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Ekonomi och rättssystem (economics and the legal system)
Book reviews
143
classical, segmented labour market and Marxist. Again the treatment is notable in its brevity: the neoclassical model is reviewed in four pages! The measurement of income inequality reviews the standard instruments (percentiles, Gini coefficient, the coefficient of variation etc.) and useful examples are given for many of these measures. These measurement issues are followed by a discussion of poverty measurement in Canada (Chapter 5) and a description of the characteristics of the poor in Canada (Chapter 6). The discussion of ‘adjustment factors’ in Chapter 7 mentions briefly a variety of factors which have to be taken into account when arriving at a measure of income, e.g., imputed incomes, taxes and transfers. The author reviews studies using various adjustment factors and shows that the distributions arrived at are sensitive to the method of calculation. In Chapter 8 the nature and effects of the income distribution policies of government are reviewed. Once again it is noticeable that the coverage is broad but brief in all aspects. This characteristic is also apparent in the review of criteria which can be used to evaluate income redistribution policies, e.g., the discussion of attaining target efficiency, both horizontal and vertical, is completed in two pages. The final three chapters review the work incentive effects of income maintenance programmes, issues in the design of programmes, and the negative income tax experiments. The author concludes quite rightly that the full evaluation of the issues arising in this area requires multi-disciplinary work. This book is written with clarity but its approach is very elementary and superficial: its superficiality is inevitable given its broad remit and short length (154 pages of text). It provides a useful very basic introduction to the field for non-economists but even this attribute is circumscribed by the fact that the reference to data and institutions is largely Canadian. Whilst there may be few rival texts in Canada (this British reviewer is not well informed about the accuracy of this statement), there are many alternative texts in the US and UK literatures (e.g., M. Bronfenbrenner, Income Distribution Theory, Macmillan (1971); H. G. Johnson, The Theory of Income Distribution, Gray Mills (1973); R. Hemming, Poverty and Incentives, Oxford (1984). As an easy-to-read elementary introduction to the literature this book will be a useful addition to some reading lists. However, both students and teachers will inevitably require more detail of theory and evidence if they are to fully appreciate the nature of the trade-offs between efficiency and equity that Morley Gunderson points to. Alan Maynard University of York Lars Werin, Ekonomi och riittssystem (Economics and the Legal System) (2nd ed.), Lund, 1982. 624 pp. This is the second edition of Lars Werin’s textbook written primarily for use in economic courses for law students in Sweden and other Scandinavian countries, as it is written in Swedish. The first edition was well received although 1 know that several law students at my university claimed it was too difficult as an introductory textbook. To a certain extent I can understand their attitude as the first edition must have been an intellectual challenge to law students. This second edition has been changed in several aspects as major revisions have been made and now are much more related to
144
Book reviews
the law and economics tradition. These changes have turned this book into a valuable textbook. The book is in six parts. In the first three parts the major tools in microeconomics are presented and at the same time related to law issues. For law students and others who would like to get a first feeling of law and economics, part four is most stimulating. But in my opinion this part can be improved by extending the use of more figures, e.g., in the analyses of optimal pollution and optimal regulation of polluters. In the last two parts, aspects of distribution issues and economic policy issues are presented. As an almost pure verbal presentation of major macroeconomic ideas it is excellent, but is it necessary to use only verbal arguments? This book is one of the best-if not the best-in a Scandinavian language for an economics course for undergraduate law students. If it were written in English and contained less on the Swedish economy, it certainly would be competitive outside Scandinavia. Peder Andersen University of Aarhus
Willi Semmler, Competition, Monopoly, and Differential Profit Rates: On the Relevance of the Classical and Marxian Theories of Production Prices for Modern Industrial and Corporate Pricing, New York: Columbia University Press, 1984. 238 pp. In this book the author attempts an ‘analysis of competition and monopoly, written within the framework of linear production models’. His stated purpose is to survey some of the empirical literature on industrial and corporate pricing and to reinterpret the results from Classical (primarily Smith and Ricardo), Neoclassical, and especially Marxian perspectives. He concludes that the empirical findings are most consistent with the Marxian theory. This conclusion, he contends, supports the sharp critiques of multinational corporations by Marxist writers cited in later chapters. In fact, one gets the impression that the entire book was written to justify these critiques. After a brief introductory chapter the second chapter surveys Classical, Neoclassical, Marxian, and ‘Post-Marxian/Post-Keynesian’ theories of competition. This lays the theoretical groundwork for the empirical surveys in Chapters 3-5. Semmler makes a mistake that many writers make when describing the Classical view of competition. This is understandable, for the same mistake is made by such distinguished economists as Arrow, Hahn, and Debreu. Namely, according to Semmler (p. 11): ‘[Tlhe theory of Adam Smith has been considered the foundation of the neoclassical general competitive analysis. According to Arrow and Hahn, Smith was the “creator of the general equilibrium theory”.’ But as McNulty* has shown, the Smithian concept of competition is nothing at all like the idealized models of general equilibrium theory. To Smith and many other Classical economists, competition was a dynamic, rivalrous process, not a static equilibrium condition as described in models of ‘perfect’ competition. For instance, according to the Smithian view, advertising, price undercutting, and product differentiation would be considered essential components of the competitive struggle. But these competitive activities are condemned by the perfect competition model as ‘imperfect’ or ‘monopolistic’ since they diverge from the perfect information and product homogeneity assumptions of the model.2 The notion that Smith was ‘the creator of the general
