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| Information Asymmetry |
Information asymmetryIn economics, information asymmetry occurs when one party to a transaction has more or better information than the other party. (It has also been called asymmetrical information and markets with asymmetrical information). Typically it is the seller that knows more about the product than the buyer, however, it is possible for the reverse to be true: for the buyer to know more than the seller.
Examples of situations where the seller usually has better information than the buyer are numerous but include used-car salespeople, stockbrokers, real estate agents, and life insurance transactions.
Examples of situations where the buyer usually has better information than the seller include estate sales as specified in a last will and testament.
This situation was first described by Kenneth J. Arrow in a seminal article on health care in 1963 entitled "Uncertainty and the Welfare Economics of Medical Care," in the American Economic Review.
George Akerlof later used the term asymmetric information in his 1970 work The Market for Lemons. He also noticed that, in such a market, the average value of the commodity tends to go down, even for those of perfectly good quality. It is even possible for the market to decay to the point of nonexistence.
Because of information asymmetry, unscrupulous sellers can "spoof" items (like software or computer games) and defraud the buyer. As a result, many people not willing to risk getting ripped off will avoid certain types of purchases, or will not spend as much for a given item.
Information asymmetry has recently been noted to be on the decline thanks to the Internet, which allows unknowledgeable users to acquire heretofore unavailable information such as the costs of competing insurance policies, used cars, etc. (see Freakonomics)
See also
- transaction cost
- microeconomics
- adverse selection
- moral hazard
- principal-agent problem
- list of economics topics
ja:情報の非対称性
Category:Market failure
1963
1963 (MCMLXIII) was a common year starting on Tuesday (link will take you to calendar).
Events
January-February
- January 1 - CSIRO scientist Dr Gilbert Bogle and Mrs Margaret Chandler are found dead, believed to have been poisoned, in bushland near the Lane Cove River, Sydney. Known as the Bogle-Chandler case.
- January 11 - The Whisky A Go-Go night club in Los Angeles, the first disco in the USA, is opened.
- January 14 - George Wallace becomes governor of Alabama.
- January 22 - Elysée treaty between France and Germany
- January 28 - Black student Harvey Gantt enters Clemson College in South Carolina, the last US state to hold out against racial integration
- January 29 - Charles De Gaulle vetos United Kingdom's entry into the EEC
- February 8 - Travel, financial and commercial transactions by United States citizens to Cuba are made illegal by the John F. Kennedy administration.
- February 11 - CIA Domestic Operations Division is created.
- February 21 - An earthquake in Libya destroys the village of Barce - 500 dead
- February 27 - Juan Bosch takes office as the 41st president of the Dominican Republic.
- February 27 - Female suffrage in Iran
March-April
Iran
- March 1 - Yoko Ono's marriage to American Christian fundamentalist filmmaker Tony Cox is annulled
- March 4 - In Paris six people are sentenced to death for conspiring to assassinate President Charles de Gaulle.
- March 16 - Mount Agung erupts on Bali - 11,000 dead
- March 18 - Court decides poor must have lawyers (Gideon vs. Wainwright Supreme Court trial)
- March 21 - Alcatraz, a federal penitentiary on an island in San Francisco Bay, closes; the last 27 prisoners are transferred elsewhere at the order of Attorney General Robert F Kennedy.
- March 27 - In Britain Dr Beeching issues report calling for huge cuts to the UK's rail network.
- April 7 - Yugoslavia is proclaimed to be a Socialist republic and Josip Broz Tito is named President for life
- April 10 - The US nuclear submarine Thresher sinks 220 miles east of Cape Cod with all hands - 129 dead
- April 15 - 70,000 marchers arrive in London from Aldermarston to demonstrate against nuclear weapons
- April 16 - Martin Luther King composes "Letter from Birmingham Jail"
- April 20 – In Quebec, Canada, members of the Quebec terrorist group, the Front de libération du Québec, bomb the Canadian Armed Forces recruitment center, killing night watchman, Wilfred V. O'Neill.
- April 22 - Lester B. Pearson becomes Canada's fourteenth prime minister.
- April 21 thru April 23 - First election of the Supreme Institution of the Bahá'í Faith, known as the Universal House of Justice whose Seat is at the Bahá'í World Centre on Mount Carmel in Haifa, Israel.
May-June
- May 1: The Coca-Cola Company debuts its first diet drink, TaB cola. Instead of sugar it is sweetened with saccharin and cyclamates. Later (after cyclamates were banned) TaB became a sugar-and-saccharin soft drink. Today it uses a blend of aspartame (NutraSweet) and saccharin.
- May 2 - Berthold Seliger launches near Cuxhaven a rocket with three stages with a maximum flight altitude of more than 100 kilometres. It is the only sounding rocket developed in Germany.
- May 15 - Mercury program: NASA launches the last mission of the program, Mercury 9 (on June 12 NASA Administrator James E. Webb told Congress the program was complete)
- May 23 - Fidel Castro visits the Soviet Union
- May 25 - The Organisation of African Unity is established in Addis Ababa, Ethiopia
- June 1 - Kenya gains autonomy.
- June 2 - Slavery declared illegal in Saudi Arabia
- June 5 - Profumo Affair - British Secretary of State for War John Profumo resigns in a sex scandal
- June 11 – Buddhist monk Thich Quang Duc publicly sets himself on fire in Saigon, Vietnam, to protest against Ngo Dinh Diem's policies
- June 11 - Prime Minister of Greece Constantine Karamanlis resigns in protest of king's visit to Britain
- June 12 - Byron de la Beckwith shoots civil rights leader Medgar Evers in front of his home in Jackson, Mississippi.
- June 16 - Vostok 6: Valentina Tereshkova (USSR) becomes the first woman in space.
- June 17 - The United States Supreme Court ruled 8 to 1 in Abington School District v. Schempp against allowing the reciting of Bible verses and the Lord's Prayer in public schools.
- June 21 - Pope Paul VI is elected by College of Cardinals.
- June 30 - Ciaculli Massacre - mafia car bomb explodes in Ciaculli, Sicily, killing 7 police officers
July-August
- July 1 - ZIP Codes introduced in the USA
- July 5 - Diplomatic relations between the Israeli and the Japanese governments are raised to embassies' level.
