As we stand at the precipice of the twenty first century the ability to capture and transmit copious amounts of information is clearly a defining feature of the human race. In order to increase the value of this vast supply of information we must develop means for effectively processing it. Newly emerging disciplines such as Information Engineering and Soft Computing are being developed in order to provide the tools required. Conferences such as the International Conference on Information Processing and ManagementofUncertainty in Knowledge-based Systems (IPMU) are being held to provide forums in which researchers can discuss the latest developments. The recent IPMU conference held at La Sorbonne in Paris brought together some of the world's leading experts in uncertainty and information fusion. In this volume we have included a selection ofpapers from this conference. What should be clear from looking at this volume is the number of different ways that are available for representing uncertain information. This variety in representational frameworks is a manifestation of the different types of uncertainty that appear in the information available to the users. Perhaps, the representation with the longest history is probability theory. This representation is best at addressing the uncertainty associated with the occurrence of different values for similar variables. This uncertainty is often described as randomness. Rough sets can be seen as a type of uncertainty that can deal effectively with lack of specificity, it is a powerful tool for manipulating granular information.

Since 1993 a major research programme, "Stochastic Decision Analysis in Forest Management" has been running at Department of Economics and Natural Resources, The Royal Veterinary and Agricultural University (KVL), Copenhagen, in collaboration with Institute of Mathematical Statistics, University of Copenhagen (KU). The research is funded by the two Universities; The Danish Agricultural and Veterinary Research Council; The Danish Research Academy; The National Forest and Nature Agency; and Danish Informatics Network in the Agricultural Sciepces (DINA). A first international workshop in the research programme was held 5 - 8 August, 1996 at Eldrupgaard, Denmark, within the frameworkofacollaborationagreementbetween University of California at Berkeley (UCB) and the Danish Universities, and funded by The Danish Research Academy and the L0venholm Foundation. Having participated in the workshop, Professor Peter Berck (UCB) suggested that the papers be published along with selected papers in the same scientific field, i.e. mainly cointegration analysis of time series in forestry. The editors express their sincere appreciations to the many persons who have contributed to the realisation of the present book: participants in the research programme and the workshop, in particular Professors S0ren Johansen (KU) and Peter Berck (UCB); authors outside the programme/workshop; reviewers of the papers not previously published, in particuler Associate Professors Niels Haldrup (Aarhus University) and Henrik Hansen (KVL); and finally Mrs Mette Riis and Lizzie Rohde who did the tedious work of giving the papers a uniform style. Copenhagen, October 1998.

The Theory of the Firm presents a path-breaking general framework for understanding the economics of the firm. The book addresses why firms exist, how firms are established, and what contributions firms make to the economy. The book presents a new theoretical analysis of the foundations of microeconomics that makes institutions endogenous. Entrepreneurs play a central economic role by establishing firms. In turn, firms create and operate markets and organizations. The book provides innovative models of economic equilibrium that endogenously determine the structure and function of economic institutions. The book proposes an "intermediation hypothesis" - the establishment of firms depends on the effects of transaction costs and on the extent of the market.

Decision Theory and Decision Analysis: Trends and Challenges is divided into three parts. The first part, overviews, provides state-of-the-art surveys of various aspects of decision analysis and utility theory. The second part, theory and foundations, includes theoretical contributions on decision-making under uncertainty, partial beliefs and preferences. The third section, applications, reflects the real possibilities of recent theoretical developments such as non-expected utility theories, multicriteria decision techniques, and how these improve our understanding of other areas including artificial intelligence, economics, and environmental studies.

"EURO." The name of the single currency for the European Union has not been chosen casually by the Heads of State and Government during the Madrid Council of December 1995. After tough discus sions, it has been unanimously accepted. The intention was to recall to every single citizen that this new money would be his money, that it would be the expression of the new European environment carefully built since the "fifties" to avoid any return to war and barbarism in Europe. Confidence and positive expectations for a better future put in the European construction have thus been clearly linked to the confidence in the new European currency and vice-versa. Euro notes and coins will be the first expression, clear, material and universal (for any European citizen being young or old, rich or poor, but also for the rest of the world) of a European identity alongside the national one. Obviously, it is of the outmost importance that the change over to the euro, be as smooth and as citizen-friendly as possible."

