Knowledge that Transforms

The Council of Mutual Economic Assistance' (CMEA) has been in existence since January 1, 1949. Despite the fact that its creation2 was attributed to the establishment of the Organization for European Economic Cooperation (OEEC), its declared ultimate goal was the promotion of a process of integration among the East European countries.3 For the Soviet Union, economic integration is primarily a means of increasing its political and economic control over the other CMEA member states. On the other hand, for the more developed members of CMEA, economic integration is a natural outgrowth of their desire to industrialize and maximize the economic gains from trade and cooperation.4 Beginning in the early 1960's, the shift from an extensive to an intensive growth policy in response to the decline in growth rates created a drive towards economic integration within CMEA. The desire to increase the static gains from international trade was further prompted by its expected contribution to rapid industrialization and efficiency. This shift to intensive growth combined with the desire for rapid industrialization has also meant greater decentralization of economic decision making and the use of limited market mechanisms.5 The CMEA as it exists today differs from the EEC customs union in one major respect. It does not rely a clearly defined common external tariff. A proxy of such a tariff, however, originates in the annual bilateral negotiations between the CMEA member states. Consequently, it is quite possible to find the existence of trade creation and/or diversion as effects of economic integration within CMEA. The analysis of trade creation and/or diversion in this study is of an ex post type. The model utilized to determine these effects is a cross-sectional trade-flow model of the type developed by Jan Tinbergen, Pentti Poyhonen, Kyosti Pulliainen, and Hans Linnemann. Using this cross-sectional trade-flow equation to empirically test the integration effects of CMEA we initially pool the cross-sectional and time-series data for both aggregate and disaggregate trade flows. In the case of disaggregate commodities, because we cannot rule out the possibility that the regression disturbances in different equations are mutually correlated, we use the estimating procedure de*Assistant professor of economics, University of South Carolina. I am grateful to the managing editor of the Review and an anonymous referee for their helpful comments an earlier draft of this paper. Responsibility for any errors is solely mine. Substantial portions of this article were previously published in the ACES Bulletin, Vol. XVIII, No. 3, Fall 1976, and this material appears here with the permission of the Association for Comparative Economic Studies. Discussion of the article and a reply appear in the same journal, Spring 1977. IThe CMEA member countries are: Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, Romania, and the USSR. 2The most plausible reasons for CMEA's origin are presented in Michael Kaser, chs. 1, 2, and in I. T. Berend, pp. 15 17. 3The communique published January 22, 1949 declared that the CMEA was created on the basis of equal representation and with the task of exchanging economic experience, technical aid and rendering mutual assistance with respect to raw materials, foodstufTs, machines, equipment, etc.. .' Heinz Kohler (pp. 377 95). Economic integration is detined as a process aimed at reducing the disparity between scarcities in the various C'MEA countries by eliminating obstacles to trade. 4See the author ( 1976a, ch. 3). 5 For a further discussion of the links between international trade, industrialization, and the reflbrms, see the author (1976a, ch. 2).

There is a growing interest in detecting manageable environmental changes which would improve overall health and life expectancy. The work we report explores differences in mortality rates in county groups (as defined by the Census) to discover whether environmental differences among them affect death probabilities. Casual inspection of Diagram I offers evidence that the probability of dying is significantly different for individuals in different parts of the country. However, these variations in mortality rates are not necessarily the result of environmental factors which differ across the country; they could also be the result of different personal characteristics of local populations. For example, an area with an unusually wholesome environment may have a high death rate because it possesses relatively more elderly citizens. The primary objective of tnis paper is to remove the influence of personal characteristics so that the effects of area specific factors can be detected. I. Research Strategy and Data Base Unfortunately, the absence of a micro data base providing extensive information about decedent's lifetime characteristics complicates the analysis of mortality rates. We were able to take advantage of three large data sets which, when combined, provide somewhat comprehensive information about individuals and their environment. Information from the two million recorded death certificates filed in 1970 were organized by county group into 28 race, sex, and age cells. The second body of data, also about two million observations, was the 1970 Census of Public Use Sample, which provides geographic identification down to the county group. The Public Use Sample provided information about the living population in race, sex, and age cells within each of the 405 county groups. Macro variables describing the entire population of the county groups were also computed from the Public Use Sample. Finally, the machine readable 1970 City and County Data Book provided additional information about the overall characteristics of county groups. The basic research strategy was to attribute as much as possible of the between-county group variation of death rates to person specific factors. Since spatial features of residual variation of death rates appears nonrandom between county groups, the existence of significant environmental influences on death probabilities are strongly suggested. The residual variation might reasonably be explained by area specific factors such as climate, industrialization, and economic vitality. Though we have not yet been able to *Professor of economics, Yale University; research associate, The Urban Institute; Ph.D. candidate, Yale University; visiting professor, Yale University, respectively. The research for this paper was conducted with financial support from the National Science Foundation to The Urban Institute, grant No. SOC73-05420-AOI for the Simulation of the Distribution of Income. Substantial support in the form of staff time, computing, housing and secretarial services was supplied by the Institution for Social and Policy Studies of Yale University. Valuable assistance in preparing this paper was received from Amihai Glazer and Jan Stolwijk. The views expressed are those of the authors and do not necessarily represent the views of the National Science Foundation, The Urban Institute or Yale University.

