The Bankruptcy Reform Act of 1978 contains several provisions that can affect the cost of producing loans for financial intermediaries. In a competitive lending market the additional monitoring and expected foreclosure costs imposed by the change in the bankruptcy law should be passed on to the borrower. Using survey data from a sample of small business loans from commercial banks, evidence is presented that the enactment of the new law resulted in higher contract rates of interest.

We examine the effects of market making and intermittent trading on estimates of stock price volatility. When observed price changes are correctly tied to a stock's true price dynamics, it is found that non-trading per se causes a loss of efficiency but no bias in traditional volatility estimates. Non-trading induces substancial inefficiency in the extreme value estimator of volatility which it biases downward. Market making's effects add to the non-trading induced inefficiency in the traditional estimator, while information trading causes a downward bias, and liquidity trading a potentially removable upward bias, in that estimator.

Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at

In answer to the question, What can we expect of schools (K-12) in raising the level of economic understanding?, my first reaction is, Not much. We can't expect much from the schools unless the economics profession is prepared to offer strong and continuing support that will advance the training of teachers and improve the quality of the materials available to help them teach economics. Therefore, my appeal in this paper is for increased assistance from the economics profession. The Joint Council of Economic Education (JCEE) has been in the forefront of the endeavor to teach economics at the primary and secondary school levels for some 37 years now. Lately, we have stepped up our efforts considerably, with encouraging results. Still, we have a long way to go, and we cannot broaden our reach as far as we should without more help from you and your colleagues. Historically, too few teachers have had any training in economics whatsoever. According to the Southern Regional Education Board (1985), only 25 percent of graduating teachers' transcripts show even a single course in economics. The only other liberal arts subject in which they had fewer courses is philosophy. Once in the classroom, teachers receive precious little in-service training to update their skills, according to William Walstead and Michael Watts (1985). Surveys of elementary teachers report that about half had no coursework, and another 25 percent had taken only one course. Surveys of secondary social studies teachers who specialize in teaching courses or units in economics show about 15 percent with no coursework and another 25 percent with one course; 30 percent reported taking only two courses in economics. In other words, 70 percent of teachers who teach economics have had two courses or less in the subject. Further indication of the weak knowledge base of teachers in economics is demonstrated by the relative ranking they give to key concepts in the discipline. The National Survey of Economic Education, 1981, asked junior and senior high school teachers to rank economic concepts by their importance. The results show that 24 percent ranked the key concepts of tradeoffs (24 percent) and opportunity costs (34 percent) as relatively unimportant.

In his Nobel Lecture, Milton Friedman (1977) argued that the greater uncertainty associated with higher inflation leads to a misallocation of resources because of shorter duration of contracts and reduced efficiency of the price system. The result is reduced economic growth and, possibly, more unemployment (i.e., a positively sloped Phillips curve) over the fairly long term. In a subsequent article, Maurice Levi and John Makin (1980) found a significant negative impact of inflation uncertainty on employment growth. Evidence of a similar nature was reported by Yakov Amihud (1981), Makin (1982), and Ronald Ratti (1985), while Donald Mullineaux (1980) found a significant positive effect of inflation uncertainty on the rate of unemployment and a negative effect on industrial production. Given the substantial body of empirical literature linking higher inflation to greater inflation uncertainty, this provides support for Friedman's hypothesis.' Friedman also noted, however, that in the very long run, institutions should adapt to an inflationary economy in a way that offsets much of the real effect of higher inflation. An example of such adaptation is more widespread indexation of wages. Levi and Makin recognized the potential impact of indexing but did not attempt to estimate it: To the extent that inflation uncertainty persists and causes lower employment, our results tend to support the case for a wider use of indexing of nominal contracts, which should reduce the impact of uncertainty felt on the real (p. 1026). The purpose of this article is to estimate the impact of inflation uncertainty on employment, while also considering the second-round effects of labor market adjustments designed to reduce the risk associated with inflation uncertainty. Despite the limited scope of the data, an increase in the prevalence of wage indexation in major collective bargaining contracts is taken to indicate a general increase in the responsiveness of nominal wages to inflation surprises.2 In other words, as the percentage of contracts with indexation clauses increases, the degree to which already indexed wages adjust to price level changes is assumed to increase. Furthermore, the effect is assumed to extend beyond the sector of the labor market covered by major collective bargaining agreements to smaller union contracts and even to nonunionized labor. This article proceeds as follows. Section I discusses the measurement of inflation uncertainty and the level of wage indexation and estimates the impact of inflation uncertainty on indexation in the United States for the period 1961-83. Section II examines the impact of inflation uncertainty, indexation, and unanticipated inflation on employment. Section III presents the results of simulations designed to illustrate how increased wage indexation offsets at least part of the adverse *Department of Economics, University of Kentucky, Lexington, KY 40506. Helpful comments from R. W. Hafer, Ronald Ratti, Richard Sheehan, Daniel Thornton, two referees, and the participants in seminars at the Board of Governors of the Federal Reserve System, Claremont College, Georgia State University, and the University of Kentucky are gratefully acknowledged. This research was conducted at the Federal Reserve Bank of St. Louis with assistance from Jude Naes. The views expressed do not necessarily reflect those of the Federal Reserve Bank of St. Louis or the Federal Reserve System. 'My 1984 article provides a review of the literature linking higher inflation to greater inflation uncertainty. 2Formal indexing typically applies only to contracts in the unionized sector-less than 25 percent of the U.S. labor market. This measure should serve the purpose at hand, however, since the behavior of union wages influences the wages of other workers, and since adjustments to greater inflation uncertainty in the unionized sector can be expected to occur at roughly the same time as adjustments in other sectors of the labor market.

E I Coll Jan 22, 1833 My dear Madam I have read John Hopkins's Notions on Political Economy with great interest and satisfaction, and am decidedly of opinion that they are calculated to be very useful. They are in many respects better suited to the labouring classes than Miss Martineau's Tales which are justly so much admired. I am strongly therefore inclined to advise you to publish them in as cheap a form as you can, for general circulation, and to give away. We shall be happy to purchase a dozen of them to distribute to the Cottagers in our neighborhood. I think your doctrines very sound, and what is a more essential point, you have explained them with great plainness and clearness. [If I were obliged to find any fault, I should say that you have presented in rather too brilliant and unshaded colours the advantages which would accrue from the abolition of the Corn Laws, so as to excite expectations which cannot be realized.a In the actual state of the redundancy of labour in this country, it appears to me scarcely possible to conceive that the money wages of labour will not fall nearly in proportion to the price of corn, and the labourers be greatly disappointed.b It will no doubt give a stimulus to foreign trade; but it must for a considerable time aggravate the redundancy of labour in country parishes; and during the process of the change, there will probably be more thrown out of work than in any other case of the restrictions of the freedom of trade, on account of the largeness of the concerns. It will also tend to raise the value of money and increase the pressure of the national debt. Still I am for the removal of the restrictions, though not without fear of the consequences.c I have been (interrupted?) and must finish. Most truly yours T. Robt Malthus