Knowledge that Transforms

After economics was included in the Goals 2000 Educate America Act in 1994, the National Council on Economic Education (NCEE) constructed a coalition of organizations to write voluntary content standards to guide economics instruction in American schools.' The coalition includes representatives from the NCEE and its network of affiliated councils and centers, the National Association of Economic Educators, the Foundation for Teaching Economics, and the American Economic Association's Committee on Economic Education. The goal of the coalition is to write content standards for the teaching of economics in grades 1-12. Such as developed for other disciplines, are not standards in the usual use of the word. Rather than identifying required performance levels on specified criteria, these standards specify the criteria. As such, the standards consist of what economists usually call principles. They are, in fact, the fundamental propositions of economics. To avoid confusion among teachers, however, the standards-writing committee calls these principles National disciplinary content standards are not mandates from the federal government. Rather, they are a resource for states and local school districts, for individual schools, and for teachers, who are responsible for specifying and integrating the curriculum into their schools. Content standards have public-good characteristics: they are nonrivalrous in consumption, and it is difficult to preclude access to them. In addition, their production relies on fixed development costs rather than variable reproduction costs, implying substantial scale economies. To develop similar standards at the state or local level would duplicate efforts. Consequently, there is a case (as is argued in standard 16) for collective provision of national standards. There is a practical reason to develop national economics content standards as well. Without these standards, some states may omit economics from their curriculum entirely. Some may give economics cursory attention, or write vague standards that are difficult to implement, or focus their economics standards on insignificant content. Some curriculum designs may include other subjects (e.g., personal finance, business, or marketing) under the economics rubric, thereby marginalizing economics. Voluntary national standards increase the probability that economics is included in school curricula. Without them, economics risks the prospect of being dropped from the curriculum. Teachers responsible for economics instruction are often overwhelmed when asked to teach a subiect in which they have little t Discussants: Cecilia Conrad, Pomona College; W. Lee Hansen, University of Wisconsin; Robert Highsmith, Pace University.

A stroll along the first floor corridor at the International Monetary Fund's Washington headquarters reveals the fundamental and indisputable fact that political considerations, rather than purely economic concerns, are the predominant practical determinants of the domain of operation of currency regimes. Despite the theory of optimum currency areas which might suggest alternative outcomes, with few exceptions, the empirical regularity is one country, one money. Even the exceptions help prove the rule. The common currencies of the African franc zone reflect still strong political, as well as economic, linkage the former colonial power. The use of the U.S. dollar as the circulating medium in Panama (and Liberia) also reflects present or past political relationships. Moreover, the political theory of currency areas is not merely statement of static facts; it has predictive power. The common currency that Rome imposed throughout its empire did not survive the decline and fall of that empire. Similarly, the states that emerged from the breakups of the Austro-Hungarian and Ottoman empires after World War I rapidly moved separate currencies. When the Soviet Union collapsed at the end of 1991, some misguidedly thought that ruble zone could and should be preserved; but reality prevailed, and the 15 sovereign republics of the former Soviet Union all now have independent national currencies. Conversely, when the Founding Fathers sought construct a more perfect in the U.S. Constitution of 1787, the power to coin money and regulate the value thereof was transferred from the states the new federal government. The objective was not only improve the monetary basis for commerce and finance within and between the states, but also thereby strengthen their political union. In Europe today, the drive construct European Monetary Union (EMU) has been justified primarily on the prospective economic benefits of common currency. However, such proposal would have been literally unthinkable, whatever its possible economic benefits, with the political divisions that characterized Europe until relatively recent years. And, still today, the strongest advocates of EMU tend be those who see monetary union not only as beneficial economic mechanism, but also as substantively and symbolically important for strengthening the political dimension of European union. Conversely, those who are skeptical about stronger political union in Europe also tend be skeptical about EMU. In view of the centrality of political considerations in determining monetary arrangements, it seems essential ask how these considerations affect the differences between currency areas and currency unions, most importantly in the effort transform European monetary arrangements from currency area into EMU. A currency area is an arrangement for group of countries peg exchange rates among distinct national currencies. In some cases, exchange rates may be rigidly pegged, but more usually they are allowed fluctuate within narrow bands. Members retain their own central banks, although with serious constraints on the independence of national monetary policies. A currency union involves much stronger political and institutional commitment fix exchange rates absolutely through single money that functions as the monetary standard for group of countries. The supporting institutional structure also includes common monetary authority for all the countries of the union which determines monetary policy on union-wide basis. * Research Department, International Monetary Fund, Washington, DC 20431. The opinions expressed in this paper are solely those of the author and do not reflect the views of the International Monetary Fund.

