American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 3 September 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=3&issue_date=September 2007 Regular Article Annotated Listing of New Books 779 869 http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=3&article=7&issue_date=September 2007 10.1257/jel.45.3.779 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 3 September 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=3&issue_date=September 2007 Regular Article JEL Classification System 870 882 http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=3&article=8&issue_date=September 2007 10.1257/jel.45.3.870 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 3 September 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=3&issue_date=September 2007 Regular Article A Review of Avner Greif’s Institutions and the Path to the Modern Economy: Lessons from Medieval Trade GregoryClark 725 741 Avner Greif's Institutions and the Path to the Modern Economy: Lessons from Medieval Trade (Cambridge University Press, 2006) is a major work in the ongoing project of many economists and economic historians to show that institutions are the fundamental driver of all economic history and of all contemporary differences in economic performance. This review outlines the contribution of this book to the project and the general status of this long standing ambition. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=3&article=5&issue_date=September 2007 10.1257/jel.45.3.725 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 3 September 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=3&issue_date=September 2007 Book Review Book Reviews 742 778 http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=3&article=6&issue_date=September 2007 10.1257/jel.45.3.742 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 3 September 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=3&issue_date=September 2007 Regular Article A Review of the Stern Review on the Economics of Climate Change Martin L.Weitzman 703 724 The Stern Review calls for immediate decisive action to stabilize greenhouse gases because "the benefits of strong, early action on climate change outweighs the costs." The economic analysis supporting this conclusion consists mostly of two basic strands. The first strand is a formal aggregative model that relies for its conclusions primarily upon imposing a very low discount rate. Concerning this discount-rate aspect, I am skeptical of the Review's formal analysis, but this essay points out that we are actually a lot less sure about what interest rate should be used for discounting climate change than is commonly acknowledged. The Review's second basic strand is a more intuitive argument that it might be very important to avoid possibly large uncertainties that are difficult to quantify. Concerning this uncertainty aspect, I argue that it might be recast into sound analytical reasoning that might justify some of the Review's conclusions. The basic issue here is that spending money to slow global warming should perhaps not be conceptualized primarily as being about consumption smoothing as much as being about how much insurance to buy to offset the small change of a ruinous catastrophe that is difficult to compensate by ordinary savings. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=3&article=4&issue_date=September 2007 10.1257/jel.45.3.703 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 3 September 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=3&issue_date=September 2007 Regular Article Vertical Integration and Firm Boundaries: The Evidence FrancineLafontaine MargaretSlade 629 685 Since Ronald H. Coase's (1937) seminal paper, a rich set of theories has been developed that deal with firm boundaries in vertical or input–output structures. In the last twenty-five years, empirical evidence that can shed light on those theories also has been accumulating. We review the findings of empirical studies that have addressed two main interrelated questions: First, what types of transactions are best brought within the firm and, second, what are the consequences of vertical integration decisions for economic outcomes such as prices, quantities, investment, and profits. Throughout, we highlight areas of potential cross-fertilization and promising areas for future work. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=3&article=2&issue_date=September 2007 10.1257/jel.45.3.629 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 3 September 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=3&issue_date=September 2007 Regular Article A Review of the Stern Review on the Economics of Climate Change William D.Nordhaus 686 702 How much and how fast should we react to the threat of global warming? The Stern Review argues that the damages from climate change are large, and that nations should undertake sharp and immediate reductions in greenhouse gas emissions. An examination of the Review's radical revision of the economics of climate change finds, however, that it depends decisively on the assumption of a near-zero time discount rate combined with a specific utility function. The Review's unambiguous conclusions about the need for extreme immediate action will not survive the substitution of assumptions that are consistent with today's marketplace real interest rates and savings rates. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=3&article=3&issue_date=September 2007 10.1257/jel.45.3.686 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 45 3 September 2007 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=45&issue=3&issue_date=September 2007 Regular Article Reputations, Relationships, and Contract Enforcement W. BentleyMacLeod 595 628 When the quality of a good is at the discretion of the seller, how can buyers assure that the seller provides the mutually efficient level of quality? Contracts that provide a bonus to the seller if the quality is acceptable or impose a penalty on the seller if quality is unacceptable can, in theory, provide efficient incentives. But how are such contracts enforced? While the courts can be used, doing so involves high real costs. Informal enforcement, involving a loss of reputation and future access to the market for any party that defaults on a contract, may often be a better alternative. This paper explores the use of both formal and informal enforcement mechanisms, provides a rationale for a variety of observed market mechanisms, and then generates a number of testable hypotheses. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=45&issue=3&article=1&issue_date=September 2007 10.1257/jel.45.3.595