In this paper we study questions of oligopoly and competition in a general equilibrium framework. In particular, we consider the Nash equilibria of a model of noncooperative exchange in the context of a measure space of economic agents which incorporates both atoms, representing large traders or organized syndicates of traders, and a nonatomic continuum of infinitesimal individual traders. Benyamin Shitovitz (1973, 1974) introduced this type of measure-theoretic model to study situations in which some but not all agents may have market power. Traditional general equilibrium treatments of such situations (see, for example, Kenneth Arrow and Frank Hahn, ch. 6) have been deficient in that they have simply assumed a priori that certain agents behave as price takers while others act noncompetitively, with no formal explanation being given as to why a particular agent should behave one way or the other. Shitovitz's approach represents an important contribution in pointing to an explicit formulation leading to such differences in behavior. In this paper we seek to explore the use of this type of model in studying issues of oligopoly in a general equilibrium framework. A specific focus of our work is in illuminating how either perfectly or imperfectly competitive behavior may emerge endogenously in this model, depending on the characteristics of the agent and his place in the economy. Shitovitz's analysis concentrated on the core of the economy, that is, the set of allocations which no group of agents can improve upon by using only its own resources to achieve a distribution of commodities which each of its members prefers to the allocation in question. This solution concept has, of course, been widely applied in economics, and the equivalence between the core and competitive equilibria in the absence of large traders or syndicates is well known. (See Werner Hildenbrand for a presentation of these results.) Most of the succeeding work with Shitovitz's mixed measure-theoretic model has also been concerned with the core. (See, for example, Jean Jaskold-Gabszewicz and Jacques Dreze, Jaskold-Gabszewicz, Robert Aumann, Andrew Postlewaite and Robert Rosenthal, and Dreze, Gabszewicz, and Postlewaite.) While Shitovitz's model would seem especially appropriate for studying oligopoly, he concentrated not so much on market power phenomena per se as on the possibility that all the core outcomes would still be competitive allocations despite the presence of atoms. Some of the results he obtained in studying this issue appear so counterintuitive as to seem to call into question the use of this model with atoms and a nonatomic ocean in studying oligopoly. For example, his Theorem B (1973) indicates that if there are two large traders or syndicates with the same endowment densities and preferences over consumption bundle densities, then the core and competitive allocations coincide, no matter what the relative sizes of the two traders. Thus, the presence of an arbitrarily small (but not infinitesimal) rival can be viewed as completely cancelling out the market power of a large trader who might represent all but a tiny fraction of the market's potential supply of a commodity. Of course, if one finds such a result unsatisfying, one need not question the model of atoms and a continuum. Rather, one might object to the use of the core as the solution concept. Our work here indicates *Okuno: University of Illinois and Yokohama National University; Postlewaite: University of Illinois; Roberts: Northwestern University. Part of this work was done while Postlewaite was a visiting faculty member at the University of California-San Diego. We wish to thank George Borts and an anonymous referee for comments. Roberts' research was supported by the National Science Foundation under grant SOC 7620953, while Postlewaite's work was partially supported under grant SOC 77-27403.

A comprehensive evaluation of any welfare reform proposal must consider both long-run and short-run costs and benefits. One short-run benefit of a negative income tax program (NIT) is likely to be improvements in the school performances of the children of participants. These improvements may occur for several reasons: health may inmprove as a result of increased consumption of nutritious food and health care; learning aids such as books and magazines may become more readily available; and parents may spend more time with their children, participating with them in learningrelated activities. Therefore, a long-term benefit of an NIT may well be the higher earnings that these children will eventually receive as a result of such improvements. This paper summarizes the findings of an analysis of the effects of the Rural Income Maintenance Experiment on four measures of school performance-attendance, comportment grades, academic grades and standardized achievement test scores.

I shall examine Adam Smith's treatment of human capital under five heads: the optimizing system of natural liberty; the nature of human capital; its sources; its unnecessary costliness; and obstacles to its optimum use. His recourse to cost-utility criteria in assessing educational practice (134) will be touched upon but not his somewhat analytical history of educational practice over the centuries.1 Smith (89, 164) was aware of the past improvement in average income (89), of the elasticity of man's wants (164), and of the impact of the gradual improvement of arts, manufactures, and commerce (755). He did not, however, anticipate that income increase might transform educational personnel and facilities into suppliers of consumer-oriented rather than essentially producer-oriented services (164), probably because he was concentrating on then current problems.