Enrollment in health maintenance organizations (HMO's) has grown rapidly in recent years as both employers and policymakers attempt to constrain health-care spending. Despite the potential cost savings linked to managed-care insurance, critics contend that the financial incentives of such plans will elicit undertreatment and possibly constrain treatment options for persons with costly medical conditions. For example, one study found that heart-attack patients enrolled in HMO's were less likely to undergo either arteriography or coronary bypass surgery than were persons with indemnity insurance (Gary Young and Bruce Cohen, 1991). However, no prior study has investigated whether enrollment in a managed-care plan influences the choice of a particular hospital for inpatient procedures. Given the growth of HMO' s, it is important to assess whether this form of insurance affects treatment and hospital choices. We analyze whether type of insurance (HMO, other private, Medicaid, or no insurance) affects treatment and hospital choices for nonelderly women with breast cancer. We estimate a model of the choice between breastconserving surgery (BCS) and modified radical mastectomy (MRM), and the decision to seek care at the nearest hospital with a program approved by the American College of Surgeons (hereafter called cancer hospital) versus a more distant hospital. Our analysis treats these choices as jointly determined and examines the influence of type of insurance on both decisions. We study breast for two reasons. First, this disease is the most prevalent form of among women and ranks as the second major cause of death in the female population. Second, in 1990 the National Institutes of Health issued guidelines stating that BCS accompanied by lymph-node dissection and radiation therapy is the recommended treatment protocol for women with early-stage breast (NIH Consensus Conference, 1991). Yet, despite the change in guidelines, the use of BCS remains relatively low.

The level and the composition of stategovernment expenditure have changed considerably in recent years. Real per capita welfare spending (including Medicaid) has doubled, and corrections spending has risen by 70 percent, while spending on elementary and secondary education and higher education have risen by only 31 percent and 24 percent, respectively. Concerns have been raised that increased spending on Medicaid and corrections have crowded out spending in other areas. Most past work on state spending has focused either on aggregate spending or on spending in one or two categories where crowding-out has been thought to occur. Some studies have examined the determinants of several state-expenditure categories (see e.g., Jane Leuthold, 1988; Richard F. Dye and Therese J. McGuire, 1992). In this paper we examine interactions among categories that encompass the entire state budget for indications of crowding-out among budget categories. To observe patterns of state financial practice that a structural model of disaggregated state spending should explain, we estimate a vector autoregression (VAR) to examine the dynamic interactions among spending categories. This VAR does not allow us to draw causal conclusions about why state spending patterns change, but it does allow us to observe whether changes in one spending category are correlated with changes in other categories, either contemporaneously or over time. Our VAR includes six categories of spending as well as federal aid and state income. The aid and income variables allow us to observe the impact on state spending of changes in available resources. The absence of crowding-out suggests that spending on particular categories is constrained by state residents' resources rather than by a fixed state budget; states shift income from the private sector into the public sector in response to increased demand for public-sector spending. Past studies of interactions among spending in various budget categories find limited, if any, evidence of crowding-out. James Fossett and James Wyckoff (1996) find that growth in Medicaid spending has resulted in lower education spending but that this effect is small relative to the effect of lower own-source revenue stemming from the recession. Michael L. Marlow and Alden S. Shiers (1996) find no evidence that higher corrections spending crowds out education spending. The hypothesis that high spending on municipal services crowds out local spending on schools is tested in Harvey Brazer and McCarty (1987). That study finds that any correlation between municipal and school spending is positive, not negative. Personal income of state citizens, rather than the 2-6 percent of income allocated to municipal spending, is the effective budget constraint. George von Furstenberg et al. (1986) estimate a VAR model of federal revenue and six categories of expenditure. They find that impulses in one spending category do not normally crowd out spending in other categories over time.