How Wide is the Scope of Hold-Up-Based Theories? Contractual Form and Market Thickness in Trucking

How far do the contractual implications of hold-up-based theories (Klein, Crawford, and Alchian (1978), Williamson (1979, 1985)) extend? I investigate this in the context of trucking. Quasi-rents in trucking are generally smaller than in the contexts studied in the previous empirical literature. They vary with hauls' distance and the thickness of local markets. I find that doubling the thickness of the market increases the likelihood that simple spot arrangements govern transactions by about 30% for long hauls. I find weaker evidence of relationships between local market thickness and contractual form for short hauls -- hauls for which quasi-rents are particularly small. Contracts' role as protectors of quasi-rents becomes less important as quasi-rents decrease, but exists over a surprisingly large range.

The Origin of Life

The origin of life is in a sense a genetic problem, for, as H. J. Muller pointed out many years ago, the essential attribute that identifies living matter is its capacity to replicate itself and its variants (1). Because this uniquely biological property has its physical basis in proteins and nucleic acids, the goal of modern work on the origin of life is to discover the manner of origin of these polymers and of the interactions between them that constitute the genetic mechanism. In attempting to review this subject in a limited space, we cannot undertake an exhaustive treatment. Rather, we summarize work published principally since 1970 in the following areas, with emphasis on those aspects that are of greatest current interest: 1. precambrian paleontology, 2. chemical evolution of genetically important monomers, 3. prebiotic dehydration-condensation reactions, 4. organic compounds in meteorites and interstellar space, and 5. biological exploration of the planets. A large number of review articles (2-5), critical and theoretical discussions (6-8), books (9-16), and conference proceedings (17-21) dealing with the origin of have appeared in recent years. In addition, a new serial, the Journal of Molecular Evolution, publishing papers on this and related subjects, appeared in 1971; the journal Space Life Sciences has been renamed "Origins of Life," and a society, the International Society for the Study of the Origin of Life, was recently founded

Specialization, Firms, and Markets: The Division of Labor Within and Between Law Firms

What is the role of firms and markets in mediating the division of labor? This paper uses confidential microdata from the Census of Services to examine law firms' boundaries. We find that firms' field scope narrows as market size increases and individuals specialize, indicating that firms' boundaries reflect organizational trade-offs. Moreover, we find that whether the division of labor is mediated by firms differs systematically according to whether lawyers in a particular field are mainly involved in structuring transactions or in dispute resolution. Our evidence is consistent with hypotheses in which firms' boundaries reflect variation in the value of knowledge-sharing or in the costs of monitoring, but not in risk-sharing. Our findings show how the incentive trade-offs associated with exploiting increasing returns from specialization lead the structure of the industry to be fragmented, but highly-skewed.

Hierarchies, Specialization, and the Utilization of Knowledge: Theory and Evidence from the Legal Services Industry

What role do hierarchies play with respect to the organization of production and what determines their structure? We develop an equilibrium model of hierarchical organization, then provide empirical evidence using confidential data on thousands of law offices from the 1992 Census of Services. The driving force in the model is increasing returns in the utilization of acquired knowledge. We show how the equilibrium assignment of individuals to hierarchical positions varies with the degree to which their human capital is field-specialized, then show how this equilibrium changes with the extent of the market. We find empirical evidence consistent with a central proposition of the model: the share of lawyers that work in hierarchies and the ratio of associates to partners increases as market size increases and lawyers field-specialize. Other results provide evidence against alternative interpretations that emphasize unobserved differences in the distribution of demand or 'firm size effects,' and lend additional support to the view that a role hierarchies play in legal services is to help exploit increasing returns associated with the utilization of human capital.

Report of Workshop on Methodology for Evaluating Potential Lunar Resources Sites

The type and quantity of lunar materials needed to support a space power satellite program was used to define the type and quality of geological information required to certify a site for exploitation. The existing geological, geochemical, and geophysical data are summarized. The difference between these data and the required data for exploitation is used to define program requirements. Most of these requirements involve linear extensions of existing capabilities, fuller utilization of existing data, or expanded use of automated systems

The Return to Knowledge Hierarchies

Hierarchies allow individuals to leverage their knowledge through others' time. This mechanism increases productivity and amplifies the impact of skill heterogeneity on earnings inequality. To quantify this effect, we analyze the earnings and organization of U.S. lawyers and use the equilibrium model of knowledge hierarchies in Garicano and Rossi-Hansberg (2006) to assess how much lawyers' productivity and the distribution of earnings across lawyers reflects lawyers' ability to organize problem-solving hierarchically. We analyze earnings, organizational, and assignment patterns and show that they are generally consistent with the main predictions of the model. We then use these data to estimate the model. Our estimates imply that hierarchical production leads to at least a 30% increase in production in this industry, relative to a situation where lawyers within the same office do not "vertically specialize." We further find that it amplifies earnings inequality, increasing the ratio between the 95th and 50th percentiles from 3.7 to 4.8. We conclude that the impact of hierarchy on productivity and earnings distributions in this industry is substantial but not dramatic, reflecting the fact that the problems lawyers face are diverse and that the solutions tend to be customized.

Contractibility and Asset Ownership: On-Board Computers and Governance in U.S. Trucking

We investigate how the contractibility of actions affecting the value of an asset affects asset ownership. We examine this by testing how on-board computer (OBC) adoption affects truck ownership. We develop and test the proposition that adoption should lead to less ownership by drivers, particularly for hauls where drivers have the greatest incentive to drive in non-optimal ways or engage in rent-seeking behavior. We find evidence in favor: OBC adoption leads to less driver ownership, especially for long hauls and hauls that use specialized trailers. We also find that non-owner drivers with OBCs drive better than those without them. These results suggest that technology-enabled increases in contractibility may lead to less independent contracting and larger firms.

A chemical model for lunar non-mare rocks

Nearly all rocks returned from the moon are readily divided into three broad categories on the basis of their chemical compositions: (1) mare basalts, (2) non-mare rocks of basaltic composition (KREEP, VHA), and (3) anorthositic rocks. Only mare basalts may unambiguously be considered to have original igneous textures and are widely understood to have an igneous origin. Nearly all other lunar rocks have lost their original textures during metamorphic and impact processes. For these rocks one must work primarily with chemical data in order to recognize and define rock groups and their possible modes of origin. Non-mare rocks of basaltic composition have chemical compositions consistent with an origin by partial melting of the lunar interior. The simplest origin for rocks of anorthositic chemical composition is the crystallization and removal of ferromagnesian minerals. It is proposed that the rock groups of anorthositic and non-mare basaltic chemical composition could have been generated from a single series of original, but not necessarily primitive, lunar materials

Make Versus Buy in Trucking: Asset Ownership, Job Design and Information

Explaining patterns of asset ownership in the economy is a central goal of both organizational economics and industrial organization. We develop a model of asset ownership in trucking, which we test by examining how the adoption of different classes of on-board computers (OBCs) between 1987 and 1997 influenced whether shippers use their own trucks for hauls or contract with for-hire carriers. We find that OBCs' incentive-improving features pushed hauls toward private carriage, but their resource-allocation-improving features pushed them toward for-hire carriage. We conclude that ownership patterns in trucking reflect the importance of both incomplete contracts (Grossman and Hart (1986)) and of job design and measurement issues (Holmstrom and Milgrom (1994)).

The state of our interstates

President Obama's budget proposal emphasizes the importance of infrastructure investments for the nation's economic health, so now seems a good time to assess the condition of our country's major roads.Express highways