Economics of the U.S. Commercial Airline Industry: Productivity, Technology and Deregulation illustrates the impact of upstream technological change in capital goods (aircraft and aircraft engines) on demand, productivity, and cost reduction in the U.S. airline industry for the years 1970-1992. The aim is to separate supply-side technology push from demand pull in determining investment in aircraft in the US airline industry. The focus of inquiry in this study is at the company level, so the measures are sensitive to company differences such as financial costs, payload, and existing aircraft inventory rather than industry averages. This monograph builds on the new developments in econometric modeling and has a substantial technical component. The quantitative results lead to implications for understanding technology and its impact on the airline industry, as well as for formulating regulatory policy.

Road pricing (tolls, etc.) as a means of generating revenue for infrastructure investment has become a major policy option in both Europe and North America. It can also be used as a policy in the management of traffic demand and flow, environmental objectives, and optimal resource allocation as regards the size of investments. Road pricing is assumed to be able to solve many problems simultaneously -- congestion control, pollution reduction, and investment financing. This volume assembles and assesses theoretical knowledge, empirical results and experiences of actual road pricing. In addition, the impact of new information technology on future policy formulation is considered.

Superfund liability). This is an issue that is currently having an dramatic impact on the industry. The impact is being felt in transactions involving the potential sale of properties, insuring operations, development of new properties, joint ventures, or more generally, practically every phase of the mining firms operation. The second issue focuses on an environmental topic that has not been specifically addressed in federal legislation, although it has been indirectly considered, that is global warming or the "greenhouse effect." One of the interesting aspects to this environmental problem is the uncertainty associated with it at every phase of the analysis. The predictions of the general circulation models of climatologists are questioned due to the uncertainty of ocean effects, urbanization, etc. (see Burness & Martin, Chapter 5). The economic models are criticized for the uncertainty associated with the benefit estimates from reducing greenhouse gases, particularly carbon dioxide (COJ, concentrations in the atmosphere as well as estimates of the cost of reducing GHG concentrations and/or emissions. This raises the interesting question of what is the optimal policy and what will be the impact of this policy(s) on the mining sector, given the uncertainty. The first of these two topics is addressed by V. Kerry Smith and Ronald G. Cummings, et al. Professors Smith and Cummings were chosen due to their pioneering work in the area of valuation of nonmarket goods, particularly involving the use of survey methods.

companies to diversify may outweigh the costs of doing so, and that some traditional regulatory concerns may be excessively restrictive. The papers by Hillman, Harris, and Jang and Norsworthy, while all relating to individual industries, have lessons for other regulated industries. Hillman's paper, "Oil Pipeline Rates: A Case for Yardstick Regulation," deals with the important topic of yardstick regulation for oil pipelines. While his application is highly specific, the potential application of yardstick regulation goes beyond oil pipelines. He reviews the evolution in the law regulating oil pipelines. While showing that some progress has been made in introducing economic efficiency considerations into regulation, he provides a careful critique of the operation of existing regulation and suggests an alternative based upon a yardstick approach. His approach seeks to use competitive market prices as the yardstick, with administration of price discrimination limited to dealing with possible "favoritism" to subsidiaries and affiliates. "Telecommunications Services as a Strategic Industry: Implications for United States Public Policy" by Harris and "Productivity Growth and Technical Change in the United States Telecommunications Equipment Manufacturing Industries" by Jang and Norsworthy provide important insights for telecommunications.

1. 1 INTRODUCTION The final chapter of my Personal Income Distribution, a Hulticapability Theory (Hartog, 1981a) carried as its motto: 'Oh richness of the unfinished'. It concluded a book in which labor services were decomposed into services arising from different capabilities. Individuals were supposed to command stocks of capabilities and to decide on the utilization rates of these capabilities, by balanc ing efforts and rewards. The optimal capability bundle they so defined was to be realized by picking the job that just required this bundle. To derive analytical implications on the structure of the labor market and on the distribution of labor earnings, the key assumption was made that arbitrage in capability supply was possible, i. e., that effectively capabilities could be sold separ ately and carried a uniform unit price throughout the labor market. While many interesting analytical and empirical results followed, there was also an indication from empirical testing that an earnings function linear in capabilities could be outperformed by a non-linear func- 2 CAPABILITIES, ALLOCATION AND EARNINGS tion, and that the arbitrage assumption might be un tenable. This book attempts to harvest a little from the richness of the unfinished that was left. It returns to some of the old topics and adds some new ones, in a more general model that no longer imposes the assumption that capabilities can be treated as if they can be unbundled. It also draws on new datasets to explore the issues empirically."

