Knowledge that Transforms

This paper examines the impact of collective-bargaining legislation on dispute costs and wages using a panel of Canadian public-sector contracts. The authors' results suggest that policymakers designing collective-bargaining legislation face a trade-off between reducing dispute costs and increasing wages. Dispute costs are lower under compulsory arbitration than under the right to strike or when no collective-bargaining legislation exists. Hence, a switch to compulsory arbitration could potentially make both the union and the employer better off by reducing dispute costs. However, the authors find that wages are higher under compulsory arbitration than under other legal structures.

Random samples of the Moscow and New York populations were compared in their attitudes towards free markets by administering identical telephone interviews in the two countries in May 1990. Although the Soviet respondents were somewhat less likely to accept exchange of money as a solution to personal problems and although their attitudes toward business were less warm, the authors found that the Soviet and American respondents were basically similar in some very important dimensions: in their attitudes toward fairness, income inequality, and incentives and in their understanding of the working of markets.

The authors examine a firm's decision either to produce an essential input itself or to hire a subcontractor to produce the input. The authors focus on how this decision is affected by technological change in the industry. In general, cost-reducing technological change leads the firm to produce the input itself more often. The firm's calculus is shown to depend on whether the subcontractor's skills are idiosyncratic or transferable. In the latter case, technological progress can even be detrimental to the firm and to society as a whole.

The debate over whether the expected present value of dividends adequately describes stock prices hinges in part on whether dividends are trend-stationary or integrated processes: it does not if dividends are trend-stationary; it does if they are integrated. This paper argues that classical statistical tests only indicate that there is not sufficient evidence to reject either specification and provides Bayesian analyses designed to reveal the relative support the data give to the two specifications. The analysis suggests that dividends and prices are more likely to be trend-stationary than integrated, leaving the determination of prices a puzzle.

Yes, and yes. The two questions asked in the title of this paper were prompted by an invitation to the American Economic Association's Committee on Economic Education to participate with eleven other disciplines in a national review of arts and sciences majors initiated by the Association of American Colleges (AAC). The goal of this Project on Study-in-Depth was to evaluate the major within the liberal arts curriculum, highlighting connections and interactions among disciplines. In the process we examined the major in considerable detail. The result was a lengthy report,1 from which the present paper abstracts key findings, focusing on the purpose of the major, recommendations for improvement, and methods for effecting change. In compiling the AAC we became painfully aware that while our collective experience in the field of economics education provides us with considerable background, the representativeness of our judgments required checking. To this end, seminars were given at several colleges and universities and over 100 copies of the were circulated to other economists, including leading economic educators; feedback was incorporated in subsequent versions. In addition, in May 1990 a survey of faculty at 127 colleges and universities was undertaken with the goal of vetting and evaluating our main conclusions and recommendations. As a part of that survey, respondents were invited to complete a report card (A,...,F) based on twelve criteria evaluating the effectiveness of the major at their institutions.2 Tabulated on a 4.0 grading scale, the major earned an overall grade of B -. An analysis of the detailed statistical tabulations and openended responses to some thirty-seven questions suggested how it might be improved. In this paper we argue that the quality of the major is suboptimal, a situation probably resulting from two decades of expanding enrollments and the relative popularity of the major, which occurred just when demands on faculty for research and other responsibilities greatly increased, and when college administrations tightened contDiscussants: David Colander, Middlebury College; Claudia Goldin, Harvard University; Alan Blinder, Princeton University; Eric Hanushek, University of Rochester.