Journal: Eastern Economic Journal, Volume 24, Issue 1

Article: William Vickrey’s Legacy: Innovative Policies for Social Concerns

Author: Richard P.F. Holt, South Oregon University; David C. Colander, Middlebury College; David A. Kennett, Vassar College; and J. Barkley Rosser, Jr., James Madison University.

JEL Code: B31

William Vickrey, who won the Nobel Prize in Economics in 1996, was a moral and brilliant man. His major contributions to economics came from his desire to advance ways to decrease waste through creative pricing. The economic areas where he had the most impact are congestion pricing, tax reform and auctions. At the end of his life the unemployment issue dominated his research. Vickrey saw macroeconomics turning increasingly from full employment to stable prices as the dominant policy goal. Vickrey was deeply concerned that economists and politicians believed that price stability was a more laudable goal than full employment.

Journal: Eastern Economic Journal, Volume 24, Issue 1

Article: Quis Custodiet Ipsos Custodes?

Author: Howard Bodenhorn, Lafayette College

JEL Code: N21

In the wake of the S&L debacle, the LDC crisis and other systemic banking shocks, several recent proposals have called for regulatory reforms that emphasize the development of market incentives for both bankers and regulators. This article suggests that market-based reform may be feasible and desirable. In the absence of effective regulatory bodies, early nineteenth-century Americans relied on two specialized players in the financial market -- banknote reporters and banknote brokers -- for bank monitoring and information provision. Historical evidence provided by these banknote reporters suggests that reporters and brokers efficiently priced bank default risks. Brokers typically downgraded the debt issues of a troubled banks two years prior to its failure. In other cases, brokers often downgraded a bank’s debt, forcing the bank to shape up and causing neither the particular bank’s failure nor a widespread bank run. Finally, a formal test based on the so-called market model supports the contention that markets can effectively monitor financial institutions.

Journal: Eastern Economic Journal, Volume 24, Issue 1

Article: An Analysis of Adam Smith’s Theory of Charity and the Problems of the Poor

Author: Thomas D. Birch, University of New Hampshire at Manchester

JEL Code: B31, D64, H10 and I30.

This paper analyzes Adam Smith’s theory of charity toward the poor. Two sources of private charity market failure are identified which lend support to the view that Smith’s writings justify government intervention on behalf of the poor. First, the poor tend to conceal their condition out of shame which violates the perfect information requirement for market allocative efficiency. Second, charity generates positive externalities since others naturally sympathize with benevolent actions. This provisional case for public charity is then analyzed using Smith’s moral concepts of propriety and merit. Smith’s view of economic altruism in a commercial society is also considered.

Journal: Eastern Economic Journal, Volume 24, Issue 1

Article: Television Revenue and the Structure of Athletic Contests: The Case of the National Basketball Association

Author: Steven B. Caudill, Auburn University and Franklin G. Mixon, Jr., University of Southern Mississippi

JEL Code: L1, L2

This study points out that changes in the format of the playoffs in the National Basketball Association have had the effect of lengthening the championship series and reducing the variance in the length of the series. These are valuable goals for the organization because they provide higher television ratings and revenues for the teams involved. Empirical evidence presented here suggests that viewership among 1.2 million additional households is at stake.

Journal: Eastern Economic Journal, Volume 24, Issue 1

Article: Mixing Welfare and Work: Evidence from the PSID

Author: Richard Chapman, Westminster College; Kevin Duncan, University of Southern Colorado; and Jerry Gray, Willamette University

JEL Code: I38

Evidence from the Panel Survey of Income Dynamics (PSID) suggests that those with a history of mixing welfare and work are more likely to continue mixing rather than be in another welfare or labor market state. This finding supports the view that, without a welfare subsidy, jobs held by working welfare recipients will not provide for self sufficiency. We find no evidence supporting the notion that time spent mixing welfare and work alters individuals tastes in favor of receiving AFDC (only) relative to working (only). Finally, as conventional theory suggests, the tax changes introduced by OBRA in 1981 discouraged the mixing of welfare and work.

Journal: Eastern Economic Journal, Volume 24, Issue 1

Article: Does Public Investment Enhance Productivity Growth in Mexico? A Cointegration Analysis

Author: Miguel D. Ramirez, Trinity College

JEL Code: O40, O54

The paper begins with an overview of the role of the Mexican state in the investment process during the period 1950-93. A set of testable hypotheses is then generated from a model that incorporates, inter alia, the public capital stock as an argument in a modified neoclassical production function, and an empirical counterpart of the conceptual model is tested relating the relevant variables to the rate of GDP growth (including labor productivity growth). The results suggest that the growth in public and private investment spending has had a positive effect on the rate of productivity growth in Mexico.

Journal: Eastern Economic Journal, Volume 24, Issue 1

Article: Pre- and Post-Merger Investigation of Hospital Mergers

Author: Ugur Tony Sinay, University of Scranton

JEL Code: I11

In the late 1980s, the Prospective Payment System and the expansion of managed care plans forced hospitals to be cost efficient. The increased number of hospital mergers suggests that merging is a way to become more efficient to ensure long-run survival. This study presents an economic framework and empirical analysis to test the existence of multiproduct scope and scale economies among merged and control hospitals prior to the merger, and one year and two years after the merger, using the AHA data from 1987 to 1990. Results support the operational efficiency hypothesis as the reason for merger.

Journal: Eastern Economic Journal, Volume 24, Issue 1

Article: The Competitive Use of Price Discrimination by Colleges

Author: Frederick G. Tiffany, Wittenburg University and Jeff A. Ankrom, Wittenburg University

JEL Code: D49

In this paper we present a model of colleges as single-product, price-discriminating, output-maximizing firms. Our model predicts that an increase in tuition sticker price, combined with an increase in institutional financial aid grants, will lead to increases in both net revenue and enrollment. Our overall conjecture is that colleges in recent years have made more and better use of price-discrimination as a response to increasing competitive pressure. Based on simple econometric tests, we conclude that the 1991-95 period of increasing sticker price, aid, enrollment and net revenue is consistent with our model.