The invisible hand is not a power that makes the good of one the good of all, and it is not any of a number of other things it is said to be. It is simply the inducement a merchant has to keep his capital at home, thereby increasing the domestic capital stock and enhancing military power, both of which are in the public interest and neither of which he intended. Smith's exposition discloses how his rhetorical sallies could disfigure his economics, confuse his argument for free trade, and make him play fast and loose with facts and the ideas of others.

Output prices tend to respond faster to input increases than to decreases. This tendency is found in more than two of every three markets examined. It is found as frequently in producer goods markets as in consumer goods markets. In both kinds of markets the asymmetric response to cost shocks is substantial and durable. On average, the immediate response to a positive cost shock is at least twice the response to a negative shock, and that difference is sustained for at least five to eight months. Unlike past studies, which documented similar asymmetries in selected markets (gasoline, agricultural products, etc.), this one uses large samples of diverse products: 77 consumer and 165 producer goods. Accordingly, the results suggest a gap in an essential part of economic theory. As a start on filling this gap, the study finds no asymmetry in the resonse of an individual decision maker (a supermarket chain) to its costs, but it finds above‐average asymmetry where a cost shock is filtered through a fragmented wholesale distribution system. It also finds a negative correlation between the degree of asymmetry and input price volatility and no correlation with proxies for inventory costs, asymmetric menu costs of price changes, and imperfect competition.

In this paper we investigate the attitudes toward risk of bettors in British horse races. The model we use allows us to go beyond the expected utility framework and to explore various alternative proposals by estimating a multinomial model on a 34,443‐race data set. We find that rank‐dependent utility models do not fit the data noticeably better than expected utility models. On the other hand, cumulative prospect theory has higher explanatory power. Our preferred estimates suggest a pattern of local risk aversion similar to that proposed by Friedman and Savage.

We characterize efficient self‐enforcing divisions of political or economic surplus between two parties that interact repeatedly. The party in power can decide the allocation, and the parties' political strength changes according to a Markov process. We find that the share of the party currently in power depends not only on its current strength but also on whether it had previously been even stronger since it last came to power. We find that the constitutional supermajority requirements that attempt to constrain the use of power can counterproductively create less compromise.

This paper shows that a minimal degree of consideration for other people's well‐being enables society to agree that one social policy is the best. I offer axioms that imply that this best policy maximizes a weighted sum of individual utilities. The weight of each individual is the inverse of his or her maximal possible utility from social endowments. The suggested policy is not sensitive to the choice of the von Neumann‐Morgenstern utilities. The key axiom is that individuals agree that giving all the endowments always to one person is as bad as giving them to any other person.

This paper proposes a market test for racial discrimination in salary setting in English league soccer over the period 1978–93 using a balanced panel of 39 clubs. If there is a competitive market for the services of players, the wage bill of the club will reflect their productivity and hence the performance of the club in the league. Discrimination can be said to exist if clubs fielding an above‐average proportion of black players systematically outperform clubs with a below‐average proportion of black players, after one controls for the wage bill. Statistically significant evidence of discrimination in this sense is found.

Possible explanations for earnings differentials in self‐employment and paid employment are investigated. The empirical results suggest that the nonpecuniary benefits of self‐employment are substantial: Most entrepreneurs enter and persist in business despite the fact that they have both lower initial earnings and lower earnings growth than in paid employment, implying a median earnings differential of 35 percent for individuals in business for 10 years. The differential cannot be explained by the selection of low‐ability employees into self‐employment and is similar for three alternative measures of self‐employment earnings and across industries. Furthermore, the estimated earnings differentials may understate the differences in compensation across sectors since fringe benefits are not included in the measure of employee compensation.

Intellectual collaboration in science includes formal coauthorship as well as presentation of papers at workshops, seminars, and professional meetings and informal commentary from colleagues, journal referees, and editors. While the incidence and extent of formal coauthorship are greater in biology than in economics, the extent of intellectual collaboration is greater in economics than in biology. Intellectual property rights to coauthored papers in economics tend to be assigned alphabetically, whereas biology is characterized by a strong merit‐based (nonalphabetical) assignment of intellectual property rights. These patterns do not result from differences in the relative importance of funding/physical capital.