Knowledge that Transforms

The public good aspect of information is used to account for periods in which the aggregate level of trade is low. It is shown that abstention from trade may occur when the uncertainty with respect to the market-clearing price (there is no auctioneer) gets large relative to the cost of getting information about it and relative to the cost of postponing transactions. In this case, all agents are aware of bilateral Pareto-improving trading opportunities, but these opportunities are not exploited.

A model incorporating costly search and implicit contracts is examined. The contracts differ from those studied in the traditional literature by allowing for both temporary and permanent layoffs. A natural rate of unemployment is determined, and comparative statics analysis shows that changes in the utility value of leisure, in the cost of search, and in the dispersion of prices each have an ambiguous effect on this natural rate.

I think that he got out of it very well for such a stupid man. [Joseph Conrad, Typhoon]

In order to argue that value depends exclusively on labor, Marx had to assume a uniform rate of surplus value (exploitation) across all industries. But if this rate of exploitation is the same everywhere, hours of work have also to be uniform. Marx accordingly insisted that this was so and quoted contemporary evidence in support. A close examination of his sources (nineteenth-century factory inspectors' reports) fails, however, to confirm his prediction. Instead the data are more consistent with the competing neoclassical hypothesis, originating with Jevons, that work hours will vary because workers' labor and leisure preferences vary.

Kravis, Heston, and Summers provided comparable price and volume data for gross domestic product and its components for each of 34 countries, varying in affluence from India and Malawi to the United States. The article discusses the data and the way in which they are generated, and considers the use of these data for applied demand analysis.