Economic Perspectives
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1 A journal of the American Economic Association Summer 2000
2 A journal of the American Economic Association Editor Alan B. Krueger, Princeton University Co-editors J. Bradford De Long, University of California at Berkeley Michael Waldman, Cornell University Associate Editors Francine D. Blau, Cornell University Timothy Bresnahan, Stanford University Anne C. Case, Princeton University Judy Chevalier, University of Chicago David C. Colander, Middlebury College Maureen Cropper, University of Maryland David Cutler, Harvard University Frederic S. Mishkin, Columbia University Matthew Rabin, University of California at Berkeley Dani Rodrik, Harvard University Kenneth Sokoloff, University of California at Los Angeles Jan Svejnar, University of Michigan John B. Taylor, Stanford University Managing Editor Timothy Taylor Assistant Editor Melinda Prescher Editorial offices: Hubert H. Humphrey Institute of Public Affairs, University of Minnesota, th Avenue South, Minneapolis, Minnesota The Journal of gratefully acknowledges the support of the Hubert H. Humphrey Institute of Public Affairs at the University of Minnesota. Copyright 2000 by the American Economic Association; All Rights Reserved. Composed by CJS-TAPSCO, Akron, Pennsylvania 17501, U.S.A. Printed by Banta Company, Menasha, Wisconsin 54952, U.S.A. No responsibility for the views expressed by the authors in this journal is assumed by the editors or by the American Economic Association. THE JOURNAL OF ECONOMIC PERSPECTIVES (ISSN ), Summer 2000, Vol. 14, No. 3, is published quarterly (February, May, August, November) by the American Economic Association, 2014 Broadway, Suite 305, Nashville, TN Annual fees for regular membership, of which 30 percent is for a year s subscription to this journal, are: $57.00, $69.00, or $80.00 depending on income. A membership also includes the American Economic Review and the Journal of Economic Literature. In countries other than the U.S.A., add $25.00 for extra postage. Further information on subscriptions and the American Economic Association can be found on the last page of this journal. Periodicals postage paid at Nashville, TN, and at additional mailing offices. POSTMASTER: Send address changes to the Journal of, 2014 Broadway, Suite 305, Nashville, TN Printed in the U.S.A.
3 Contents Volume 14 Number 3 Summer 2000 Symposia Fiscal Policy Alberto Alesina, The Political Economy of the Budget Surplus in the United States... 3 John B. Taylor, Reassessing Discretionary Fiscal Policy Alan J. Auerbach and Daniel Feenberg, The Significance of Federal Taxes as Automatic Stabilizers Douglas W. Elmendorf and Louise M. Sheiner, Should America Save for its Old Age? Fiscal Policy, Population Aging, and National Saving Sports Economics Lawrence M. Kahn, The Sports Business as a Labor Market Laboratory John Siegfried and Andrew Zimbalist, The Economics of Sports Facilities and Their Communities Articles Charles F. Manski, Economic Analysis of Social Interactions Elinor Ostrom, Collective Action and the Evolution of Social Norms Ernst Fehr and Simon Gächter, Fairness and Retaliation: The Economics of Reciprocity David Lucking-Reiley, Vickrey Auctions in Practice: From Nineteenth- Century Philately to Twenty-First-Century E-Commerce Finis Welch, In Honor of Kevin M. Murphy: Winner of the John Bates Clark Medal Features J.D. Foster and James C. Miller III, Policy Watch: The Tyranny of Budget Forecasts Kenneth L. Sokoloff and Stanley L. Engerman, History Lessons: Institutions, Factor Endowments, and Paths of Development in the New World Bernard Saffran, Recommendations for Further Reading Benno J. Ndulu and Stephen A. O Connell, Correction: Governance and Growth in Sub-Saharan Africa Notes...243
4 Statement of Purpose The Journal of attempts to fill a gap between the general interest press and most other academic economics journals. The journal aims to publish articles that will serve several goals: to synthesize and integrate lessons learned from active lines of economic research; to provide economic analysis of public policy issues; to encourage cross-fertilization of ideas among the fields of economics; to offer readers an accessible source for state-of-the-art economic thinking; to suggest directions for future research; to provide insights and readings for classroom use; and to address issues relating to the economics profession. Articles appearing in the journal are normally solicited by the editors and associate editors. Proposals for topics and authors should be directed to the journal office, at the address inside