In this article, the book written by Juan Gabriel Valdes - entitled "Pinochet's Economists: The Chicago School in Chile" - serves as a point of departure. Valdes's account of the way in which University of Chicago economists came to be linked with the Catholic University in Chile in the mid-1950s is summarized, as is his characterization of the manner in which Chilean "Chicago Boys" subsequently won control of the economics faculty there. The centerpiece of Valdes's story is the behavior of the "Chicago Boys" in restructuring Chile's economy in the service of General Pinochet's military dictatorship (1973-89). The article concludes that Valdes's treatment of two additional themes - the cross-cultural transmission of economic ideas and the capacity of Chicago School economists to accommodate to authoritarian regimes - calls for qualification.

Estimation and Inference in Econometrics, Russell Davidson and James G. MacKinnon, Oxford University Press, 1993, 874 + xx pages (Designated DM). A Course in Econometrics, Arthur S. Goldberger, Harvard University Press, 1991, 405 + xvii pages (Designated GO). Econometric Analysis, second edition, William H. Greene, Macmillan, New York, 1993, 791 + xxii pages (Designated GR). Learning and Practicing Econometrics, William E. Griffiths, R. Carter Hill, and George G. Judge, John Wiley, New York, 1993, 866 + xxv pages (Designated GHJ).

2 Of the many frustrations of any editor, surely, avoidable delay is the greatest. And this frustration is almost infinitely compounded when in the interim an unexpected death occurs. Professor Ferguson sent this manuscript as a draft; certain questions which he raised in the accompanying letter would normally have been resolved in the exchange of two or three letters or 'phone calls. I placed one call to learn he was ill; rather than press the query, I delayed. When next I 'phoned, I was shocked to learn of his completely unexpected and therefore all the more untimely death. Because the draft he sent contains so much of his own style and vigor, I have elected to print it in this incomplete form. The points he raised in his letter remain unclarified. In the face of this series of events, I have asked Professor Nell to undertake the task initially given to Ferguson. The two rarely saw things in the same way. Thus, the choice of Nell was not intended to finish Ferguson's incomplete assessment. I mention the foregoing simply to explain the unique treatment in these review essays. Of Charles Ferguson's death so little can be said-he was an ebullient souil, and a man of significant originality. -M. P.

The article studies the U.S. earning trends since 1950 and gives explanations for the inequality in earnings. Both slow growth and increased inequality appear in the comparison of adult male earnings distributions for 1979 and 1987. Trends in women's earnings paint a somewhat brighter picture. Women, like men, have experienced slow hourly wage growth and growing wage inequality. But in terms of annual earnings, both factors have been offset by changes in hours worked. The result is a significant increase in the proportion of women who earn $20,000 a year or more. A combination of shifts in supply and shifts in demand is necessary to explain the observed trends between these groups. A critical aspect of supply shifts was the entry into the labor market of the well-educated baby boom generation. Demand shifts can be characterized as a long-term trend toward increasing relative demand for highly skilled workers. The growth in within group earnings inequality has many potential explanations, but it is not well understood and contains opportunities for future research.

Berk and Green (2004) make a theoretical argument that performance persistence should not exist since new money flows into well-performing mutual funds and there are diseconomies of scale, or because successful funds capture excess returns by raising fees. We find that performance prediction continues when we examine samples of larger and larger funds and that past performance predicts future performance for holding periods up to three years. Funds that outperform index funds of the same risk can be identified. We find that expense ratios are lower for large funds, and decrease as funds get larger or perform well.

As a result of poor asset allocation decisions by 401(k) participants, 72% of all plans now offer target date funds, and participants heavily invest in them. Here, we study the characteristics and performance of TDFs, providing a unique view by employing data on TDFs holdings. We show that additional expenses charged by TDFs are largely offset by the low-cost share classes they hold, not normally open to their investors. Additionally, TDFs are very active in their allocation decisions and increasingly bet on nonstandard asset classes. However, TDFs do not earn alpha from timing or their selection of individual assets. (JEL G11. G23.)

Counterparty risk could hamper trade and worsen a financial crisis. A central clearing party (CCP) insures traders against counterparty default and thus benefits trade. Default of the CCP however becomes a new systemic risk. CCP risk management does not account for risks associated with crowded positions. This paper proposes a CCP exposure measure based on tail risk in trader portfolios. It identifies and measures crowded risk and assigns it to traders according to the polluter pays principle. CCP data show that crowded positions increase CCP exposure most (about one-third) on turbulent days, when exposure is high already.

This paper investigates the incentives of a regulator to close depository institutions, recognizing that an institution′s risk taking will be influenced by the regulator′s policy regarding bank closure and that there are opportunity costs in closing banks arising from their intermediation function. The regulator focuses not on the current portfolio of the bank, but on the bank′s future portfolio. Even if the regulator seeks to maximize welfare, the first best is not obtainable because the regulator is unable to credibly commit to certain policies regarding closure. Journal of Economic Literature Classification Numbers: G2, L5, G1.

This paper examines whether middle age American households purchase adequate amounts of life insurance. The analysis is based on SRI International's 1980, 1982, and 1984 surveys of the financial positions of American households. Our findings indicate that a significant minority of American wives are highly underinsured with respect to the possible deaths of their husbands. We find that 25 to 30% of wives are inadequately insured, by which we mean that they would suffer a loss in their rate of sustainable consumption of at least 30% in the event of being widowed. These findings on inadequate life insurance are even more striking if one focuses on those households in which over half of the couple's present expected value of resources is dependent on the husband's survival. The results of this paper together with those of the related literature strongly suggest that raising the share of social security benefits that are paid to surviving spouses as well as increasing employer-provided group life insurance could have a very considerable impact on the alleviation of poverty among widows, especially elderly widows.