Knowledge that Transforms

In this paper a market where a buyer (job seeker) is searching in a known order among sellers (e.g., a motorist driving along a road looking for gasoline) is described. Both sellers and buyers are assumed to behave strategically. There are many types of buyers. The sellers know only the distribution of all possible buyers; similarly, buyers have imperfect information about sellers. The analysis is conducted by modeling the market as a game with incomplete information; the equilibrium is characterized. A central feature of the game is that both buyers and sellers rationally update their prior information about each other as the game unfolds sequentially. It is shown that prices need not vary monotonically along the search process.

The debate between Ricardo and Thornton and Malthus about the causes of balance of trade deficits is reexamined. It is argued that, given the state of real trade theory in the period, the debate could not have been resolved. With the discovery of the principle of comparative advantage Ricardo changed the views he had expressed during the controversy and implicitly repudiated the arguments he had used against Thornton and Malthus.

This paper compares monopsonistic and competitive search equilibria. While the competitive equilibrium is efficient, the monopsonistic equilibrium is not: there is too much search, and the employment rate is too low.

The class struggle is formalized as a differential game in a strictly supply-side model, an approach that synthesizes the models of Lancaster and Goodwin. Four different steady-state equilibria are derived, each corresponding to different assumptions about the degree to which each class is organized to promote its own interests. In particular, the Goodwin growth cycle is shown to emerge from a world characterized by unorganized capitalists and workers, in which individuals ignore the effects of their own actions on economywide variables. More relevant for discussion of modern capitalism are the hierarchical equilibria, especially the codetermination equilibrium in which the existence of a full-employment equilibrium turns out to be problematic. Finally, comparative-statics results suggest that the incentives for technological change differ widely among the four regimes.

Compared with the work of his contemporaries, Keynes's General Theory represented a radical change in theoretical method--from sequence analysis to the method of equilibrium. The nature of this change is discussed, together with its implications for the substance of Keynes's message and for the subsequent development of macroeconomics.

Because of extreme differences in factor endowments and price ratios among factors between the United States and Japan, both countries have experienced sharply different patterns of factor use and productivity growth in agriculture for the past 100 years of modern economic growth. In this study, the method of testing the Hicksian hypothesis of induced innovation was developed using the two-level CES production function. The model was applied to the historical data of U.S. and Japanese agricultural development for 1880-1980. The results were consistent with the hypothesis that different patterns of technical change in the two countries were induced by differences in the levels and the movements in relative factor prices.

This paper examines a new possible explanation for the recent rejections of the life cycle-permanent income model of consumption: the treatment of seasonal fluctuations. The paper shows that when the seasonal fluctuations in consumption purchases are included in an analysis of the life cycle-permanent income model, there is no evidence in the aggregate data against the model. The estimates of the parameters of agents' utility functions obtained with seasonally unadjusted data are plausible, and the unadjusted data do not reject the overidentifying restrictions on the model.