We present a model of the creation of social networks, such as political parties, trade unions, religious coalitions, or political action committees, through discussion and mutual persuasion among their members. The key idea is that people are influenced by those inside their network, but not by...

We use the revised estimates of U.S. GNP constructed by Christina Romer (1989) to assess the time-series properties of U.S. output per capita over the past century. We reject at conventional significance levels the null that output is a random walk in favor of the alternative that output is a...

When world trade is not free and costless, a less developed country can profitably industrialize only if its domestic markets are large enough. In such a country, for increasing returns technologies to break even, sales must be high enough to cover the set-up costs, This paper studies some...

This paper explores Rosenstein-Rodman's (1943) idea that simultaneous industrialization of many sectors of the economy can be profitable for all of them, even when no sector can break even industrializing alone. We analyze this ides in the context of an imperfectly competitive economy with...

We evaluate Richard Posner's famous hypothesis that common law converges to efficient legal rules using a model of precedent setting by appellate judges. Following legal realists, we assume that judicial decisions are subject to personal biases, and that changing precedent is costly to judges....

Private ownership should generally be preferred to public ownership when the incentives to innovate and to contain costs must be strong. In essence, this is the case for capitalism over socialism, explaining the dynamic vitality' of free enterprise. The great economists of the 1930s and 1940s...

When should a government provide a service inhouse and when should it contract out provision? We develop a model in which the provider can invest in improving the quality of service or reducing cost. If contracts are incomplete, the private provider has a stronger incentive to engage in both...

We present a model of market competition and product differentiation in which consumers' attention is drawn to the products' most salient attributes. Firms compete for consumer attention via their choices of quality and price. With salience, strategic positioning of each product affects how all...