The class is theory of price regulation assumed that the regulator knows the fIrm's costs, the key piece of information that enables regulators to pressure fmns to choose appropriate behaviors. The "regulatory problem" was reduced to a mere pricing problem: the regulator's goal was to align price with marginal cost, subject to the constraint that revenues must cover costs. Elegant and important insights ensued. The most important was that regulation was inevitably a struggle to achieve second-best outcomes. (Ramsey pricing was a splendid example. ) Reality proved harsh to regulatory theory. The fmn's costs are by no means known to the regulator. At best, the regulator may know how much is currently spent to provide services, but hardly what costs would be if the fmn vigorously pursued effIciency. Even if the current cost curve were known to the regulator, technologies change so swiftly that today's costs are a very poor indicator of tomorrow's, and those are the costs that will determine the fIrm's future decisions. With the burgeoning attention to information considerations and game theory in economics, the regulator's problem of eliciting host information about cost has received considerable attention. In most cases, however, it has been in context that are both static and stylized; such analyses rarely capture many of the essential elements of real world regulatory issues. This volume represents a fresh approach. It reflects Glenn Blackmon's twin strengths, a keen analytic mind and important experience in the regulatory arena.

Information, Innovation and Impacts - a joint project between the Program of Research in International Management and Economy (PRIME) at the University of Ottawa and Statistics Canada - brings together economic, social and statistical views of the impacts of the innovative uses of information. It examines the costs as well as the benefits of rapidly expanding availability of data, of information, and of codified knowledge, and it provides suggestions for future work and research. This project fits into an on-going research program at Statistics Canada to develop indicators for science and technology (S&T) in a more coherent manner, and it fits into the research program of PRIME to better understand the dynamics of innovation in an information economy. Together, Statistics Canada and PRIME strive to tell the story of the activities in S&T systems, their interactions, and the outcomes as actors go about the generation, transmission, or mediation of knowledge, information, and of data, as part of the effective functioning of the system.

THE JANUS-FACE OF RACE: REFLEC- TIONS ON ECONOMIC THEORY Patrick L. Mason and Rhonda Williams Many economists are willing to accept that race is a significant factor in US eco nomic and social affairs. Yet the professional literature displays a peculiar schizo phrenia when faced with the task of actually formulating what race means and how race works in our political economy. On the one hand, race matters when the dis cussion is focused on anti-social behavior, social choices, and undesired market outcomes. Inexplicably, African Americans are more likely to prefer welfare, lower labor force participation, and unemployment. On the other hand, race does not matter when the subject of discussion is economically productive or socially accept able activities and legal market choices (for example, wages and employment). This Janus-faced construction of race is maintained by economists' stubborn ad herence to the market power hypothesis. The market power hypothesis asserts that racial discrimination and market competition are inversely correlated. Discrimina tory behavior will persist only in those sectors of society where the competitive forces of the market are least operative. When applied to the labor market, the mar ket power hypothesis suggests that pre- and post-labor market decisions represent disjoint sets. On average, members of a disadvantaged social group may accumulate a lower amount of or a lower quality of productive attributes because of discrimina tion in marital, residential, or school choice, or because of substantial animosity in day-to-day interpersonal relations with members of a privileged group.

Regulation Under Increasing Competition brings together practitioners, regulators, and economists to examine the important policy and regulatory issues facing the telecommunications and electricity industries. This volume reviews such topics as competitive entry, stranded costs, pricing and market mechanisms. It provides a unique perspective on problems in a newly deregulated environment.

Students in Technical and Agricultural faculties spend only a limited amount of time on general economics, environmental economics and resource economics. However, while their knowledge of economics may be limited, they often have adequate mathematical skills. The objective of The Economic Metabolism, therefore, is to present these three branches of economics in an integrated, mathematically oriented way, so that the subjects can be taught together, without losing time on separate economics courses. While the approach adopted is mathematical, the mathematics used is certainly not too difficult for the target group: university students in technical and/or agricultural faculties will be used to far more difficult mathematics. After studying the book, the basic/intermediate level student should be able to understand the basic principles of economics, especially microeconomics; understand the economic principles of environmental policy; understand the economic principles of resource extraction; apply the standards for efficiency and sustainability; and apply the theory to practical problems.

