The American Economist


	SPRING 2008 VOLUME LII NUMBER 1 table of contents abstracts TABLE OF CONTENTS Articles Macroeconomics for a Modern Economy Edmund S. Phelps Memorializing Milton Friedman: A Review of his Major Works, 1912-2006 Lall Ramrattan and Michael Szenberg "See How they Learn": the Impact of Faculty and Student Learning Styles on Student Performance in Introductory Economics Kara Boatman, Richard Courtney, and William Lee Income Inequality vs. Standard of Living Inequality Uriel Spiegel Do Price Guides Guide Ebay Prices: The Market for Individual Baseball Cards Jannett Highfill and Kevin O'Brien Low Flu Shot Rates Puzzle – Some Plausible Behavioral Explanations Shosh Shahrabani, Amiram Gafni, and Uri Ben-Zion Risk Avoidance and Risk Taking Under Uncertainty: A Graphical Analysis Yang-Ming Chang South Africa's Manufactured International Trade in the Post-Sanctions Epoch: Patterns and Potentials Ross D. Weiner, Trevor Roxo, and Mitchell Kellman Outsourcing Innovation in a Durable Good Monopoly Sanghoon Lee Pareto Optimum and The Emerald Enchantress - Two Short Poems by Chennat Gopalakrishnan Book Reviews Immigrants and Their International Money Flows Marina Slavina The Paradox of a Global US Iva Juric The Myth of the Rational Voter: Why Democracies Choose Bad Policies David McClough Theories of the Firm Lall Ramrattan and Michael Szenberg Chapter Roll ABSTRACTS Macroeconomics for a Modern Economy Edmund S. Phelps more... Memorializing Milton Friedman: A Review of his Major Works, 1912-2006 Lall Ramrattan and Michael Szenberg more... "See How they Learn": the Impact of Faculty and Student Learning Styles on Student Performance in Introductory Economics Kara Boatman, Richard Courtney, and William Lee This paper reports the results of a recent study completed at Saint Mary's College of California, in which the TUCE was administered to introductory economics students. Students and instructors also completed the VARK questionnaire to identify which of the sensory modalities they prefer to use to learn information. Results suggest that a strong visual learning preference positively influences student performance. Our finding that neither ethnicity nor gender influence student performance confirms results of prior research, and suggests that ethnicity- and gender-based differences in student performance may be at least partially caused by differences in learning style preferences. more... Income Inequality vs. Standard of Living Inequality Uriel Spiegel This paper distinguishes between income inequality and standard of living inequality. It examines the case where the utility of individuals is positively affected by a private good and a public good. We show that a wealthy individual will bear the financial burden of financing the public good, which increases the utility of the poor and reduces utility inequality. Moreover, at certain levels of inequality in income, it turns out that an individual whose share in income has decreased will not experience a reduction in utility as a result of the reduction in income. This may explain why within certain ranges of income inequality there is no attempt on the part of either the wealthy or the poor to struggle for income redistribution. more... Do Price Guides Guide Ebay Prices: The Market for Individual Baseball Cards Jannett Highfill and Kevin O'Brien The paper considers the question of whether eBay selling prices for baseball cards are correlated with "book prices." Three book prices are used, "Lo," and "Hi" from the price guide Beckett Baseball Card Plus, and their average "Avg. HiLo." The paper demonstrates a close relationship between book prices and the final sale price. Higher book prices (by all three measures) were associated with higher eBay selling prices, and in separate regressions, each book price explained a substantial proportion of the variance of the final sale price. There is mixed evidence about which book price best is the best guide to the final sale price. The Lo price was closest to the final sales price, but the regression results suggest the Ave. HiLo price because its coefficient is relatively close to one. more... Low Flu Shot Rates Puzzle – Some Plausible Behavioral Explanations Shosh Shahrabani, Amiram Gafni, and Uri Ben-Zion The paper presents an economic model to analyze an individual's decision about whether or not to be vaccinated against influenza. It shows that based upon objective parameters, the vaccination rate should be high. Yet, empirical findings indicate low vaccination rates. Therefore, we use the behavioral approach and subjective variables to explain the empirical findings. The subjective variables in the model include perceived infection probability, time preference, subjective costs of vaccination, perceived severity of illness and perceived vaccination effectiveness. A low vaccination rate has a negative externality on society. The paper discusses potential policies that can be applied to changing the situation. more... Risk Avoidance and Risk Taking Under Uncertainty: A Graphical Analysis Yang-Ming Chang Using a graphical approach, we characterize explicitly variations in optimizing behavior from risk avoidance (e.g., insurance buying) to risk taking (e.g., "gambling") in terms of risk preferences, market insurance terms, and exogenous changes in endowed incomes. An individual who is a "risk avoider" at one income position may become a "risk taker" at another income position. Moreover, both low- and high-income risk-averse individuals may engage in risk-taking activities at the same time. These results imply that predictions about attitude towards risk cannot be made independently of income positions or economic opportunities. more... South Africa's Manufactured International Trade in the Post-Sanctions Epoch: Patterns and Potentials Ross D. Weiner, Trevor Roxo, and Mitchell Kellman We identify those sectors of the South African economy in which the country exhibits a comparative advantage or positive competitive trend. This is accomplished through the development of an index of Regional Revealed Comparative Advantage, based in the work of Richardson and Zhang (2001). South Africa's comparative advantage is associated with products servicing producers and high in capital intensity. We identify underlying factors using multivariate regression analysis. The changing pattern of comparative advantage in South Africa differs from those patterns found to be typical of "developing countries in general, and from those describing the "flying geese" dynamic changes of East Asian NICs as well as other Asian countries. An important contribution of this paper is a demonstration of a high degree of compatibility of projected shifts in competitiveness patterns developed utilizing (solely) trade data and RRCA methodology with patterns developed (solely) utilizing relative unit labor measures. more... Outsourcing Innovation in a Durable Good Monopoly Sanghoon Lee Make-or-buy decision of a durable-good monopolist is analyzed when the quality of an existing product may be improved through investment. Outsourcing generates a hold-up problem which leads to underinvestment in product development. But the very inefficiency in investment also helps the monopolist's initial sales as it makes the existing product less likely to become obsolete. Outsourcing is shown to outperform vertical integration when the value of the improvement is relatively small. The strategic motive for outsourcing identified in the analysis sheds new light on the "core competence" argument commonly used in management literature. more... Pareto Optimum and The Emerald Enchantress - Two Short Poems by Chennat Gopalakrishnan more... Book Reviews Immigrants and Their International Money Flows Marina Slavina more... The Paradox of a Global US Iva Juric more... The Myth of the Rational Voter: Why Democracies Choose Bad Policies David McClough more... Theories of the Firm Lall Ramrattan and Michael Szenberg more...