Knowledge that Transforms

[Available theorems establishing the existence of general equilibrium in models incorporating imperfectly competitive firms rely on the assumption that reaction curves are continuous functions (or convex-valued, upper hemi-continuous correspondences). However, this property has not been derived from conditions on the fundamental data of tastes, technology, and maximizing behavior. We show here that continuity may fail even in extremely simple cases, with the result that equilibrium price and/or quantity choices fail to exist. The non-pathological nature of the examples we present suggests the need for a fundamental re-examination of the way our partial and general equilibrium models of monopolistic competition fit together.]

[Regularity conditions in social welfare analysis can be seen as ways of making specific types of information "inadmissible" in welfare judgements: the evaluation is made invariant with respect to information of those types. In this sense, these conditions--often reflecting "principles" of judgement--serve also as informational constraints. In this lecture alternative approaches to social welfare evaluation are examined in this light. The analysis covers both Arrovian and Bergson--Samualsonian social welfare functions as well as principles underlying utilitarianism, Rawlsian conception of justice, notions of liberty and egality, and "historical" theories of rights and entitlements (e.g., Marx or Nozick).]

[It is shown that, in a wide class of economies with Marshallian externalities, a Pareto optimum can be sustained by a competitive equilibrium with the aid of a tax-subsidy system. The tax-subsidy system consists of commodity taxes, commodity subsidies, lump-sum taxes, and lump-sum subsidies. The model can be interpreted as describing an economy with various kinds of public goods.]

The low estimates of the income elasticity of housing demand obtained when individual households are the unit of observation are theoretically reconciled with the high estimates obtained when metropolitan-wide averages are used. The omission of the housing price term biases the ungrouped (whether stratified by metropolitan areas or not) estimate(s) downward and the grouped estimate upward. The inclusion of a metropolitan-wide average housing price term worsens the downward bias of the unstratified ungrouped estimate. The corresponding price elasticity estimate is biased upward (toward zero). These results are interpreted in terms of the theory of residential location and used to explain the empirical evidence. For the evidence considered, the true income and price elasticities are approximately .75 and -.75, respectively.

This paper develops an econometric model of production technology in terms of the ante-ex description of production possibilities. Ex ante and ex post substitution characteristics are allowed to differ from one another and parametric representations are derived which provide arbitrary second-order approximations to the true underlying characteristics. Nested in the maintained model are the specialized putty-putty, puttyclay, and structures of technology; and hypothesis tests are developed to test for the applicability of these specialized structures. An example is provided in which the hypotheses that fossil fuel electricity generation can be characterized by putty-clay or clay-clay technologies are tested using data drawn from individual United States electricity generating plants.