Goldman School of Public Policy Working Paper (July 2003)
There is and always has been virtual consensus among economists that many agricultural
crop support programs cause inefficiency. Equally true, economists also know that whenever
there is inefficiency, there is “room for a deal” that mitigates it. However, the standard
political explanations for the persistence of these inefficient programs rely on the strength of
the farm lobby relative to the diffuse and difficult-to-organize consumers that pay for them.
This is unsatisfactory because, by the logic of economics, there is an opportunity for a deal
that would benefit the farm lobby in exchange for shedding the inefficient programs. If the
farm lobby could itself benefit, then we have no explanation for the persistence of the
inefficient programs. I examine this puzzle, and conclude that increased political
sophistication on the part of agricultural economists could have a high social payoff in terms
of reduced program inefficiencies over time.
Goldman School of Public Policy Working Paper (May 2003)
Goldman School of Public Policy Working Paper (July 2002)
Patents differ from other forms of intellectual property in that independent invention is not a defense to infringement. We argue that the patent rule is inferior. First, the threat of entry by independent invention would induce patentholders to license the technology, lowering the market price. Provided independent invention is as costly as the original cost of R&D, the market price will still be high enough to cover the patentholder's costs. Second, a defense of independent invention would reduce the wasteful duplication of R&D effort that occurs in patent races. In either case, the threat of independent invention creates a mechanism that limits patentholders' profits to levels commensurate with their costs of R&D.
Goldman School of Public Policy Working Paper (May 2002)
Goldman School of Public Policy Working Paper (April 2002)
The rules under which jurisdictions (nations, provinces) can deny immigration or expel residents are generally governed by a constitution, but there do not exist either positive or normative analyses to suggest what types of exclusion rules are best. We stylize this problem by suggesting four constitutional rules of admission: free mobility, admission by majority voite, admission by unanimous consent, admission by a demand threshold for public goods. In a simple model we characterize the equilibria that result from these rules, and provide a positive theory for which constitutional rules will be chosen.
Goldman School of Public Policy Working Paper (March 2002)
I discuss recent contributions to the theory of group formation and the provision of jointly consumed public goods and services. I highlight the distinction between models of pure group formation, and models where the formation of groups and the sharing of public goods are constrained by a division of geographic space into jurisdictions. Much of the literature concerns the distortions that arise when price systems or tax systems are constrained, for example, to serve the dual roles of redistributing income and funding public services. I also highlight the distortions that can arise from arbitrary divisions of space, and review recent contributions that emphasize the distortions that arise when there are both public and private providers of services. My focus is mainly on equilibrium concepts and policy instruments.
Goldman School of Public Policy Working Paper (February 2002)
In many areas of the world, including large parts of the United States, scarce
water supplies are a serious resource and environmental concern. The possibility
exists that water is being used at rates that exceed what would be dictated by
eﬃciency criteria, particularly when externalities are taken into account. Because
of this, much attention has been paid by policy makers and others to the use of
demand management techniques, including requirements for the adoption of speciﬁc
technologies and restrictions on particular uses. A natural question for economists
to ask is whether price would be a more cost-eﬀective instrument to facilitate water
As a ﬁrst step in such an investigation, this paper draws upon a newly-available
set of detailed data to estimate econometrically the demand function for household
use of urban water supplies. We analyze cross-sectional time-series data that track
1,082 single-family households served by 16 water utilities in 11 urban areas in the
United States and Canada. Because of the diverse multiple-block pricing structures
that abound, estimating the eﬀects of price and price structure on residential water
demand poses some challenging and interesting problems.
We ﬁnd that the sensitivity of residential water demand to price is quite low,
and that the eﬀect of price structure may be more inﬂuential than the magnitude
of marginal price itself. The household-level data we use allow us to assess the
inﬂuences on residential water demand of climate, sociodemographic factors, and characteristics of housing stock, including home vintage. Our results indicate substantial heterogeneity in likely household responses to utility demand-management
Goldman School of Public Policy Working Paper: 937 (November 2001)