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TitleBiographical Memoirs: V.83 (Biographical Memoirs: A Series)
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Page 194

183S H E R W I N R O S E N

cars that deliver more power, especially in a package that is
small enough and light enough to be practical. There is an
analogous relation on the producer side that matches that
of the consumer. Producers can supply more output to con-
sumers but only at increased cost. Furthermore, the increased
cost relationship is probably not linear and is likely to be
convex. It costs more to increase horsepower from 350 to
400 than it does to increase it from 50 to 100.

Which level of horsepower is provided and at what price?
The Rosen analysis showed that if all consumers had the
same preferences and all producers had the same cost tech-
nology, there would be one and only one type of car pro-
duced and its price would be determined uniquely. Of course,
this is the extreme case. In the real world both sides of the
market would be characterized by heterogeneity, and again
the Rosen analysis explained under which circumstances an
investigator could infer either preferences or cost technol-
ogy. If consumers were identical, but firms differed in their
ability to provide increasing horsepower at increased costs,
then there would be many varieties of cars produced and
the price would rise with horsepower in a concave fashion.
The concave function that related price to horsepower would
be an exact representation of consumer preferences. That
is, it would tell us how much consumers were willing to pay
for additional horsepower at every level of horsepower. For
example, if the price of a car with 100 horsepower were
priced at $15,000 and an identical car with 150 horsepower
were priced at $18,000, this would imply that every con-
sumer (since they are identical) viewed 50 additional horses
as being worth $3,000.

The converse is also true. If consumers differed in their
preferences, but producers were identical in their ability to
produce horsepower at increasing cost, then the market
relation of price to horsepower would trace out the producersÕ

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184 B I O G R A P H I C A L M E M O I R S

cost relation. For example, if the price of a car with 150
horse power were $18,000 and the price of one with 200
horsepower were $25,000, then this would imply that the
extra 50 horses cost $7,000 to produce.

If, as is typical, both sides of the market are heteroge-
neous, then the market prices provide neither the prefer-
ences nor costs of any given producer. This is because sort-
ing occurs and the market facilitates this sorting. Those
producers who produce cars with 150 horsepower at $18,000
could not increase horsepower to 200 at a cost of $25,000.
Although there is some firm that could provide that higher
level of power at that price, the firm that chooses to pro-
duce the lower horsepower car is the one that has a com-
parative advantage at low horsepower and a comparative
disadvantage at high horsepower. Analogously, the person
who buys the 150-horsepower car at a cost of $18,000 would
not be willing to pay an extra $7,000 for 50 more horse-
power. Indeed, that is why he chose the low-cost, low-horse-
power car in the first place. Conversely, the individual who
buys the $25,000 car with 200 horsepower would not settle
for a 150-horsepower car at $18,000. She preferred the high-
horsepower car at a cost of $25,000 to the low-horsepower
car at a cost of $18,000. This revealed preference is gener-
ated by the market mechanism that Rosen identified.

The point is even more profound in the labor market
context. To put it simply, when choosing a job, money isnÕt
everything. People care about other aspects of the job and
Rosen showed us how to analyze and understand the tradeoffs.
Again, to make it simple, suppose that jobs differed in only
one dimensionÑ flexibility of hours. Some people (e.g.,
mothers of small children) prefer jobs that offer a great
deal of flexibility and might be willing to accept signifi-
cantly lower wages to have such jobs. Others (e.g., 54-year-
old men) might be less interested in flexible hours. Although

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376 B I O G R A P H I C A L M E M O I R S

1968

Regulation in macromolecules as illustrated by haemoglobin. Q. Rev.
Biophys. 1:35-80.

1975

A group of thermodynamic potentials applicable to ligand binding
by a polyfunctional macromolecule. Proc. Natl. Acad. Sci. U. S. A.
72:1464-68.

The turning wheel: A study in steady states. Proc. Natl. Acad. Sci.,
U. S. A. 72:3983-87.

1979

Recollections of Jacques Monod. In Origins of Molecular Biology: A
Tribute to Jacques Monod, eds. A. Lwoff and A. Ullman, pp. 221-24.
New York: Academic Press.

1980

With S. J. Gill. Ligand-linked phase changes in a biological system:
Applications to sickle cell hemoglobin. Proc. Natl. Acad. Sci. U. S. A.
77:5239-42.

1981

The cybernetics of biological macromolecules. Biophys. Chem. 14:135-46.

1984

Linkage graphs: A study in the thermodynamics of macromolecules.
Q. Rev. Biophys. 17:453-88.

With G. Careri. Soliton-assisted unidirectional circulation in a bio-
chemical cycle. Proc. Natl. Acad. Sci. U. S. A. 81:4386-88.

1985

With S. J. Gill, B. Richey, and G. Bishop. Generalized binding
phenomena in an allosteric macromolecule. Biophys. Chem. 21:1-14.

1987

With C. H. Robert, H. Decker, B. Richey, and S. J. Gill. Nesting:
Hierarchies of allosteric interactions. Proc. Natl. Acad. Sci. U. S. A.
84:1891-95.

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377J E F F R I E S W Y M A N

1988

With E. Di Cera and S. J. Gill. Canonical formulation of linkage
thermodynamics. Proc. Natl. Acad. Sci. U. S. A. 85:5077-81.

1990

With S. J. Gill. Binding and Linkage: Functional Chemistry of Biological
Macromolecules. Mill Valley, Calif.: University Science Books.

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