Knowledge that Transforms

A general model of optimal factor accumulation over an infinite horizon is presented in which the steady state depends on initial conditions and on the history of the system. In contrast to conventional results, any change in initial conditions or any temporary shock in the convergence process will in general change the optimal steady state. The result is shown to arise, when the discount rate is positive, from standard assumptions made about the technology of converting heterogeneous factors from one type to another. The dynamic optimizing models commonly used in economics are characterized by state or path independence. Steady state equilibria are determined by underlying exogenous parameters, independent of initial conditions and the history of the economy. Though certain phenomena may be well described by this type of analysis, one wonders whether there are other economic phenom-ena where initial conditions of history will indeed matter. In this paper we consider a model of dynamic optimization

Journal Article Reward Structures in a Planned Economy: Some Difficulties Get access H. S. E. Gravelle H. S. E. Gravelle Queen Mary College, University of London Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 100, Issue 1, February 1985, Pages 271–278, https://doi.org/10.2307/1885746 Published: 01 February 1985

Journal Article Reward Structures in a Planned Economy: Some Further Thoughts Get access Mo-Yin S. Tam Mo-Yin S. Tam University of Illinois at Chicago Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 100, Issue 1, February 1985, Pages 279–289, https://doi.org/10.2307/1885747 Published: 01 February 1985

Geoffrey Brennan, Cliff Walsh; Private Markets in (Excludable) Public Goods: A Reexamination*, The Quarterly Journal of Economics, Volume 100, Issue 3, 1 A

V. Vance Roley, Carl E. Walsh, Monetary Policy Regimes, Expected Inflation, and the Response of Interest Rates to Money Announcements, The Quarterly Journal of Economics, Vol. 100, Supplement (1985), pp. 1011-1039

This paper presents a macroeconomic model containing optimizing, inventory-holding firms that is consistent with a number of prominent empirical regularities concerning fluctuations in output, exchange rates, relative prices, and money. Prices are sticky, but they are not predetermined. Still, our model is consistent with exchange rate overshooting in the sense of Dornbusch. Typical sticky-price models allow a divergence between current production and current demand, but this divergence is never allowed to feed back into the model. Our optimal inventory adjustments reconcile divergences between current demand and production, and the inventory stock movements provide expected future dynamics.

This paper analyzes a model in which fixed wages and layoffs may be the most efficient way to organize employment contracts. When wages fluctuate to reallocate labor among firms, workers must make costly decisions and may undertake excessive search. In contrast, if all firms reallocate labor with layoffs and new hires at fixed wages, only those workers laid off will have decisions to make. The lower decision costs of the fixed wage contract may more than compensate for the resource cost of the unemployment it causes. A novel feature of the model is the result that the socially optimal contract, when chosen by all firms, may not be the privately optimal contract.

Journal Article Uncertainty in Future Government Spending and Investment Get access Richard Hartman Richard Hartman University Of Washington Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 100, Issue 4, November 1985, Pages 1339–1347, https://doi.org/10.2307/1885688 Published: 01 November 1985

Even when only labor is scarce, the validity of a labor theory of value depends on reducing all labor to a homogeneous equivalent. The various implicit or explicit efforts of Smith, Ricardo, and Marx to do so are shown to fail on more counts than previously recognized. The labor theory is also shown to fail when laborers are not indifferent among alternative occupations.