Knowledge that Transforms

For many centuries, auctions have been a common form of selling procedure. Although auction methods vary across country and product, the two most frequently observed are the open, ascending bid (or English) auction and the sealed-bid auction. Recent theoretical research has led to a theory of equilibrium bidding in these two auctions and a wide range of alternatives as well. As a result it has been possible to compare the revenue extracted by the seller under different auction methods and even to characterize the revenue-maximizing auction. The Revenue Equivalence Theorem (see for example, William Vickrey, 1961, Roger Myerson, 1981, and Riley and William Samuelson, 1981) asserts that when each bidder's reservation price for a unit of an indivisible good is an independent draw from the same distribution, and bidders are risk neutral, the sealed-bid auction generates the same expected revenue as the open auction. Much recent research has involved weakening each of the main hypotheses-risk neutrality, identically distributed values, and independence of values-in turn. We shall illustrate some of the principal conclusions of this work by considering the properties of open and sealed-bid auctions in a model of two bidders whose reservation prices can assume only two values, and by comparing these auctions to the optimal or revenuemaximizing auction. I. Revenue Equivalence

For more than a decade Michael Todaros model has provided a widely accepted theoretical framework for explaining the massive flows of rural urban migration that are observed in many Third World countries. This paper however presents data amassed from a wide range of countries to highlight a crucial shortcoming of that model. It will be shown that far from being general in nature the Todaro approach is limited to explaining the movement of persons possessed of sufficient human capital to qualify them for modern sector employment....The present work utilizes the perspective of the urban subsistence sector to develop a model that serves as a useful complement to that of Todaro. (EXCERPT)

The economic policies of Japan's Finance Minister, Korekiyo Takahashi, during the Great Depression are more than a curious footnote in economic history. By 1932, Takahashi's interventionist policies had reversed Japan's economic decline. They also preceded similar measures adopted in other countries. Takahashi has even been characterized as Japan's Keynes, because of his use of deficit-financed, fiscal stimuli. He also has been blamed for his role in initiating in Japan the process of expanding military expenditures to stimulate the economy. This paper takes a second look at the Japanese economy during the early years of the Great Depression, with a particular reference to the policies of Takahashi. Two major questions addressed relate to the Keynesian origin of his ideas and the extent to which his policies contributed to the subsequent economic recovery.

Despite the volumes that have been written about George Orwell during this past year of 1984, virtually no one has commented on the economic assumptions implicit in his work. Yet understanding the economics in Orwell's vision of hell is necessary if we are to fully appreciate the horror of that vision. Orwell believed that socialism led to totalitarianism; indeed, that is the chief message of Orwell's 1949 classic. But he also believed that capitalism led to breadlines and poverty. This combination of beliefs led him to that profoundly disturbing view he described so vividly in 1984. But probably the most remarkable aspect of Orwell's economic thought is that he said so little explicitly on the subject. He wrote literally volumes of social and political commentary, with an economic worldview implicit in every line. Yet, explicit discussion of economics is limited to a few pages in 1984 and offhand comments scattered throughout his book reviews and essays. The statements that he did make suggest that his economic ideas were obviously influenced by Marxist theory, but were not revolutionary. That is, his views were quite conventional for his time. His views about technology are quite another matter. Orwell was not opposed to or in favor of technology per se. His primary concern was over who would control technology. Would new technologies be widely available for personal use or would they be centrally controlled? In this area Orwell was a decentralist, radical for his time and for ours.