- July 5 - The Catholic Church accepts cremation as a funeral practice
- July 26 - Earthquake in Skopje, Yugoslavia - 1800 dead
- July 26 - Syncom, the world's first geostationary (synchronous) satellite is orbited by NASA
- July 27 – Indonesian president-for-life Sukarno declares that he will crush Malaysia – official start of Indonesian Confrontation
- July 30 - Soviet newspaper Izvestia reports that Kim Philby has been given asylum in Moscow
- August 5 - United States, United Kingdom, and Soviet Union sign a nuclear test ban treaty.
- August 8 - The Great Train Robbery takes place in Buckinghamshire, England
- August 18 - American civil rights movement: James Meredith becomes the first black person to graduate from the University of Mississippi
- August 28 - Martin Luther King jr. delivers his "I have a dream" speech on the steps at the Lincoln Memorial in Washington D.C.
September-October
- September 5 - Christine Keeler arrested for perjury. On December 6 she is sentenced to nine months in prison.
- September 6 - The Centre for International Industrial Property Studies (CEIPI) is founded.
- September 7 - The Pro Football Hall of Fame opens in Canton, Ohio with 17 charter members.
- September 10 - Mafia boss Bernardo Provenzano is indicted for murder. He goes on the run and, as of 2005, is still a fugitive.
- September 15 - American civil rights movement: The 16th Street Baptist Church bombing results in 4 deaths and 22 injuries.
- September 16 – Federation of Malaysia formed through the merging of the Federation of Malaya and the British crown colony of Singapore, North Borneo (renamed Sabah) and Sarawak.
- September 18 – Rioters burn down British embassy in Jakarta to protest formation of Malaysia
- September 23 - King Fahd University for Petroleum and Minerals was was established by a Saudi Royal Decree as the College of Petroleum and Minerals
- September 25 - Denning Report on Profumo affair
- September 29 - Opening of second period of Second Vatican Council in Rome.
- October 9 - Uganda becomes a republic.
- October 9 - In northeast Italy, over 2,000 people are killed when a large landslide behind the Vajont Dam causes a giant wave of water to overtop it.
November
Vajont Dam]]
- November 2 - South Vietnamese President Ngo Dinh Diem is assassinated following a military coup
- November 6 - Vietnam War: Coup leader General Duong Van Minh takes over leadership of South Vietnam
- November 7 - Wunder von Lengede: In Germany, 11 miners are rescued from a collapsed mine after 14 days
- November 9 - 1963 Miike coal-mine explosion: In Japan, a coal mine explosion kills 458 and sends 839 carbon monoxide poisoning victims to the hospital
- November 14 - A volcanic eruption under the sea near Iceland creates a new island, Surtsey
- November 16 - Newspaper strike begins in Toledo, Ohio
- November 18 - Dartford Tunnel opens
- November 22 - John F. Kennedy assassination: In Dallas, Texas, U.S. President John F. Kennedy is assassinated, Texas Governor John B. Connally is seriously wounded, and Vice President Lyndon B. Johnson is sworn-in as the 36th President of the United States.
- November 23 - The first episode of the BBC television series Doctor Who is broadcast in the United Kingdom.
- November 24 - John F. Kennedy assassination: Alleged assassin Lee Harvey Oswald is mortally shot by Jack Ruby in Dallas, Texas on live national television.
- November 24 - Vietnam War: Newly sworn in U.S. President Lyndon B. Johnson confirms that the United States intends to continue supporting South Vietnam militarily and economically
- November 25 - John F. Kennedy assassination: The late U.S. President Kennedy is buried at Arlington National Cemetery.
- November 29 - John F. Kennedy assassination: U.S. President Lyndon B. Johnson establishes the Warren Commission to investigate the assassination of President Kennedy.
- November 29 - Trans-Canada Airlines Flight 831, a Douglas DC-8 carrying 118, crashes into a wooded hillside after taking-off from Dorval International Airport near Montreal, killing all 118 on board (for many years this was the worst air disaster in Canada's history).
December
- December 4 - Closing of second period of Second Vatican Council
- End of the Mercury program of United States manned spaceflight
- December 5 - The Seliger Forschungs- und Entwicklungsgesellschaft mbH demonstrates rockets for military use to representatives of the military of non-NATO-countries near Cuxhaven. Although these rockets landed via parachute at the end of their flight and no allied laws were violated, this action led to protests by the Soviet Union.
- December 12 – Kenya becomes independent with Jomo Kenyatta as a prime minister
- December 22 - Cruise ship Lakonia burns 180 miles north of Madeira with the loss of 128 lives
- December 24 - Cyprus Emergency - A brief civil war in Cyprus between Greek and Turkish Cypriots erupts
- December 31 - Federation of Rhodesia and Nyasaland formally dissolved
Unknown date
- David. H. Frisch and J. H. Smith prove radioactive decay of mesons is slowed by their motion. (See Einstein's special relativity and general relativity).
- Full deployment of SAGE, the semi-automated ground environment.
- TAT-3 cable goes into operation.
- Arecibo Observatory officially begins operation.
- Ostankino Tower in Moscow begins construction.
- The divorce case of the Duke and Duchess of Argyll causes scandal in the United Kingdom
- Harvey Ball invents the ubiquitous smiley
- One of the most spectacular years for vintage Port in the 20th Century.
