This paper presents a critical evaluation of the recent emphasis on job-search and employment-acceptance friction as an explanation for the actual causal relationship between aggregate demand and employment. Although job-search theory seems to provide a choice-theoretic basis for the relationship between aggregate demand and employment, the paper points out that prominent qualitative aspects of the predicted relationship between aggregate demand and employment are empirically unacceptable. In particular, the analysis of employment-acceptance friction (1) does not allow for layoffs and nonwage rationing of jobs, (2) predicts that cyclical variations in employment will involve countercyclical variation in real wages rates, and (3) predicts that cyclical variations in employment will involve countercyclical variations in consumption expenditures. As an alternative, the paper suggests that analysis of friction in the process by which markets are cleared can provide a more satisfactory theoretical basis for the causal relationship between aggregate demand and employment.

This paper develops a general model of multimarket disequilibrium and uses it to explain the disequilibrium behavior of prices and interest. Section I summarizes the conventional distinctions between the dynamic loanable-funds and liquidity-preference theories of interest and between the dynamic quantity and expenditure theories of prices. Sections II and III develop the concepts of notional demand and gradual market clearing, which are essential in the conventional analysis. The next three sections develop a choice-theoretic theory of effective demands, starting in Section IV with a generalization of Clower's dual-decision hypothesis to a multimarket context. Section V analyzes the determination of quantity constraints on individual transactions implied by market disequilibriums. Section VI deals with aggregation of the individual effective-demands functions. Finally, Section VII shows how the aggregate effective demands determine the dynamic behavior of the interest rate and price level, and Section VIII shows that the traditional dynamic theories mentioned above are all special cases of the more general effective-demands theory. A priori, the dynamic loanable-funds, liquidity-preference, quantity, and expenditure theories all turn out to be consistent with the structure of exchange in a monetary economy. Which better approximates reality depends upon choice-theoretic behavioral parameters which determine the pattern of response to the constraints imposed by market disequilibriums.

This paper develops a general equilibrium model of the allocation of resources among appropriative and productive activities. The model emphasizes the distinction between offensive weapons, which are the instruments of predation, and fortifications, which provide defense against predation. The analysis of this model shows how the equilibrium security of claims to property is determined. The analysis focuses on the possibility of a nonaggressive equilibrium, in which no resources are allocated to offensive weapons and claims to property are fully secure. We also analyze the complex relation between economic welfare and the security of claims to property. We find, for example, that a relatively poor agent could be better off in an equilibrium with less secure claims to property.

This paper evaluates the effects of inflationary expectations within an extended inventory model of the determination of optimal money holdings and commodity inventories. One important innovation is to introduce into the consumption bundle a commodity which is purchased less frequently than income is received. A second innovation is to consider household use of earning assets as a store of savings balances rather than working balances. The analysis shows that the effects of inflationary expectations on optimal commodity inventories and money holdings depend critically on whether the household holds part of its savings balance as earning assets. For example, if the household holds its savings balance only as money, and if the real rate of return on earning assets is constant, an increase in the expected rate of inflation would induce a reduction in total money holdings and also, somewhat surprisingly, a reduction in total commodity inventories.

This paper develops a general equilibrium model of the allocation of resources among appropriative and productive activities. The model emphasizes the distinction between offensive weapons, which are the instruments of predation, and fortifications, which provide defense against predation. The analysis of this model shows how the equilibrium security of claims to property is determined. The analysis focuses on the possibility of a nonaggressive equilibrium in which no resources are allocated to offensive weapons and claims to property are fully secure. The authors also analyze the complex relation between economic welfare and the security of claims to property.