Richard W. Lichty

Identifying Subareas That Comprise A Greater Metropolitan Area: The Criterion of County Relative Efficiency

Data Envelopment Analysis (DEA) is used to rank the relative efficiency of thirty–two counties comprising the Greater Minneapolis–St. Paul Metropolitan Region and finds that the greatest external economies originate in the urban core and decline toward the periphery. By employing 1993 IMPLAN input–output database and county estimates of final payments (inputs) and final demands (outputs), DEA classifies efficient and inefficient counties that produce maximum output using minimum input, and a sensitivity analysis ranks counties according to robustness of the efficiency classifications. Efficiency differences between three groups identify the metropolitan core, transitional region, and peripheral region. Dominant industries in the three regions are identified and contrasted using location quotients. This study adopts the various analytical techniques into an urban regional systems approach for policy analysis and implementation.

The Economic Effects of Grade Inflation on Instructor Evaluation: An Alternative Interpretation.

There continues to be a lively interest in the relationship between instructor evaluations and instructor tendencies to “inflate” grades. Allen Kelley and Richard McKenzie have provided interesting theoretical analyses of this relationship in earlier issues of the JEE. The authors of this article review the work of Kelley and McKenzie, and then carry the analysis further. New dimensions are considered, such as the possibility that students will look upon a university education as an inferior “Giffen” good. The implications of such a development are set forth in the concluding section of the report.

Estimating medical industry impacts on a regional economy.

The authors demonstrate a large-scale, computerized simulation model to estimate the economic impacts of the regional health services industry on a seven-county region in Northeast Minnesota, known as the Arrowhead Region. The model, known as SIMLAB, was developed at the University of Minnesota. SIMLAB is designed to simulate the economic performance of a subnational region. Three scenarios were developed: one to illustrate a regional economy functioning normally, one to show how the areas economy would operate in the absence of its entire health services industry, and one to show the regional economic impacts of the closing of a single major hospital within the region. The first two scenarios were compared, with the differences between them representing the impact estimates for the region. The findings give a graphic demonstration of how vitally important health services are to the region. Without the health sector, the regions total gross output for all industries- is estimated to fall by more than

Taxes, Quotas and Environmental Policies: A Comment on Economic Efficiency

1 billion by 1990. A comparison of the first and third scenarios demonstrates the sensitivity of SIMLAB to smaller but still significant economic dislocations, such as the closing of a single major health care facility.

Measuring the impact of tourism on a small community.

In a recent article, Buchanan and Tullock (B & T) [1, pp. 139-147] developed a theoretical argument showing the rationale for political leaders choosing direct controls over penalty taxes as a strategy for solving pollution problems. Their arguments centered on a public choice theory of policy-making where the regulators take into ac count both the interests of those being regulated as well as those affected by the externalities. During the course of the B & T theoretical presentation, the authors attempted to show the elementary efficiency basis for preferring taxes and charges to direct control. Nevertheless, B & T contend that the political realities will usually win over public support to direct control. In deference to the results of B & T, this paper will show that both the quota and effluent tax strategy are equally capable of achieving an eco nomically efficient solution to a pollution problem at a given point in time [4, pp. 2-9]. However, the effluent tax strategy is more equitable in income distribution than a quota strategy since the quota strategy generates excess profits for the polluter. In fact, these excess profits seem to be the source of the political strength calling for the quota strategy. Finally, the quota strategy, while as efficient as the tax strategy at a given point in time, seems to freeze pollution abatement technology into legal codes. Once these quotas have been established, firms will have little incentive to develop new tech nological pollution abatement equipment because there will be little chance of improving the firms profit by installing such equipment. The remainder of this paper will be devoted to the development of B?T theoretical arguments in terms of the Coase Case to illustrate our conclusions [2, pp. 1-44]. No attempt is made to generalize our results beyond the Coase example [3, pp. 1-33]. Assume initially 400 cattle ranchers and 600 wheat farmers. Each cattle rancher grazes cattle on the range land, rounding up his herd in the spring and selling them for a profit. His profits, shown in Table I, are a function of the number of cattle he has grazed over the year. He is operating in a perfectly competitive product market so that his price is determined by the interaction of the supply and demand for cattle shown in Figure 1. Under these conditions a rancher finds that his most profitable herd size is 14 cattle which will net him

An Efficiency Analysis of Minnesota Counties: A Data Envelopment Analysis Using 1993 IMPLAN Input-Output Analysis

112 in profit when he sells the herd. If each of the 400 ranchers is assumed to maximize profits over 1,000 herds, the total supply of cattle raised and sold will be 14,000 head of cattle at

Assessing University Impacts Using Interindustry Analysis

100 per cow (see Figure 1). Since cattle ranchers are competing with the 600 wheat farmers for use of the range land, the ranchers grazing cattle may damage the wheat farmers fields, i.e., cause pollution. Experience has shown that if each rancher raises nine cows or less