11. Work requirements imposed under the federal Work Incentives Program, for example, involved little in the way of training. See David L. Kirp, “The California Work/Welfare Scheme,” The Public Interest, 83 (Spring 1986): 34.
12. For examples of programs like this, see Englander and Englander, “Workfare in New Jersey: A Five-Year Assessment,” Policy Studies Review (August 1985): 35; Milton Coleman, “When ET Came to Massachusetts, Welfare Dependency Declined,” Washington Post National Weekly Edition, July 26, 1985, p. 31.
13. In 1950 only one out of four elderly widows was living alone; most of the rest lived with their families. By 1980, two out of three were living alone, largely due to the expansion of Social Security. See United States Bureau of the Census, “Marital Status and Living Arrangements,” Current Population Reports (Washington, D.C.: United States Government Printing Office, March 1980), series P-2, no. 365, table 6.
14. See Reich and John D. Donahue, op. cit., 249.
15. Johnson & Johnson, Annual Report, 1986; see also, Joseph Califano, Jr., America’s Health Care Revolution (New York: Random House, 1986).
16. Under a plan adopted in Wisconsin, a fraction of the absent father’s earnings, sufficient to support a child under eighteen who lived with the mother, was withheld by employers, and then distributed to the mother as child support. If the father fell into arrears, the state would continue to make minimal payments; if the father’s payments dipped below the minimum, the state would also make up the difference.
17. See “Novel War on Teenage Sex,” The New York Times, November 14, 1985, sec. A, p. 20.
18. This approach was being tried in California, among other places.
16. THE FABLE OF THE FISHERMAN (REVISED)
1. See D. Archer and R. Cartner, Violence and Crime in Cross-National Perspective (New Haven: Yale University Press, 1984); E. Doleschal and A. Newton, “International Rates of Imprisonment,” National Council on Crime and Delinquency (unpublished, 1979).
2. See Statistical Abstract of the United States (Washington, D.C.: United States Government Printing Office, 1985), tables 213–17; United States Bureau of the Census, “English Language Proficiency Survey” (Washington, D.C.: United States Government Printing Office, April 1986); Edward B. Fiske, “American Students Score Average or Below in International Math Exams,” The New York Times, September 28, 1984, p. 30; University of Texas, “Adult Performance Level Project,” cited in The New York Times, April 16, 1985, sec. I, p. 1.
3. See data from A Children’s Defense Budget (Washington, D.C.: Children’s Defense Fund, 1985).
4. The Perry Pre-School Project in Ypsilanti, Michigan is recounted, along with several other studies, in Richard Darlington and Irving Lazar, The Lasting Effects After Preschool, U.S. Department of Health and Human Services (Washington, D.C.: United States Government Printing Office, 1979).
5. National Academy of Science, Youth Unemployment Training Programs (Washington, D.C.: National Academy Press, 1985).
6. Nathan Glazer, “Education and Training Programs and Poverty: Or Opening the Black Box,” in S. Danziger and D. Weinberg, eds., op. cit.
7. The relevant studies are cited in David Blumenthal and David Calkins, “Health Care and the Poor,” in M. Carballo and M. Bane, eds., The State and the Poor in the 1980s (Boston: Auburn House, 1984).
8. Karen Davis, “Primary Care for the Medically Underserved: Public and Private Financing,” in Changing Roles in Serving the Underserved: Public and Private Responsibilities and Interests (Washington, D.C.: American Health Planning Assn., 1981).
9. Gertrude Himmelfarb, The Idea of Poverty (New York: Vintage, 1985), 12.
17. THE CYCLES OF RIGHTEOUS FULMINATION
1. More specifically, only 16 percent registered “great confidence” in Congress; 24 percent in the executive; 34 percent for corporate leaders; 28 percent for military leaders; 12 percent for labor leaders; and 16 percent for the press. Data are from Seymour Martin Lipset and William Schneider, The Confidence Gap: Business, Labor, and Government in the Public’s Mind (New York: Free Press, 1983).
2. Survey data cited in Samuel P. Huntington, “The United States,” in Michael J. Crozier et al., eds., The Crisis of American Democracy (New York: New York University Press, 1975), 78–85.
3. Boston Globe, October 14, 1971, p. 8.
4. By 1983, 2 percent of the nation’s households owned half of all family holdings of common stock, 40 percent of all bonds, and over 70 percent of tax-free securities. This distribution was not substantially different from that of twenty-five years before. See study by the United States Federal Reserve Board, October 1984, cited in The New York Times, October 9, 1984, sec. A, p. 31.
5. For a detailed discussion of this point, see Samuel Huntington, American Politics: The Promise of Disharmony, op. cit., 33–39.
6. Federal expenditures, which had been $18.5 billion in 1919, fell to $4.4 billion in 1929—a far bigger drop than the end of World War I and deflation alone account for. From 1920 until 1932, the number of federal employees steadily dwindled. These and subsequent data from U.S. Bureau of the Census, Historical Statistics of the United States (Washington, D.C.: United States Government Printing Office, 1965).
7. Federal Election Commission, 1985.
18. THE MIASMA OF REGULATION
1. Cited by Herbert Kaufman, Red Tape: Its Origins, Uses, and Abuses (Washington, D.C.: The Brookings Institution, 1977), 7–8.