Births
January-February
- January 1 - Laura Ingraham, American talk show host and author
- January 2 - David Cone, baseball player
- January 2 - Edgar Martinez, baseball player
- January 14 - Steven Soderbergh, American film director
- January 21 - Hakeem Olajuwon, Nigerian basketball player
- January 21 - Detlef Schrempf, German basketball player
- January 23 - Gail O'Grady, American actress
- January 24 - Arnold Vanderlyde, Dutch boxer
- January 26 - José Mourinho, Portuguese football manager
- January 26 - Andrew Ridgely, English musician
- January 30 - Thomas Brezina Austrian author
- February 8 - Vince Neil, American musician, Motley Crue
- February 9 - Travis Tritt, American singer
- February 11 - Diane Franklin, American actress
- February 11 - Todd Benzinger, baseball player
- February 17 - Michael Jordan, American basketball player
- February 19 - Seal, English singer
- February 20 - Charles Barkley, American basketball player
- February 21 - William Baldwin, American actor
- February 22 - Vijay Singh, Fiji golfer
March-April
- March 1 - Dan Michaels, American record producer and saxophonist (The Choir and The Swirling Eddies)
- March 4 - Jason Newsted, American bassist (Metallica)
- March 6 - D.L. Hughley, American actor and comedian
- March 10 - Neneh Cherry, Swedish musician
- March 12 - Joaquim Cruz, Brazilian runner
- March 14 - Bruce Reid, Australian cricketer
- March 17 - Michael Ivins, American bassist (The Flaming Lips)
- March 18 - Vanessa L. Williams, American beauty queen, actress, and singer
- March 20 - Paul Annacone, American tennis player and coach
- March 20 - Kathy Ireland, American model and actress
- March 21 - Ronald Koeman, Dutch football player and manager
- March 23 - Kyogoku Natsuhiko, Japanese writer
- March 27 - Quentin Tarantino, American actor, director, writer, and producer
- March 27 - Xuxa, Brazilian television personality
- April 4 - Jack Del Rio, American football player and coach
- April 4 - Graham Norton, Irish talk show host
- April 9 - Joe Scarborough, American newscaster
- April 11 - Chris Ferguson, American poker player
- April 13 - Garry Kasparov, Russian chess player
- April 17 - Joel Murray, American actor
- April 18 - Conan O'Brien, American television entertainer
- April 21 - Ken Caminiti, baseball player (d. 2004)
- April 21 - Roy Dupuis, Canadian actor
- April 26 - Jet Li, Chinese martial artist and actor
- April 27 - Cali Timmins, Canadian actress
- April 30 - Michael Waltrip, American race car driver
May-August
- May 9 - Barry Douglas Lamb, English musician, author, and preacher
- May 11 - Natasha Richardson, English-born actress
- May 12 - Vanessa A. Williams, American actress
- May 16 - Mercedes Echerer, Austrian actress and politician
- May 23 - Wally Dallenbach Jr., American race car driver and announcer
- May 24 - Joe Dumars, American basketball player
- May 25 - Mike Myers, Canadian actor and comedian
- June 6 - Jason Isaacs, English actor
- June 9 - Johnny Depp, American actor
- June 13 - Bettina Bunge, German tennis player
- June 17 - Greg Kinnear, American actor
- June 18 - Bruce Smith, American football player
- June 23 - Colin Montgomerie, Scottish golfer
- June 25 - George Michael, English singer
- June 27 - Meera Syal, English comedian, writer, singer, and actress
- July 4 - Christopher George Kennedy , son of Robert F.Kennedy and Ethel Skakel Kennedy
- July 16 - Phoebe Cates, American actress
- July 24 - Karl Malone, American basketball player
- July 30 - Lisa Kudrow, American actress
- August 3 - James Hetfield, American singer (Metallica)
- August 6 - Kevin Mitnick, computer hacker
- August 9 - Whitney Houston, American singer
- August 19 - Joey Tempest, Swedish singer (Europe)
- August 19 - John Stamos, American actor
- August 22 - Tori Amos, American singer
- August 23 - Hans-Henning Fastrich, German field hockey player
- August 23 - Kenny Wallace, American race car driver
- August 24 - Hideo Kojima, Japanese video game director
- August 30 - Paul Oakenfold, British disc jockey
September-December
- September 6 - Geert Wilders, Dutch politician
- September 9 - Lauren Allen, American Porn Star,Adult Model
- September 10 - Randy Johnson, baseball player
- September 18 - Rob Brettle, English historian
- September 21 - Cecil Fielder, baseball player
- September 23 - Jackie Pearcey, English politician
- September 29 - Dave Andreychuk, Canadian hockey player
- September 29 - Les Claypool, American bassist and singer (Primus)
- October 1 - Mark McGwire, baseball player
- October 3 - Tommy Lee, American musician, Motley Crue
- October 10 - Anita Mui, Hong Kong singer (d. 2003)
- October 10 - Daniel Pearl, American journalist (d. 2002)
- October 10 - Jolanda de Rover, Dutch swimmer
- October 22 - Brian Boitano, American figure skater
- October 26 - Natalie Merchant, American singer, songwriter, and musician
- October 30 - Kristina Wagner, American actress
- October 31 - Fred McGriff, baseball player
- November 1 - Rick Allen, British musician (Def Leppard)
- November 4 - Lena Zavaroni, Scottish entertainer (d. 1999)
- November 13 - Vinny Testaverde, American football player
- November 15 - Benny Elias, Australian rugby player
- November 18 - Dante Bichette, baseball player
- November 19 - Terry Farrell, American actress
- November 19 - Jon Potter, British field hockey player
- November 21 - Nicolette Sheridan, English actress
- November 23 - Troy Hurtubise, Canadian inventor
- December 3 - Terri Schiavo, American right-to-die cause célèbre (d. 2005)
- December 14 - Cynthia Gibb, American actress
- December 16 - Benjamin Bratt, American actor
- December 18 - Brad Pitt, American actor
- December 23 - Jim Harbaugh, American football player
- December 29 - Francisco Bustamante, Filipino billiard player
- December 29 - Dave McKean, English artist and filmmaker
Unknown date
- Andrew Weatherall, English disc jockey
Deaths
- January 2 - Dick Powell, American actor (b. 1904)
- January 3 - Jack Carson, Canadian actor (b. 1910)
- January 5 - Rogers Hornsby, baseball player (b. 1896)
- January 18 - Edward Charles Titchmarsh, British mathematician (b. 1899)
- January 29 - Robert Frost, American poet (b. 1874)
- January 30 - Francis Poulenc, French composer (b. 1899)
- February 11 - Sylvia Plath, American poet and novelist (suicide) (b. 1932)
- February 28 - Eppa Rixey, baseball player (b. 1891)
- March 4 - William Carlos Williams, American writer (b. 1883)
- March 5 - Patsy Cline, American singer (b. 1932)
- April 6 - Otto Struve, Russian-born astronomer (b. 1897)
- April 9 - Eddie Edwards, American jazz trombonist (b. 1891)
- May 11 - Herbert Spencer Gasser, American physiologist, Nobel Prize laureate (b. 1888)
- May 12 - Bobby Kerr, Canadian runner (b. 1882)
- May 31 - Edith Hamilton, German-born author (b. 1867)
- June 3 - Pope John XXIII (b. 1881)
- June 11 - Thich Quang Duc, Vietnamese Bhuddist monk (suicide)(b. 1897)
- June 18 - Pedro Armendariz, Mexican actor (suicide)(b. 1912)
- August 5 - Theodore Roethke, American poet (b. 1908)
- August 23 - Glen Gray, American saxophonist and conductor (b. 1906)
- August 31 - Georges Braque, French painter (b. 1882)
- September 11 - Suzanne Duchamp, French painter (b. 1889)
- October 11 - Edith Piaf, French singer (b. 1915)
- October 11 - Jean Cocteau, French writer (b. 1889)
- November 2 - Ngo Dinh Diem, President of South Vietnam (b. 1901)
- November 15 - Fritz Reiner, Hungarian conductor (b. 1888)
- November 22 - Aldous Huxley, English novelist (b. 1894)
- November 22 - John F. Kennedy, 35th President of the United States (b. 1917)
- November 22 - C.S. Lewis, Irish writer (b. 1898)
- November 24 - Lee Harvey Oswald, American assassin of John F. Kennedy (shot) (b. 1939)
- November - Luis Cernuda, Spanish writer (b. 1902)
- December 2 - Thomas Hicks, American marathon runner (b. 1875)
- December 5 - Karl Amadeus Hartmann, German composer (b. 1905)
- December 5 - Sri Deep Narayan Mahaprabhuji, Hindu saint (b. 1828)
- December 28 - shaun gantz]], deemed coolest in america (b. 1895)
Prize in Physics|Physics]] - Eugene Paul Wigner, Maria Goeppert-Mayer, J. Hans D. Jensen
- Chemistry - Karl Ziegler, Giulio Natta
- Medicine - Sir John Carew Eccles, Alan Lloyd Hodgkin, Andrew Fielding Huxley
- Literature - Giorgos Seferis
- Peace - International Committee of the Red Cross, League of Red Cross Societies
Category:1963
ko:1963년
ms:1963
ja:1963年
simple:1963
th:พ.ศ. 2506
The Market for Lemons"The Market for Lemons: Quality Uncertainty and the Market Mechanism" is a paper by George Akerlof written in 1970 that established the fundamentals of asymmetrical information theory. Akerlof, a professor at the University of California, Berkeley, won the Nobel Prize of Economics in 2001 for his research.
