Knowledge that Transforms

Franklin M. Fisher, Robert M. Solow, James M. Kearl; Aggregate Production Functions: Some CES Experiments, The Review of Economic Studies, Volume 44, Issue

Stiglitz establishes the relationship between monopoly, non-linear pricing, and imperfect information in the insurance market.

Steven Salop, Joseph Stiglitz; Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion, The Review of Economic Studies, Volume 44, Issue

This article examines the relative merits of tariffs and quotas as revenue raising devices in the presence of economic uncertainty. It has long been recognized that, provided the government auctions off the quota, the optimum pure tariff and the optimum pure quota are equivalent in a competitive world with no uncertainty. However, in such a world the equivalence is between a pure tariff and a pure quota that are both functions of the state of nature. The border policies that are most commonly resorted to by governments are fixed tariff rates and fixed quantity restrictions. They are often regarded as polar forms of trade restrictions. They have different very different effects: a fixed tariff on a commodity stabilizes its domestic price in the face of random domestic demand and supply but a fixed international price; while a quota stabilizes its domestic price if its international price is random but its domestic demand and supply functions are fixed. Results of the study reveal that under the conventional criterion of maximizing the expected value of net consumer's surplus, the optimum fixed tariff is superior to the optimum fixed quota. The result continues to hold if instead the maxi-min criterion is followed.

This paper attempts to determine whether the relationship between education and income results because schooling allows individuals to earn higher income or because higher income individuals purchase more of all normal goods, including schooling. Education is treated as a joint product, producing potential wage gains and utility simultaneously. The framework permits estimation of the rental price of a unit of education, net of consumption effects. The major finding is that education does causally produce income. By moving from 0 years of schooling to 12 years, the mean individual approximately triples his wealth. More surprising is that education is a bad." Individuals stop short of acquiring the wealth-maximizing level of education because of the disutility associated with school attendance.

This paper begins by introducing three alternative properties of expectations: weak consistency, strong consistency, perfect foresight. These concepts are then used to consider the relationship between beginning-of-period (stock) equilibrium and end-of-period (flow) equilibrium for both discrete and continuous time. We show that in the former case the consistency between them requires not only that there be perfect foresight in predicting certain relevant variables but also that there be no accumulation of assets. In the latter case the relationship between the two equilibria rests on much weaker conditions. They are equivalent provided expectations satisfy our assumption of weak consistency.

This paper deals with the effects of transaction costs on the efficacy of covered interest arbitrage during three periods: 1962-67, the tranquil peg; 1968-69, the turbulent peg; and 1973-75, the managed float. Several conclusions emerge: (i) during the managed float transaction costs have risen dramatically, (ii) these costs played a similar role in accounting for deviations from parity during the periods of the tranquil peg and the managed float but not during the turbulent peg. Similar conclusions emerge from a time-series analysis of the various exchange rates with the implication that a classification of periods according to the degree of turbulence is preferred to a classification based on the legal arrangement (e.g., pegged or floating rates), and (iii) covered interest arbitrage does not seem to entail unexploited opportunities for profits.

I. Introduction and summary, 289.—II. The basic model, notation and assumptions, and analysis of the n = 1 case, 296.—III. The no-joint production case with n > 1,301.—IV. The joint production case with n > 1,303.—V. The social rate of return, 306.—VI. Concluding remarks, 312.

Irreplaceable commodities, 144.—Insuring irreplaceable commodities, 148.—The value of collective protection, 151.—Appendix, 155.