Journal of Economic Literature
Vol. 34, No. 3, September 1996
Contents
The Economics of Science
Paula E. Stephan 1199
Reimbursing Health Plans and Health Providers: Efficiency
in Production versus Selection
Joseph P. Newhouse 1236
Adjustment Costs in Factor Demand
Daniel S. Hamermesh and Gerard A. Pfann 1264
Economics and Psychology: Lessons for Our Own Day
from the Early Twentieth Century
Shira B. Lewin 1293
The Discovery of the Residual: A Historical Note
Zvi Griliches 1324
Reply to Review by George Borjas [Review of Julian
Simon, The Economic Consequences of Immigration].
Julian L. Simon 1331
Reply to Julian Simon's Rejoinder [Review of Julian
Simon, The Economic Consequences of Immigration].
George J. Borjas 1332
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The Economics of Science
Paula E. Stephan
This essay examines in an interdisciplinary context the contributions
that economists have made to the study of science and the types of contributions
the profession is positioned to make in the future. Special emphasis is
placed on the public nature of knowledge and characteristics of the reward
structure that encourage the production and sharing of knowledge. Scientific
labor markets are discussed as are life-cycle models. The role that resources
play in discovery leads to the conclusion that the human capital model
is not up to the task of explaining the career patterns that emerge in
science. The essay also discusses the relationship of scientific research
to economic growth.
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Reimbursing Health Plans and Health Providers: Efficiency in Production
versus Selection
Joseph P. Newhouse
The tradeoff between an insurer's or medical provider's incentives to
select good risks and to produce efficiently is governed by the supply-price
analog to the demand-price tradeoff between moral hazard and risk aversion.
Under a variety of models the optimum supply price is a mixture of capitation
and fee-for-service payments. Empirical literature shows that pure capitation
payment leaves strong incentives for selection that are acted upon. The
presence of contracting costs in a Rothschild-Stiglitz model means a limited
pooling equilibrium can exist and that poor risks will not be at their
preferred outcome.
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Adjustment Costs in Factor Demand
Daniel S. Hamermesh and Gerard A. Pfann
This study discusses the nature of adjustment costs, which underlie
the dynamic theory of input demand. We examine the implications of the
conventional assumption that they are quadratic-symmetric and of various
alternatives. A recent rapidly growing literature based on microeconomic
data shows that the conventional assumption is inferior. We demonstrate
the importance of this new knowledge for predicting macroeconomic fluctuations
in employment and investment. We indicate its relevance for constructing
general equilibrium simulation models, drawing inferences about the likely
impacts of labor-market and investment policies, and analyzing firms'
dynamic behavior in factor markets.
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Economics and Psychology: Lessons for Our Own Day from the Early Twentieth
Century
Shira B. Lewin
This paper studies the historical roots of the relationship between
economics and psychology, and places recurring controversies between these
disciplines in the context of the relationship between economics and the
other human sciences, especially sociology. We focus on the formative
years of contemporary economics, the early twentieth century, when psychologists
and institutionalist economists attacked the "unscientific" nature of
economics. Economists responded by (mistakenly) renouncing verstehen and
claiming adherence to behaviorism, rather than by actually addressing
the institutionalist critique. "Behaviorist" economics declared independence
from psychology, and by analogy, from the other human sciences. Our illusion
of independence continues to this day.
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The Discovery of the Residual: A Historical Note
Zvi Griliches
This note reviews the history of the "residual," from its earliest articulation
in Copeland (1937) to its codification in Solow (1957), describing the
various earlier contributions by Tinbergen, Stigler, Schmookler, Fabricant,
Kendrick, Abramovitz, and others.
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Reply to Review by George Borjas [Review of Julian Simon, The Economic Consequences
of Immigration].
Julian L. Simon
No abstract available.
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Reply to Julian Simon's Rejoinder [Review of Julian Simon, The Economic
Consequences of Immigration].
George J. Borjas
No abstract available.
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