The paper by Akerlof describes how the interaction between quality heterogeneity and asymmetrical information can lead to the disappearance of a market where guarantees are indefinite.
In this model, as quality is undistinguishable beforehand by the buyer (due to the asymmetry of information), incentives exist for the seller to pass off a low-quality good as a higher-quality one. The buyer, however, takes this incentive into consideration, and takes the quality of the good to be uncertain. Only the average quality of the good will be considered, which in turn will have the side effect that goods that are above average in terms of quality will be driven out of the market. This mechanism is repeated until a no-trade equilibrium is reached.
As a consequence of the mechanism described in this paper, markets may fail to exist altogether in certain situations involving quality uncertainty. Examples include the market for used cars, the dearth of formal credit markets in developing countries and the unavailability of health insurance for the elderly (that is, in the absence of government programs such as Medicare).
A simple exposition of the model: The automobiles market
The paper describes the second-hand market for cars as an example of the more general problem of quality uncertainty. There are good used cars, and defective used cars ("lemons"). The buyer of a car does not know beforehand whether it is a good car or a lemon. So the buyer's best guess for a given car is that the car is of average quality; accordingly, he/she will be willing to pay for it only the price of car of known average quality. This means that the owner of a good used car will be unable to get a high enough price to make selling the car worthwhile. Therefore, owners of good cars will not place their cars on the used car market. The withdrawal of good cars reduces the average quality of cars on the market, causing buyers to revise downward their expectations for any given car. This, in turn, motivates the owners of moderately good cars not to sell, and so on. The result is that a market in which there is asymmetrical information with respect to quality shows characteristics similar to those described by Gresham's Law: the bad drives out the good.
Suppose we can use some number, q to index the quality of used cars, where q is uniformly distributed over the interval [0,1]. The average quality of a used car on the market is therefore 1/2.
There are a large number of buyers looking for cars who are prepared to pay their reservation price of (3/2)q for a car that is of quality q. There are also a large number of sellers who are prepared to sell a car of quality q for the price q. If quality were observable, the price of used cars would therefore be somwhere between q and (3/2)q, and the cars would be sold and everyone would be perfectly happy.
If the quality of cars is not observable by the buyers, then it seems reasonable for them to estimate the quality of a car offered to market using the average quality of the cars. Based on this estimation, the willingness to pay for any given car will therefore be (3/2)q.
Now, assume that the equilibrium price in the market is some price, p, where p>0. At this price, all the owners of cars with quality less than p will want to offer their cars for sale. Since quality is uniformly distributed over the interval from 0 to p, the average quality of the cars offered for sale at p will be p/2.
We know however that for an expected quality of p/2, buyers will only be willing to pay (3/2)(p/2) = (3/4)p. Therefore we can conclude that no cars will be sold at p. Because p is any arbitrary positive price, it is shown that no cars will be sold at any positive price at all. The market for used cars collapses when there is asymmetric information.
The term "lemon," did not enter the language of economics as a result of this paper. Rather, it came from the famous "Lemon" Volkswagen advertisement of the 1960s.
Reference
-
See also
- Lemon law
- Highest quality is lowest cost
External links
- [http://nobelprize.org/economics/articles/akerlof/ Writing the “The Market for ‘Lemons’”: A Personal and Interpretive Essay] by George A. Akerlof
- [http://web.cz3.nus.edu.sg/~chenk/gem2503_3/notes6_2.htm The paradigm of the market for lemons] explains with a Java applet
- [http://courses.temple.edu/economics/Econ_92/Game_Lectures/11th-Lemons/market_for_lemons.htm The Market for Lemons: The Good, the Bad and the Ugly]
ja:レモン市場
Category:Market failure
category:journal articles
SpoofSpoof can refer to:
#A form of parody (which see for more details of the term),
#Spoofing attack, a computer security term;
#A game called Spoof; or
#A term sometimes used in Commonwealth countries as a euphemism for ejaculate. It is pronounced with a short "oo" (like book) in this case.
#A paper towel tube stuffed with fabric softener sheets. Used in college dorm rooms to mask the smell of marijuana smoke. After taking a bong hit you exhale through the spoof.
FreakonomicsFreakonomics: A Rogue Economist Explores the Hidden Side of Everything is a book by economist Steven Levitt and journalist Stephen J. Dubner published in 2005. Freakonomics peaked at number 2 among nonfiction on the New York Times bestseller list.
The book is a collection of economic articles written by Levitt, translated into prose meant for a wide audience. Levitt had already gained a reputation in academia for applying economic theory to diverse topics usually not covered by "traditional" economists. The book's topics include:
- Roe v. Wade as a cause for the drop in crime during the 1980's and 1990's (from his article The Impact of Legalized Abortion on Crime).