This book focuses on the empirical analysis of productivity in services at the firm level. Productivity studies are still scarce in services, especially in view of the major role of the services sector in modern developed economies and the increasing concern about its performance. The services industries studied in this volume are quite diverse, with a strong representation of financial services. All analyses are performed on the microlevel, being based on cross-sectional or panel data for samples of firms of widely varying sizes. They focus on a variety of topics ranging from comparing the efficiency of different categories of service firms or exploring the impact of mergers and deregulation on productivity performance to assessing the magnitude of returns to scale and scope or investigating the properties of different parametric or nonparametric methods to estimate cost and production functions. Perhaps the most valuable feature of all these studies is the authors' care and ingenuity in putting the data together, measuring variables and extracting relevant information. After reading the book, one is inclined to consider that services may not be all that different from goods.

Industrial production and consumption patterns rely heavily on the intensive use of both renewable and non-renewable resources and the consequences for the environment can be serious. Following a long period of time where the profit incentives of firms have prevailed over preservation of the environment and the world's natural resources, a new consensus has emerged concerning the need to regulate firm behaviour, aimed at ensuring the sustainability of the economic system in the long run. This book offers an exhaustive overview of current economic debate about these topics, taking modern oligopoly theory as a benchmark. The first part of the book covers static models dealing with incentives for green research and development, Pigovian taxation, cartels, environmental quality and international trade, as well as the role of corporate social responsibility, public firms and consumer environmental awareness as endogenous regulatory instruments. Then, the author moves on to examine the role of time while drawing from optimal control and differential game theory. This opens the way to the discussion of fair discount rates to ensure the welfare of future generations, as well as the long run sustainability of production and consumption patterns.

After 25 years of expansion and liberalisation in the post-war period, social security policies in industrial countries have been encountering stresses and strains in the 1970s and 1980s in an environment of slower economic growth, concern over inflation and high unemployment. This has led to intensified controversy between conservatives, who blame economic instability on the generosity of the welfare state and liberals who defend the role of social security programmes in contributing to economic stability and preventing people from falling into poverty. The discussion focuses on questions such as the relative merits of earnings-related, income-tested and universal benefits; who bears the financial burden; and the impact of social security benefits on incentives to work. Among the controversial issues receiving considerable attention are the arguments over the persistence of high unemployment in Western Europe, the attacks on 'entitlements' that benefit the middle class and the growing problem of disadvantaged youth, especially in the ghetto areas of large cities in some of the Western European countries and in the United States.

oil is the lifeblood of the World's economy. It was a critical element in two World Wars and in the Cold War, and, as recent events in the Middle East confirm, people are willing to fight for it. The cheap energy it provides, especially for transport and agriculture, was one of the main factors that made possible the economic prosperity and growth that the World has enjoyed for the past fifty years and more. People rely on it everywhere, and in many forms, and they have become so accustomed to its ready availability that they take it for granted. To conceive of a world without traffic jams and airliners is unthinkable, and while not so obvious, oil lies behind every supermarket shelf, fuelling the tractor that ploughs the field and the delivery van that brings the consumer his food. Yet everyone knows that it is a finite and irreplaceable commodity, formed long ago in the geological past. What no one knows is just how finite it is. This book is an effort to try to answer that question : not in detail, but at least in orders of magnitude. More useful than the figures themselves is the discussion of the elements involved in addressing the subject. While it is impossible to predict the precise pattern of future production, which will be affected by many unforeseeable factors, one can at least begin to think in terms of resource constraint instead of an ever expanding supply of oil.

Economics is taught in some form in the secondary schools of nations throughout the world. The subject is rarely taught in elementary schools, and while economics courses are offered in universities, the majority of students end their formal education with secondary school. Thus, the best opportunity for the economic education of the youth of a nation occurs in secondary schools. This book examines economic education at this critical level of the educational system. The teaching of economics in secondary schools varies across countries. These differences occur because of history, the structure of education, and other national factors. At the same time, there are common elements in the economic education of many countries, especially in content coverage. This contrast between the common features and the uniqueness of economic education in secondary schools of major industrial nations exemplifies the international perspective presented in this book. The international perspective is developed in the six sections of the volume. The first section discusses why nations should include economics in school curricula, and presents a framework for teaching economics that should have global appeal. Dissension and consensus on economic issues among North American and European economists are examined in the second section. The third section surveys the U.S. research literature on precollege economic education and assesses the current state of economics instruction in U.S. schools. The economics curricula and educational practices in seven other nations -- the U.K., Canada, Japan, Germany, Austria, Korea, and Australia -- are described in the fourth and fifth sections. The fifth section also presents international comparisons of economic understanding based on national testing in six of those nations. The sixth and final section explores the role of economic education in centrally planned economies, and its effects on the transition to a market economy, using Russia, Bulgaria, and China as case studies.

