Knowledge that Transforms

A class of three good (output, labour, money), one consumer private ownership economies is studied. With an exogenous number of identical, increasing or decreasing returns firms necessary and sufficient conditions for globally unique, non-trivial, uniform rationing non-Walrasian equilibria are obtained in terms of suitably defined “marginal propensities”. Following Weddepohl a non-Walrasian equilibrium at a set of parameters with m firms producing is stable if there is no equilibrium at those parameters with m + 1 firms producing. Under the global uniqueness conditions only trivial stable equilibria occur under decreasing returns; under increasing returns multiple, non-trivial stable equilibria can occur.

A model is studied where firms advertise prices and buyers play a noncooperative search game in an attempt to secure output from firms at the advertised prices. Firms face rising marginal costs and may not be willing to supply everything demanded at their price if they wind up with many buyers. It is shown that rationing will occur in equilibrium no matter how averse buyers are to this possibility. The result is specialised to a case where rationing occurs with probability one. The equilibrium price and outputs are characterised for this case.

This paper attempts to provide a unified analysis of the effects of taxation on the equilibrium value of marginal q under alternative financial policies. It is shown that the q approach does not avoid all the specification problems associated with analyses based on the cost of capital. The (theoretically and empirically) crucial relationship between average and marginal q is also examined, and it is shown that, under UK and US tax rules, the possibility of winding up precludes persistent undervaluation in equilibrium.

This paper considers the problem of finding the “best” estimator among a class that includes most of the commonly used limited information estimators in simultaneous equation systems. Concentration comparisons, based on the Edgeworth expansion of the distribution of these estimators, lead to selection rules of sufficient simplicity to be useful in applied econometric research.

This paper presents a dynamic, choice-theoretic general equilibrium model of capital accumulation in an open economy. Equilibria with and without capital mobility are described and compared. It is shown that neither is necessarily Pareto optimal and that an equilibrium with free trade in capital does not Pareto-dominate an equilibrium with autarky. The effects of restricting capital flows by taxing foreign investment earnings are discussed. It is seen that there will be no agreement within a country as to what constitutes an optimal tax. 1.

The exchange rate is recognised as a particularly tricky subject for modelling and prediction. The problems of unobservables such as expectations, of simultaneity, and of policy changes (both overt and covert) in the sample period to which models must be fitted may account for the disappointing results of recent attempts to test theories of exchange rate determination. This paper develops an appropriate empirical model to deal with these problems; it allows consideration of the proper interpretation of theoretical assumptions and determination of how far modelling for ex ante prediction can succeed.

This paper shows that if a social choice rule can be implemented in dominant strategies by an indirect mechanism, but there does not exist a direct mechanism that implements it in dominant strategies, then it must be the case that the original indirect mechanism does not implement the social choice rule in Nash strategies (under complete information) or in Bayesian strategies (under imcomplete information).

The paper is concerned with the implications of a maximin welfare function for an intertemporal society which has a nonlinear technology at its disposal, but holds conflicting preferences over time. The complete solution given shows that time-consistency and optimality of plans may or may not be compatible. The time-consistent case is generalized to a very wide class of models. This leads to the partial invalidation of a result stated in the earlier literature on the subject.

In this study a model of firm behavior that allows the level of capital utilization to be optimally chosen by cost-minimizing firms is embedded into the standard specific-factors model employed in the international trade literature. The resulting generalization of the specific-factors model provides several new insights. For instance, allowing for variable utilization in either or both sectors gives rise to a greater variety of possible trade patterns than forcing utilization to remain constant. Similarly, international differences in the willingness to work during abnormal hours generate a wider variety of trade patterns than are possible in the standard specific-factors model. Finally, this model allows a reconciliation of the “dual scarcity” explanation of the nineteenth century Anglo-American pattern of trade with the historical evidence on levels of utilization.

Sufficient conditions are found for the existence of an orderly sequence of temporary equilibria in economies with incomplete forward markets without exogenous limits on short-sales. In the absence of institutionally imposed trade restrictions, equilibrium exists under the assumption of overlapping expectations. In the institutional model a clearinghouse imposes rules of trade (interpreted as margin requirements) to reduce the likelihood of bankruptcies. Under this rule, equilibrium exists without overlapping expectations, and subsequent bankruptcies are less likely.