- The surprisingly low wages of crack cocaine dealers.
- The impact of unusual names on children.
One striking example of the authors' creative use of economic theory involves mathematically proving the existence of cheating among Sumo wrestlers. In a Sumo tournament, all wrestlers compete in fifteen matches. Those who win a majority of the matches receive preferential treatment; those who don't must perform humiliating duties, such as washing hard-to-reach places on the bodies of their betters. The authors studied the odds involved in the fifteenth match and noticed an odd discrepancy. Statistically, the wrestlers who won eight of the previous fourteen matches and lost only six should have out-performed the wrestlers who won seven and lost seven, as they'd already proven themselves slightly better. This was not the case; the 7-7 underdogs beat their 8-6 opponents far too often for it to be a mathematical coincidence. The authors came to the inescapable conclusion that the 8-6 wrestlers, who could afford to throw a single match without fear of jeopardizing their standings, were deliberately losing, presumably for a later favor.
External links
- [http://www.freakonomics.com/ Official site]
- [http://www.nplusonemag.com/weakonomics.html critical review of book by n+1 magazine]
- [http://www.ornery.org/essays/warwatch/2005-09-11-1.html review of book by Orson Scott Card]
References
-
Category:2005 books
Category:Economics books
Adverse selectionAdverse selection or anti-selection is a term used in economics and insurance. On the most abstract level, it refers to a market process in which bad results occur due to information asymmetries between buyers and sellers: the "bad" products or customers are more likely to be selected.
Example: insurance
The term adverse selection was originally used in insurance. It describes a situation where the people who take out insurance are more likely to make a claim than the population of people used by the insurer to set their rates.
For example, when setting rates for a life insurance contract, a life insurer may look at death rates among people of a certain age in a certain area. Now suppose that there are two groups among the population, smokers and non-smokers, and the insurer can't tell which is which so they each pay the same premiums. Non-smokers are less likely to die than average, while smokers are more likely to die than average. If the insurance company could discern smokers from non-smokers, they would charge non-smokers less, and smokers more, than the current premium. Part of the premium that non-smokers pay will therefore go to pay for claims from smokers.
Non-smokers know that they are cross-subsidising smokers, so they will be reluctant to insure themselves. Smokers, on the other hand, have to pay less than they should, and so will be more likely to buy insurance.
The insurance company ends up losing money, because (in the extreme) only smokers insure themselves, and they have a higher mortality rate than the one the insurance company used when it calculated the premium.
Adverse selection may also occur on the other "side" of the market. If an insurance company has only the ability to provide or deny coverage to individuals, a rational company will seek to avoid insuring those whose expected cost exceeds their payment. This so called "cherry picking" or "cream skimming" will likely lead to only certain groups having insurance. Taking the example of motor insurance, if coverage is provided at a set fee on an all or nothing basis, a profit-maximising firm would likely seek out middle aged drivers (who have more experience and are less likely to take risks), while avoiding young male drivers (who tend to have the highest crash rates of any demographic group).
Asymmetric information
In the usual case, a key condition for there to be adverse selection is an asymmetry of information - people buying insurance know whether they are smokers or not, whereas the insurance company doesn't. If the insurance company knew who smokes and who doesn't, it could set rates differently for each group and there would be no adverse selection. However, other conditions may produce adverse selection even when there is no asymmetry of information. For example, some U.S. states require health insurance providers to insure all who apply at the same cost. In this case, there may not be an actual asymmetry of information: the insurance company may know who is or isn't a smoker, but because the insurer is not allowed to act on that information, there is a "virtual" asymmetry of information.
The market for lemons
The concept of adverse selection has been generalised by economists into markets other than insurance, where similar asymmetries of information may exist. For example, George Akerlof developed the model of the "market for lemons
See also
- [[moral hazard]]
[[Category:Market failure
ja:逆選抜
Principal-agent problemIn economics, the principal-agent problem treats the difficulties that arise under conditions of incomplete and asymmetric information when a principal hires an agent. Various mechanisms may be used to try to align the interests of the agent with those of the principal, such as piece rates/commissions, profit sharing, efficiency wages, the agent posting a bond, or fear of firing. The principal-agent problem is found in most employer/employee relationships, for example, when stockholders hire top executives of corporations.
Overview
In economics, the problem of motivating one party to act on behalf of another is known as ‘the principal-agent problem’. The principal-agent problem arises when a principal compensates an agency for performing certain acts which are useful to the principal and costly to the agent, and where there are elements of the performance which are costly to observe. This is the case to some extent for all contracts which are written in a world of information asymmetry, uncertainty and risk. Here, principals do not know enough about whether (or to what extent) a contract is or has been satisfied. The solution to this information problem – closely related to the moral hazard problem – is to ensure (as far as possible) the provision of appropriate incentives so that agents act in the way principals wish them to. In terms of game theory, it involves changing the rules of the game so that the self-interested rational choices which the principal predicts the agent will make, coincide with the choices the principal desires. Even in the limited arena of employment contracts, the difficulty of doing this in practice is reflected in a multitude of compensation mechanisms (‘the carrot’) and supervisory schemes (‘the stick’).
Employment contract
In the context of the employment contract, individual contracts form a major method of restructuring incentives, by connecting as closely as is optimal the information available about employee performance, and the compensation for that performance. Because of differences in the quantity and quality of information available about the performance of individual employees, the ability of employees to bear risk, and the ability of employees to manipulate evaluation methods, the structural details of individual contracts vary widely, including such mechanisms as “piece rates, [share] options, discretionary bonuses, promotions, profit sharing, efficiency wages, deferred compensation, and so on.” (Prendergast 1999, 7) Typically, these mechanisms are used in the context of different types of employment: salespeople often receive some or all of their remuneration as commission, production workers are usually paid an hourly wage, while office workers are typically paid monthly or semimonthly (and if paid overtime, typically at a higher rate than the hourly rate implied by the salary). The way in which these mechanisms are used is different in the two parts of the economy which Doeringer and Piore called the “primary” and “secondary” sectors (see also dual labour market). The secondary sector is characterised by short-term employment relationships, little or no prospect of internal promotion, and the determination of wages primarily by market forces. In terms of occupations, it consists primarily of low or unskilled jobs, whether they are blue-collar (manual-labour), white-collar (e.g. filing clerks), or service jobs (e.g. waiters). These jobs are linked by the fact that they are characterized by “low skill levels, low earnings, easy entry, job impermanence, and low returns to education or experience.”
