Output prices tend to respond faster to input increases than to decreases. This tendency is found in more than two of every three markets examined. It is found as frequently in producer goods markets as in consumer goods markets. In both kinds of markets the asymmetric response to cost shocks is substantial and durable. On average, the immediate response to a positive cost shock is at least twice the response to a negative shock, and that difference is sustained for at least five to eight months. Unlike past studies, which documented similar asymmetries in selected markets (gasoline, agricultural products, etc.), this one uses large samples of diverse products: 77 consumer and 165 producer goods. Accordingly, the results suggest a gap in an essential part of economic theory. As a start on filling this gap, the study finds no asymmetry in the resonse of an individual decision maker (a supermarket chain) to its costs, but it finds above‐average asymmetry where a cost shock is filtered through a fragmented wholesale distribution system. It also finds a negative correlation between the degree of asymmetry and input price volatility and no correlation with proxies for inventory costs, asymmetric menu costs of price changes, and imperfect competition.

This paper reviews the current evidence supporting the benefits of improving automobile safety by regulation of product design, and proceeds to an independent evaluation of the effects. Technological studies imply that annual highway deaths would be 20 percent greater without legally mandated installation of various safety devices on automobiles. However, this literature ignores offsetting effects of nonregulatory demand for safety and driver response to the devices. This article indicates that these offsets are virtually complete, so that regulation has not decreased highway deaths. Time-series (but not cross-section) data imply some saving of auto occupants' lives at the expense of more pedestrian deaths and more nonfatal accidents, a pattern consistent with optimal driver response to regulation.

The article points out that a subsidy-in-kind, such as below-cost education provided by state universities, replaces more private consumption of the subsidized good that an equivalent money subsidy, such as a scholarship. Indeed, a subsidy-in-kind may reduce total consumption. Empirical estimates in the article indicate that in higher education (a) about three-fourths of government expenditures substitute for private expenditures, (b) this fraction has exceeded one in a recent period, (c) a substantial part of this government-private substitution is due to the in-kind form of government subsidies, and (d) there is less government-private substitution in enrollment than expenditures.

The 1962 drug amendments seek to prevent wasted expenditure stimulated by exaggerated claims for effectiveness of new drugs by requiring premarketing approval of all new drug claims by the Food and Drug Administration. The compliance costs are shown to have engendered a marked reduction in drug innovation. Consumer surplus analysis is then adapted and supplemented with "expert" drug evaluations to estimate the relevant benefits and costs. The main finding is that benefits forgone on effective new drugs exceed greatly the waste avoided on ineffective drugs. The estimated net impact is equivalent to a 5-10 percent tax on drug purchases.