143
classical, segmented labour market and Marxist. Again the treatment is notable in its brevity: the neoclassical model is reviewed in four pages! The measurement of income inequality reviews the standard instruments (percentiles, Gini coefficient, the coefficient of variation etc.) and useful examples are given for many of these measures. These measurement issues are followed by a discussion of poverty measurement in Canada (Chapter 5) and a description of the characteristics of the poor in Canada (Chapter 6). The discussion of ‘adjustment factors’ in Chapter 7 mentions briefly a variety of factors which have to be taken into account when arriving at a measure of income, e.g., imputed incomes, taxes and transfers. The author reviews studies using various adjustment factors and shows that the distributions arrived at are sensitive to the method of calculation. In Chapter 8 the nature and effects of the income distribution policies of government are reviewed. Once again it is noticeable that the coverage is broad but brief in all aspects. This characteristic is also apparent in the review of criteria which can be used to evaluate income redistribution policies, e.g., the discussion of attaining target efficiency, both horizontal and vertical, is completed in two pages. The final three chapters review the work incentive effects of income maintenance programmes, issues in the design of programmes, and the negative income tax experiments. The author concludes quite rightly that the full evaluation of the issues arising in this area requires multi-disciplinary work. This book is written with clarity but its approach is very elementary and superficial: its superficiality is inevitable given its broad remit and short length (154 pages of text). It provides a useful very basic introduction to the field for non-economists but even this attribute is circumscribed by the fact that the reference to data and institutions is largely Canadian. Whilst there may be few rival texts in Canada (this British reviewer is not well informed about the accuracy of this statement), there are many alternative texts in the US and UK literatures (e.g., M. Bronfenbrenner, Income Distribution Theory, Macmillan (1971); H. G. Johnson, The Theory of Income Distribution, Gray Mills (1973); R. Hemming, Poverty and Incentives, Oxford (1984). As an easy-to-read elementary introduction to the literature this book will be a useful addition to some reading lists. However, both students and teachers will inevitably require more detail of theory and evidence if they are to fully appreciate the nature of the trade-offs between efficiency and equity that Morley Gunderson points to. Alan Maynard University of York Lars Werin, Ekonomi och riittssystem (Economics and the Legal System) (2nd ed.), Lund, 1982. 624 pp. This is the second edition of Lars Werin’s textbook written primarily for use in economic courses for law students in Sweden and other Scandinavian countries, as it is written in Swedish. The first edition was well received although 1 know that several law students at my university claimed it was too difficult as an introductory textbook. To a certain extent I can understand their attitude as the first edition must have been an intellectual challenge to law students. This second edition has been changed in several aspects as major revisions have been made and now are much more related to
144
Book reviews
the law and economics tradition. These changes have turned this book into a valuable textbook. The book is in six parts. In the first three parts the major tools in microeconomics are presented and at the same time related to law issues. For law students and others who would like to get a first feeling of law and economics, part four is most stimulating. But in my opinion this part can be improved by extending the use of more figures, e.g., in the analyses of optimal pollution and optimal regulation of polluters. In the last two parts, aspects of distribution issues and economic policy issues are presented. As an almost pure verbal presentation of major macroeconomic ideas it is excellent, but is it necessary to use only verbal arguments? This book is one of the best-if not the best-in a Scandinavian language for an economics course for undergraduate law students. If it were written in English and contained less on the Swedish economy, it certainly would be competitive outside Scandinavia. Peder Andersen University of Aarhus
Willi Semmler, Competition, Monopoly, and Differential Profit Rates: On the Relevance of the Classical and Marxian Theories of Production Prices for Modern Industrial and Corporate Pricing, New York: Columbia University Press, 1984. 238 pp. In this book the author attempts an ‘analysis of competition and monopoly, written within the framework of linear production models’. His stated purpose is to survey some of the empirical literature on industrial and corporate pricing and to reinterpret the results from Classical (primarily Smith and Ricardo), Neoclassical, and especially Marxian perspectives. He concludes that the empirical findings are most consistent with the Marxian theory. This conclusion, he contends, supports the sharp critiques of multinational corporations by Marxist writers cited in later chapters. In fact, one gets the impression that the entire book was written to justify these critiques. After a brief introductory chapter the second chapter surveys Classical, Neoclassical, Marxian, and ‘Post-Marxian/Post-Keynesian’ theories of competition. This lays the theoretical groundwork for the empirical surveys in Chapters 3-5. Semmler makes a mistake that many writers make when describing the Classical view of competition. This is understandable, for the same mistake is made by such distinguished economists as Arrow, Hahn, and Debreu. Namely, according to Semmler (p. 11): ‘[Tlhe theory of Adam Smith has been considered the foundation of the neoclassical general competitive analysis. According to Arrow and Hahn, Smith was the “creator of the general equilibrium theory”.’ But as McNulty* has shown, the Smithian concept of competition is nothing at all like the idealized models of general equilibrium theory. To Smith and many other Classical economists, competition was a dynamic, rivalrous process, not a static equilibrium condition as described in models of ‘perfect’ competition. For instance, according to the Smithian view, advertising, price undercutting, and product differentiation would be considered essential components of the competitive struggle. But these competitive activities are condemned by the perfect competition model as ‘imperfect’ or ‘monopolistic’ since they diverge from the perfect information and product homogeneity assumptions of the model.2 The notion that Smith was ‘the creator of the general