Non-financial compensation
Part of this variation in incentive structures and supervisory mechanisms may be attributable to variation in the level of intrinsic psychological satisfaction to be had from different types of work. Sociologists and psychologists frequently argue that individuals take a certain degree of pride in their work, and that introducing performance-related pay can destroy this “psycho-social compensation”, because the exchange relation between employer and employee becomes much more narrowly economic, destroying most or all of the potential for social exchange. Evidence for this is inconclusive – Deci (1971), and Lepper, Greene and Nisbett (1973) find support for this argument; Staw (1989) suggests other interpretations of the findings.
Team production
On a related note, Drago and Garvey (1997) use Australian survey data to show that when agents are placed on individual pay-for-performance schemes, they are less likely to help their coworkers. This negative effect is particularly important in those jobs that involve strong elements of ‘team production’ (Alchian and Demsetz 1972), where output reflects the contribution of many individuals, and individual contributions cannot be easily identified, and compensation is therefore based largely on the output of the team. In other words, pay-for-performance increases the incentives to free-ride, as there are large positive externalities to the efforts of an individual team member, and low returns to the individual (Holmstrom 1982, McLaughlin 1994). The negative incentive effects implied are confirmed by some empirical studies, eg Newhouse (1973) for shared medical practices (costs rise and doctors work fewer hours as more revenue is shared), and Leibowitz and Tollison (1980) find that larger law partnerships typically result in worse cost containment. As a counter, peer pressure can potentially solve the problem (Kandel and Lazear 1992), but this depends on peer monitoring being relatively costless to the individuals doing the monitoring/censuring in any particular instance (unless one brings in social considerations of norms and group identity and so on). Studies suggest that profit-sharing, for example, typically raises productivity by 3-5% (Jones and Kato 1995, Knex and Simester 1997), although there are some selection issues (Prendergast).
Empirical evidence
There is however considerable empirical evidence of a positive effect of compensation on performance (although the studies usually involve “simple” jobs where aggregate measures of performance are available, which is where piece rates should be most effective). In one study, Lazear (1996) saw productivity rising by 35% (and wages by 12%) in a change from salary to piece rates, with a third of the productivity gain due to worker selection effects. Paarsch and Shearer (1996) also find evidence supportive of incentive and productivity effects from piece rates, as do Banker, Lee, and Potter (1996), although the latter do not distinguish between incentive and worker selection effects. Fernie and Metcalf (1996) find that British jockeys perform significantly better when offered prizes for winning races compared to being on fixed retainers. McMillan, Whalley and Zhu (1989) and Groves et al (1994) look at Chinese agricultural and industrial data respectively and find significant incentive effects. Kahn and Sherer (1990) find that better evaluations of white-collar office workers were achieved by those employees who had a steeper relation between evaluations and pay. Nikkinen and Sahlström (2004) find empirical evidence that agency theory can be used, at least to some extent, to explain financial audit fees internationally.
Four principles of contract design
Milgrom and Roberts (1992) identify four basic principles of contract design:
- the Informativeness Principle,
- the Incentive-Intensity Principle,
- the Monitoring Intensity Principle, and
- the Equal Compensation Principle.
Informativeness Principle
In the absence of a world of perfect information, Holmstrom (1979) developed what became known as the Informativeness Principle. This essentially states that any measure of performance that (on the margin) reveals information about the effort level chosen by the agent should be included in the compensation contract. This includes, for example, Relative Performance Evaluation – measurement relative to other, similar agents, so as to filter out some common background noise factors, such as fluctuations in demand. By removing some exogenous sources of randomness in the agent’s income, a greater proportion of the fluctuation in the agent’s income falls under his control, increasing his ability to bear risk. If taken advantage of, by greater use of piece rates, this should improve incentives. (In terms of the simple linear model below, this means that increasing x produces an increase inc b.)
Incentive-Intensity Principle
However, setting incentives as intense as possible is not necessarily optimal from the point of view of the employer. The Incentive-Intensity Principle states that the optimal intensity of incentives depends on four factors: the incremental profits created by additional effort, the precision with which the desired activities are assessed, the agent’s risk tolerance, and the agent’s responsiveness to incentives. According to Prendergast (1999, 8), “the primary constraint on [performance-related pay] is that [its] provision imposes additional risk on workers…” A typical result of the early principal-agent literature was that piece rates tend to 100% (of the compensation package) as the worker becomes more able to handle risk, as this ensures that workers fully internalize the consequences of their costly actions. In incentive terms, where we conceive of workers as self-interested rational individuals who provide costly effort (in the most general sense of the worker’s input to the firm’s production function), the more compensation varies with effort, the better the incentives for the worker to produce.
Monitoring Intensity Principle
The third principle – the Monitoring Intensity Principle – is complementary to the second, in that situations in which the optimal intensity of incentives is high correspond to situations in which the optimal level of monitoring is also high. Thus employers effectively choose from a “menu” of monitoring/incentive intensities. This is because monitoring is a costly means of reducing the variance of employee performance, which makes more difference to profits in the kinds of situations where it is also optimal to make incentives intense.
Equal Compensation Principle
The final principle is the Equal Compensation Principle, which essentially states that activities equally valued by the employer should be equally valuable (in terms of compensation, including non-financial things such as pleasantness) to the employee. This relates to the problem that employees may be engaged in several activities, and if some of these are not monitored or are monitored less heavily, these will be neglected, as activities with higher marginal returns to the employee are favoured. This can be thought of as a kind of “disintermediation” – targeting certain measurable variables may cause others to suffer. For example, teachers being rewarded by test scores of their students are likely to tend more towards teaching ‘for the test’, and de-emphasise less relevant but perhaps equally or more important aspects of education; while AT&T’s practice at one time of rewarding programmers by the number of lines of code written resulted in programs that were longer than necessary – i.e. program efficiency suffering (Prendergast 1999, 21). Following Holmstom and Milgrom (1990) and Baker (1992), this has become known as “multi-tasking” (where a subset of relevant tasks is rewarded, non-rewarded tasks suffer relative neglect). Because of this, the more difficult it is to completely specify and measure the variables on which reward is to be conditioned, the less likely that performance-related pay will be used: “in essence, complex jobs will typically not be evaluated through explicit contracts.” (Prendergast 1999, 9). Where explicit measures are used, they are more likely to be some kind of aggregate measure, for example, baseball and American Football players are rarely rewarded on the many specific measures available (e.g. number of home runs), but frequently receive bonuses for aggregate performance measures such as Most Valuable Player. The alternative to objective measures is subjective performance evaluation, typically by supervisors. However, there is here a similar effect to “multi-tasking”, as workers shift effort from that subset of tasks which they consider useful and constructive, to that subset which they think gives the greatest appearance of being useful and constructive, and more generally to try to curry personal favour with supervisors. (One can interpret this as a destruction of organizational social capital – workers identifying with, and actively working for the benefit of, the firm – in favour of the creation of personal social capital – the individual-level social relations which enable workers to get ahead (“networking”).)