2. U.S. Commission on Federal Paperwork, Final Summary Report (Washington, D.C.: United States Government Printing Office, 1977), 5; “The Regulation Mess,” Newsweek, June 12, 1978, p. 86.
3. One estimate blames government regulation for about 25 percent of the productivity slowdown between 1973 and 1983. See Robert Litan and William Nordhaus, Reforming Federal Regulation (New Haven: Yale University Press, 1983), chap. 2.
4. For a sampling of cross-national comparisons, see Joseph L. Badaracco, Jr., Loading the Dice: A Five-Country Study of Vinyl Chloride Regulation (Cambridge, Mass.: Harvard Business School Press, 1985); Steven Kelman, Regulating America, Regulating Sweden: A Comparative Study of Occupational Safety and Health (Cambridge, Mass.: MIT Press, 1981); David Vogel, National Styles of Regulation: Environmental Policy in Great Britain and the United States (Ithaca, N.Y.: Cornell University Press, 1986).
5. Irving Kristol, Two Cheers for Capitalism (New York: Basic Books, 1978), chap. 2.
6. Paul H. Weaver, “Regulation, Social Policy, and Class Conflict,” The Public Interest (Winter 1978): 59–60.
19. THE MYTHOLOGY OF THE MARKET
1. Economists call these negative and positive side effects “externalities” because they fall outside the specific market transactions that give rise to them. That is, the parties to the transactions do not consider these consequences in their decisions, with the result that there are apt to be too many external “bads” and too few “goods” from society’s point of view. The notion of an “externality” suggests something inevitable and definitive. It is important to understand, however, that these “bads” and “goods” are external to the transactions only because the prevailing market rules do not include them.
2. See Ackerman and Stewart, “Reforming Environmental Law,” Stanford Law Review, 37 (1985): 1333.
3. In 1979 the U.S. Environmental Protection Agency initiated a “bubble policy” which allows state and local regulators to offset increases in pollution from one plant by decreases at another. On this and related proposals see Albert Nichols, Targeting Economic Incentives for Environmental Protection (Cambridge, Mass.: MIT Press, 1984); see also Richard B. Stewart, “Two Models of Regulation” (unpublished manuscript, Harvard Law School, 1986).
4. In the 1980s, several American cities were experimenting with this approach, with varying degrees of success.
5. For a sampling, see James C. Miller III, “The Case Against ‘Industrial Policy,’ ” The Cato Journal, 4 (Fall 1984); Chalmers Johnson, ed., The Industrial Policy Debate (San Francisco: ICS Press, 1984);
Claude E. Barfield and William Schambra, eds., The Politics of Industrial Policy (Washington, D.C.: American Enterprise Institute, 1986).
6. In our rapidly changing competitive environment, the definition of an “industry” becomes problematic (see chapter 10). For present purposes, let us define an industry as a collection of firms pursuing similar strategies.
7. In 1982 commercial banks paid 2 percent of their income to the government; food processors, 25 percent; auto makers, 48 percent. See Joint Committee on Taxation, “Taxation of Banks and Thrift Institutions,” (Washington, D.C.: United States Government Printing Office, March 9, 1983), table 2.
8. This issue arose in Apple Computer, Inc. v. Franklin Computer Corporation, 714 F.2d 1240 (C.A. 3, 1983); Congress grappled with it in enacting the Semiconductor Chip Protection Act of 1984; but in important respects the issue has remained unresolved. While circuit designs may be protected, it remains unclear to what extent the functions performed by a design may also be protected.
9. The technical question was whether the government should confer to the pipelines the power of “eminent domain” to take the land, paying the railroads only an appraised market price.
20. NEW VERSIONS, NEW VISIONS
1. For an earlier and pessimistic discussion of this phenomenon, see Thomas Hobbes, The Leviathan (Liberal Arts Press edition) (New York: Bobbs Merrill, 1958).
2. The exception is organized crime groups, where members are made to understand that in the event of capture silence will be rewarded and betrayal punished; this device for bonding trust, indeed, is an example of why organized crime is so successful.
3. For an appraisal of alternative strategies in repeated rounds of the prisoner’s dilemma, see Robert Axelrod, The Evolution of Cooperation (New York: Basic Books, 1984).
4. Thus their interest charge would fluctuate from year to year according to their ability to pay; such a swap of debt for equity, familiar to bankruptcy proceedings, would give creditors a stake in their future growth.
5. Tracy Kidder’s fine book The Soul of a New Machine (Boston: Atlantic, Little, Brown, 1981) was widely read and cited not because it described an unusual occurrence, but because it captured clearly what was increasingly recognized as the norm in important sectors of the economy.
6. The observation that American workers are already major equity owners will come as no surprise to anyone familiar with the central role of pension funds in corporate finance. But the motivating force of this sort of ownership is severely limited, because pension funds are invested in a broad portfolio of stocks over which employees have no direct control, and upon which their job performance thus has no effect.
7. For a representative discussion of these issues see Derek C. Jones and Jan Svejnar, eds., Participatory and Self-Managed Firms (Lexington, Mass.: Lexington Books, 1982). See also Howard Frant, “Is There Any Point to Employee Ownership?” (unpublished, Kennedy School of Government, Harvard University, June 1986).
8. On this point, see Martin Weitzman, The Share Economy (Cambridge, Mass.: Harvard University Press, 1984).
9. Negligence could be punished by fines rather than judgments; the current system, which attempts to merge deterrence and compensation in a single transaction, has proven unworkable.
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