the front cover. Policy on Data Availability It is the policy of the Journal of to publish papers only if the data used in the analysis are clearly and precisely documented and are readily available to any researcher for purposes of replication. Details of the computations sufficient to permit replication must be provided. The Editor should be notified at the time of submission if the data used in a paper are proprietary, or if, for some other reason, the above requirements cannot be met. Policy on Disclosure Authors of articles appearing in the JEP are expected to disclose any potential conflicts of interest that may arise from their consulting activities, financial interests or other non-academic activities. Journal of Advisory Board Henry J. Aaron, The Brookings Institution Marcus Alexis, Northwestern University Alan Auerbach, University of California at Berkeley William J. Baumol, New York University Clive Crook, The Economist Victor R. Fuchs, Stanford University Anne O. Krueger, Stanford University Alicia H. Munnell, Boston College William A. Niskanen Jr., The Cato Institute Joseph E. Stiglitz, Stanford University Laura Tyson, University of California at Berkeley Gordon C. Winston, Williams College
5 The American Economic Association Founded in 1885 Officers President Dale W. Jorgenson, Harvard University President-elect Sherwin Rosen, University of Chicago Vice-Presidents Thomas J. Sargent, Stanford University John B. Taylor, Stanford University Secretary-Treasurer John J. Siegfried, Vanderbilt University Editor of The American Economic Review Orley C. Ashenfelter, Princeton University Editor of The Journal of Economic Literature John McMillan, Stanford University Editor of The Journal of Alan B. Krueger, Princeton University Elected Members of the Executive Committee Angus S. Deaton, Princeton University Laurence J. Kotlikoff, Boston University Gene M. Grossman, Princeton University Nancy L. Rose, Massachusetts Institute of Technology James J. Heckman, University of Chicago Nancy L. Stokey, University of Chicago Ex Officio Members Robert W. Fogel, University of Chicago D. Gale Johnson, University of Chicago Counsel Terry Calvani, Pillsbury Madison & Sutro LLP Correspondence relating to advertising, business matters, permissions to quote, subscriptions and changes of address should be sent to the American Economic Association, 2014 Broadway, Suite 305, Nashville, TN ( address: Please remit any membership payment with the application included elsewhere in this journal. Change of address notice must be received at least six (6) weeks prior to the publication month. A membership or subscription paid twice is automatically extended for an additional year unless otherwise requested. Copyright 2000 by the American Economic Association. Permission to make digital or hard copies of part or all of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or direct commercial advantage and that copies show this notice on the first page or initial screen of a display along with the full citation, including the name of the author. Copyrights for components of this work owned by others than AEA must be honored. Abstracting with credit is permitted. To copy otherwise, to republish, to post on servers, to redistribute to lists, or to use any component of this work in other works requires prior specific permission and/or a fee. Permissions may be requested from the American Economic Association, 2014 Broadway, Suite 305, Nashville, TN
6 Summer 2000, Volume 14, Number 3 Symposia Fiscal Policy Alberto Alesina, The Political Economy of the Budget Surplus in the United States John B. Taylor, Reassessing Discretionary Fiscal Policy Alan J. Auerbach and Daniel Feenberg, The Significance of Federal Taxes as Automatic Stabilizers Douglas W. Elmendorf and Louise M. Sheiner, Should America Save for its Old Age? Fiscal Policy, Population Aging, and National Saving Sports Economics Lawrence M. Kahn, The Sports Business as a Labor Market Laboratory John Siegfried and Andrew Zimbalist, The Economics of Sports Facilities and Their Communities Articles Charles F. Manski, Economic Analysis of Social Interactions Elinor Ostrom, Collective Action and the Evolution of Social Norms Ernst Fehr and Simon Gächter, Fairness and Retaliation: The Economics of Reciprocity David Lucking-Reiley, Vickrey Auctions in Practice: From Nineteenth-Century Philately to Twenty-First-Century E-Commerce Finis Welch, In Honor of Kevin M. Murphy: Winner of the John Bates Clark Medal Policy Watch History Lessons Recommendations for Further Reading Correction Notes
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