A linear model
The four principles can be summarised in terms of the simplest (linear) model of incentive compensation:
:: w = a + b(e + x + g×y)
where w stands for the wage, e for (unobserved) effort, x for unobserved exogenous effects on outcomes, and y for observed exogenous effects; while g and a represent the weight given to y, and the base salary, respectively. The interpretation of b is as the intensity of incentives provided to the employee.
Nonlinearities
The above discussion on explicit measures assumed that contracts would create the linear incentive structures summarised in the model above. But while the combination of normal errors and the absence of income effects yields linear contracts, many observed contracts are nonlinear. To some extent this is due to income effects as workers rise up a tournament/hierarchy: “Quite simply, it may take more money to induce effort from the rich than from the less well off.” (Prendergast 1999, 50). In addition, the marginal return to effort may increase: it is more important for a CEO to work hard than for a shop floor worker (eg Murphy 1998 highlights the importance of bonuses for executives). Similarly, the threat of being fired creates a nonlinearity in wages earned versus performance. Moreover, many empirical studies illustrate inefficient behaviour arising from nonlinear objective performance measures, or measures over the course of a long period (eg a year), which create nonlinearities in time due to discounting behaviour. This inefficient behaviour arises because incentive structures are varying: for example, when a worker has already exceeded a quota or has no hope of reaching it, versus being close to reaching it – eg Healy (1985), Oyer (1997), Leventis (1997). Leventis shows that New York surgeons, penalised for exceeding a certain mortality rate, take less risky cases as they approach the threshold. Courty and Marshke (1997) provide evidence on incentive contracts offered to agencies, which receive bonuses on reaching a quota of graduated trainees within a year. This causes them to ‘rush-graduate’ trainees in order to make the quota.
Objective and subjective performance evaluation
Objective performance evaluation
The major problem in measuring employee performance in cases where it is difficult to draw a straightforward connection between performance and profitability is the setting of a standard by which to judge the performance. One method of setting an absolute objective performance standard - rarely used because it is costly and only appropriate for simple repetitive tasks - is time-and-motion studies, which study in detail how fast it is possible to do a certain task. These have been used constructively in the past, particularly in manufacturing. More generally, however, even within the field of objective performance evaluation, some form of relative performance evaluation must be used. Typically this takes the form of comparing the performance of a worker to that of his peers in the firm or industry, perhaps taking account of different exogenous circumstances affecting that worker in particular (x in the linear model). Sometimes, the performance in the previous period is used as a standard. The problem with this is that there is potential for a ratchet effect, with standards being raised by employers over time. The threat of this may lead to severe negative consequences as workers respond to this by reducing output levels. A good example is the reluctance of Soviet managers to try to push output levels up, as this frequently resulted in “punishment” for having been lazy or corrupt in earlier periods, by even higher standards (targets) being set for the future (Milgrom and Roberts 1992, 233). It is often suggested that one of the reasons for the general union opposition to piece rates stems from the potential for a racket effect (where piece rates drift down over time as incentives make workers more productive, leaving them little better off). Where piece rates have been successful, for example at the Lincoln Electric Company, it has typically been through the establishment of a credible policy of only changing them due to new equipment or new work methods (Milgrom and Roberts 1992, 236).
Subjective performance evaluation
Subjective performance evaluation allows the use of a subtler, more balanced assessment of employee performance, and is typically used for more complex jobs where comprehensive objective measures are difficult to specify and/or measure. Whilst often the only feasible method, the attendant problems with subjective performance evaluation have resulted in a variety of incentive structures and supervisory schemes.
One problem, for example, is that supervisors may under-report performance in order to save on wages, if they are in some way residual claimants, or perhaps rewarded on the basis of cost savings. This tendency is of course to some extent offset by the danger of retaliation and/or demotivation of the employee, if the supervisor is responsible for that employee’s output. As an example, there have been numerous cases where net profits were apparently underreported on successful Hollywood films, where actors or writers had been promised a percentage of net profits – Cheatham, David, and Cheatham (1996).
Another problem relates to what is known as the “compression of ratings”. Two related influences – centrality bias, and leniency bias - have been documented (Landy and Farr 1980, Murphy and Cleveland 1991). The former results from supervisors being reluctant to distinguish critically between workers (perhaps for fear of destroying team spirit), while the latter derives from supervisors being averse to offering poor ratings to subordinates, especially where these ratings are used to determine pay, not least because bad evaluations may be demotivating rather than motivating. However, these biases introduce noise into the relationship between pay and effort, reducing the incentive effect of performance-related pay. Milkovich and Wigdor (1991) suggest that this is the reason for the common separation of evaluations and pay, with evaluations primarily used to allocate training.
Finally, while the problem of compression of ratings originates on the supervisor-side, related effects occur when workers actively attempt to influence the appraisals supervisors give, either by influencing the performance information going to the supervisor: multitasking (focussing on the more visibly productive activities – Paul 1992), or by working “too hard” to signal worker quality or create a good impression (Holmstrom 1982); or by influencing the evaluation of it, eg by “currying influence” (Milgrom and Roberts 1988) or by outright bribery (Tirole 1992).
Incentive structures: alternatives to direct pay for performance
Tournaments
Much of the discussion here has been in terms of individual pay-for-performance contracts; but many large firms use internal labour markets (Doeringer and Piore 1971, Rosen 1982) as a solution to some of the problems outlined. Here, there is “pay-for-performance” in looser sense over a longer time period. There is little variation in pay within grades, and pay increases come with changes in job or job title (Gibbs and Hendricks 1996). The incentive effects of this structure are dealt with in what is known as “tournament theory” (Lazear and Rosen 1981, Green and Stokey (1983), see Rosen (1986) for multi-stage tournaments in hierarchies where it is explained why CEOs are paid many times more than other workers in the firm). Workers are motivated to supply effort by the wage increase they would earn if they win a promotion. Some of the extended tournament models predict that relatively weaker agents, be they competing in a sports tournaments (Becker and Huselid 1992, in NASCAR racing) or in the broiler chicken industry (Knoeber and Thurman 1994), would take risky actions instead of increasing their effort supply as a cheap way to improve the prospects of winning. These actions are inefficient as they increase risk taking without increasing the average effort supplied.