R. H. Coase Duncan Black was a close and dear friend. A man of great simplicity, un worldly, modest, diffident, with no pretensions, he was devoted to scholarship. In his single-minded search for the truth, he is an example to us all. Black's first degree at the University of Glasgow was in mathematics and physics. Mathematics as taught at Glasgow seems to have been designed for engineers and did not excite him and he switched to economics, which he found more congenial. But it was not in a lecture in economics but in one on politics that he found his star. One lecturer, A. K. White, discussed the possibility of constructing a pure science of politics. This question caught his imagination, perhaps because of his earlier training in physics, and it came to absorb his thoughts for the rest of his life. But almost certainly nothing would have come of it were it not for his appointment to the newly formed Dundee School of Economics where the rest of the. teaching staff came from the London School of Economics. At Glasgow, economics, as in the time of Adam Smith, was linked with moral philosophy. At Dundee, Black was introduced to the analytical x The Theory o/Committees and Elections approach dominant at the London School of Economics. This gave him the approach he used in his attempt to construct a pure science of politics."

The main objective of this book is to restate the important theories and evidence from economic analysis concerning intergovernmental fiscal issues. More importantly, the second objective of the book is to identify gaps in knowledge, empirical uncertainties, and missing theoretical structures and then to establish a preliminary agenda for new research on this topic. The book is organized in two sections. The first covers the core body of intergovernmental fiscal relations, including optimal size for jurisdictions and assignment of public sector functions, the formulation and execution of tax policy in an intergovernmental setting, and the appropriate structure and use of intergovernmental transfers. In the second section, the core knowledge is applied to four major policy areas: education, welfare, fiscal interaction in urban areas, and economic development. In thinking about a new research agenda, the authors call for more current and authoritative estimates of fiscal incidence, including interjurisdictional spillovers, for more fundamental research about the federation process and effects of consolidation, for new evidence about the long run, general equilibrium effects of interjurisdictional competition, and for basic research about the choice process and establishment of intergovernmental fiscal institutions and policies by federal and subnational governments.

In order to survive as a social institution a firm needs a constitutional social contract, even though implicit, among its stakeholders. This social contract must exist if an institution is to be justified. The book focuses on two main issues: To find out the terms of the hypothetical agreement among the firm's stakeholders in an ex ante perspective and to understand the endogenous mechanism generating appropriate incentives that induce to comply with the social contract itself, as seen in the ex post perspective.

Some of the fundamental tenets of conventional economic wisdom, which have had a profound impact on public policy, are challenged in this book. These precepts include the affirmation that low wages are more beneficial that high wages to the process of growth and development; convergence in terms of output per person is just a matter of time; minimum wage laws and trade unions negatively impact on the economy as a whole; pay inequality due to labor market discrimination cannot persist over time; larger firms are typically more efficient than smaller firms; and culture is of little consequence to the course of economic development. Such predictions, the author argues, are a product of unrealistic behavioral assumptions about the economic agent. In this book, the author offers a more inclusive theoretical framework and a more reasonable modeling of the economic agent. This new approach is built upon conventional neoclassical theory while incorporating the most recent research in behavioral economics. The case is made that individuals have some choice over the quantity and quality of effort which they can supply in the process of production. Even under the constraints of severe product market competition and the assumption of `utility maximizing' individuals, effort need not be maximized, especially in firms characterized by antagonistic management-labor relations. This is especially true when relatively inefficient firms can remain competitive by keeping wages relatively low - low wages serve to protect such firms from more efficient firms. Alternatively, relatively high wage firms can remain competitive only if they become more productive. Under these assumptions, higher wages and factors contributing to higher wages can advance the performance of an economy while lower wages can have the opposite effect and cultural and institutional variables, by themselves, can affect the long run productivity and even the long run competitiveness of firms and economies. In summary, this book calls for a revised approach to the study of economics from a behavioral and socio-economic perspective, with significant consequences for public policy.

The concept of localized technological change is emerging at the crossroads of different approaches to the economics of innovation and new technologies. The term localized technological change' refers to the introduction of technological changes which make possible an increase in total factor productivity within only a limited range of techniques defined by the levels of factor intensity. This contrasts with generalized technological change', which is defined as the global shift of all the techniques represented on the map of isoquants of the neoclassical tradition. The Economics of Localized Technological Change elaborates the notion of localized technology with respect to firms, factor substitution, sectors, regions and techniques. It also assesses the implications for industrial policy, technology and innovation policy. The book will be of interest to corporate policy makers, scholars of industrial organization and economics of innovation as well as business school students.