Graduate School of Business, University of Santa Clara
We will show below that failure to fully specify the choice problem and therefore the transformation between what is inherently a multi-attribute decision problem and the wealth only problem has led Becker, Ehrlich, and Sjoquist to conclusions which are valid only in very special cases. In general, we show that plausible preference restrictions are not sufficient to generate unambiguous supply results, a result that should come as no surprise since it is the same situation that confronts the investigator in most household allocation problems. Therefore, policy prescriptions in this area, as in the tax incentive area do not follow from theory but rather require empirical determination of relative magnitudes.
Heineke, John, and M. K. Block. "The Supply of Legal and Illegal Activity: A Choice Theoretic Analysis." Santa Clara Business Review 4.1 (1973): 1-16.