A major problem with tournaments is that individuals' are rewarded based on how well they do relative to others, co-workers might become reluctant to help out others and might even sabotage others' effort instead of increasing one's own effort (Lazear 1989, Rob and Zemsky 1997). This is supported empirically by Drago and Garvey (1997). Why then are tournaments so popular? Firstly, because – especially given compression rating problems – it is difficult to determine absolutely differences in worker performance. Tournaments merely require rank order evaluation. Secondly, it reduces the danger of rent-seeking, because bonuses paid to favourite workers are tied to increased responsibilities in new jobs, and supervisors will suffer if they do not promote the most qualified person. Thirdly, where prize structures are (relatively) fixed, it reduces the possibility of the firm reneging on paying wages. As Carmichael (1983) notes, a prize structure represents a degree of commitment, both to absolute and to relative wage levels. Lastly when the measurement of workers' productivity is difficult, e.g. say monitoring is costly, or when the tasks the workers have to perform for the job is varied in nature, making it hard to measure effort and/or performance, then running tournaments in a firm would encourage the workers to supply effort whereas workers would have shirked if there are no promotions.
Deferred compensation
Tournaments represent one way of implementing the general principle of “deferred compensation”, which is essentially an agreement between worker and firm to commit to each other. Under schemes of deferred compensation, workers are overpaid when old, at the cost of being underpaid when young. Salop and Salop (1976) argue that this derives from the need to attract workers more likely to stay at the firm for longer periods, since turnover is costly. Alternatively, delays in evaluating the performance of workers may lead to compensation being weighted to later periods, when better and poorer workers have to a greater extent been distinguished. (Workers may even prefer to have wages increasing over time, perhaps as a method of forced saving, or as an indicator of personal development. eg Loewenstein and Sicherman 1991, Frank and Hutchens 1993.) For example Akerlof and Katz 1989: if older workers receive efficiency wages, younger workers may be prepared to work for less in order to receive those later. Overall, the evidence suggests the use of deferred compensation (eg Freeman and Medoff 1984, and Spilerman 1986 – seniority provisions are often included in pay, promotion and retention decisions, irrespective of productivity.)
Summary
In conclusion, the reason that employees are often paid according to hours of work rather than by direct measurement of results is that it is often more efficient to use indirect systems of controlling the quantity and quality of effort, due to a variety of informational and other issues (eg turnover costs, which determine the optimal minimum length of relationship between firm and employee). This means that methods such as deferred compensation and structures such as tournaments are often more suitable to create the incentives for employees to contribute what they can to output over longer periods (years rather than hours). These represent “pay-for-performance” systems in a looser, more extended sense, as workers who consistently work harder and better are more likely to be promoted (and usually paid more), compared to the narrow definition of “pay-for-performance”, such as piece rates.
It should also be noted that this discussion has been conducted almost entirely in terms of the analysis of self-interested rational individuals. In practice, however, the incentive mechanisms which successful firms use take account of the socio-cultural context they are embedded in (Fukuyama 1995, Granovetter 1985), in order not to destroy the social capital they might more constructively mobilise towards building an organic, social organization, with the attendant benefits from such things as “worker loyalty and pride (...) [which] can be critical to a firm’s success...” (Sappington 1991,63)
References
- Alchian, Armen A., and Demsetz, Harold (1972), "Production, Information Costs, and Economic Organization", American Economic Review 62 (5), p777-795
- Doeringer, P. B. and M. J. Piore. 1971. Internal Labor Markets and Manpower Analysis. Lexington, Massachusetts, Heath Lexington Books.
- Eisenhardt, K. (1989) Agency theory: An assesment and review, "Academy of Management Review", 14 (1): 57-74.
- Fukuyama, Francis, Trust: The Social Virtues and the Creation of Prosperity, Hamish Hamilton: London, 1995
- Granovetter, Mark, 1985, “Economic Action and Social Structure: The Problem of Embeddedness”, American Journal of Sociology 91:3, p481-510
- Green, J. R. and N. L. Stokey. 1983. "A Comparison of Tournaments and Contracts", Journal of Political Economy, 91, 349-364.
- Milgrom, Paul, and Roberts, John, Economics, Organization and Management 1992, London: Prentice-Hall
- Nikkinen, Jussi and Sahlström, Petri (2004): Does agency theory provide a general framework for audit pricing? International Journal of Auditing, 8: November, 253-262.
- Prendergast, Canice, “The Provision of Incentives in Firms”, Journal of Economic Literature 37 (Mar. 1999), 7-63
- Rosen, S. 1986. "Prizes and Incentives in Elimination Tournaments", American Economic Review, 76, 4, 701-715.
- Sappington, David E.M., “Incentives in Principal-Agent Relationships”, Journal of Economic Perspectives 5:2 (Spring 1991), 45-66
- Williamson, Oliver E., Markets and Hierarchies: Analysis and Antitrust Implications, NY: The Free Press, 1975
See also
- Governance
- Rent seeking
- List of topics about the economics of corruption
Category:organizations
Category:Market failure
Thomas CroninThomas Cronin is a noted political scientist and educator. He served as President of Whitman College from 1993-2005.
Before that, he taught at Colorado College (1979-1983), Princeton University (1985-1986), and The University of North Carolina (1967-1970).
An authority on the expanding power of the American Presidency in the 20th Century, Dr. Cronin has written or edited several books, including:
- The Presidency Reappraised (Praeger, 1974, 1977)
- The State of the Presidency (Little Brown, 1980)
- US v. Crime in the Streets (Indiana, 1981)
- Inventing the American Presidency (Kansas, 1989)
- Colorado Politics and Government (Nebraska, 1993)
- Direct Democracy (Harvard, 1989)
- The Paradoxes of the American Presidency (Oxford University Press, 1998).
- Government by the People (Prentice-Hall, 2000)
- State and Local Politics (Prentice-Hall, 2000)
Dr. Cronin is well-known at Whitman College for his ability to remember the names of the majority of students and for bringing cookies to students while studying in the college library.
External links
- [http://www.whitman.edu/president/cronin/bio.cfm President Cronin: Biography]
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