbying activities, contributing to political campaigns, advertising a point of view, acquiring the stock of human capital necessary for dealing with regulatory bureaucracies, and so onreduces the wealth of society in opportunitycost terms. For the reasons just stated, the cost of obtaining additional output in the regulated industry following deregulation is higher. We also pointed out that the increase in marginal costs due to what Bell calls resource immobility may only be a short-term phenomenon: Over time, resources in the [deregulated] industry will adapt to the new competitive environment, and new resources coming into the industry will embody the r quisite skills for working in a competitive rather than a government-sponsored sector. Thus, after the relevant adjustment period, marginal costs in the deregulated sector may decline, but it is simply wrong to suppose that deregulation enables the capital value of resources specializing in rent-seeking activities to be used again in the production of goods. Anyway, in present-value terms it does not take very long for this adjustment process to impose significant costs on the economy. This point is covered in fn. 7 in our original paper.

Economic models of politics typically use the expected value of a candidate's vote share to proxy electoral probability. In this paper, the authors introduce a risk calculation to augment the evaluation of a candidate's (or party's) expected vote share and they divide this risk element into its systematic and unsystematic components. For the same reason that systematic risk is a primary focus of portfolio management, the authors discover that an analogous systematic risk component is central to presidential elections. Their approach accounts for correlations in vote swings among states, piercing the fiction of a state-by-state or 'local' campaign strategy.

This paper treats racial integration as an innovation in economic process in which economic entities find it advantageous to utilize potentially more productive inputs previously unavailable due to law, custom, or managerial discretion. Data on the racial integration of Major League Baseball and Atlantic Coast Conference basketball are employed to address this issue. The central question examined is which type of team integrated first—losers or winners? The results strongly support the idea that entrepreneurship trumps competitive rivalry; that is, winning teams led the process of racial integration.