Knowledge that Transforms

The equivalence between optimal growth solutions and solutions of decentralized models of intertemporal allocation is explored in a one-consumer, heterogeneous capital goods framework. The decentralized economy follows a perfect foresight path. The main result is that the decentralized economy will impose on itself a transversality condition. This yields the interpretation of equilibrium prices as prices consistent with a certainty version of the efficient markets hypothesis. The results rest on the recent contribution by Benveniste and Scheinkman providing sufficient conditions for infinite horizon concave programs to exhibit capital value transversality as a necessary condition for optimality.

Robert B. Ekelund, Jr., William F. Kordsmeier; J. S. Mill, Unions, and the Wages Fund Recantation: A Reinterpretation—Comment, The Quarterly Journal of Economic

This paper considers a reward mechanism for inducing the choice of a socially optimal level of output by a socialist price-setting manager. Under this mechanism the planner is assumed to have no information other than the observed output and price level. It thus has informational advantages over other schemes thus far discussed in the literature. The other schemes require the additional knowledge of demand elasticities of all the products produced in the economy. Besides this informational advantage the reward structure suggested here also eliminates other basic weaknesses of those schemes suggested previously.

This paper extends the experimental examination of posted offer auction markets to a market with intertemporal speculators. Previous experimental results demonstrate that posted offer markets induce inefficiencies, and also an income distribution that works to the disadvantage of those facing posted prices. The results of this paper suggest that these properties of the posted offer institution hold in the presence of intertemporal speculation.

Two fundamentally different explanations of gambling behavior have developed. The first is generally referred to as the psychological model. It stresses that gambling is an enjoyable activity for many people and is consumed like any other good or service. Participation in gambling provides one with social and personal gratification. Unfair bets, or those gambles with negative expected return, are taken because people misperceive probabilities in risk-taking situations. The best predictors of who will gamble according to the psychological model include race, sex, family and demographic characteristics, and one's cultural background. According to the Friedman-Savage model, a rational individual will gamble if he possesses a particular type of utility of wealth function [Friedman and Savage, 1948]. The motivation of the gambler according to this model is the high value he places on the chance of achieving a major increase in personal wealth and thus moving upward on the socioeconomic ladder:

The well-known free-rider hypothesis is examined experimentally to see (i) whether individuals behave systematically as free riders when systematic incentives to do so are created, and (ii) the extent to which free riding actually occurs. Though the experiment's participants behaved in accordance with the hypothesis, the quantitative extent to which such behavior occurred was rather modest. From this it may be concluded that the free-rider hypothesis as presently stated indicates an incompleteness in standard public microeconomics rather than providing a description of the real world.

Journal Article Summing up on the Australian Case for Protection Get access Paul A. Samuelson Paul A. Samuelson Massachusetts Institute of Technology Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 96, Issue 1, February 1981, Pages 147–160, https://doi.org/10.2307/2936145 Published: 01 February 1981

It is argued that a full loss offset corporate tax with interest deductibility may reduce risk taking in that entrepreneurs might decrease the amount of investment made in risky projects with higher corporate tax rates. Unlike previous results in the literature, production functions with decreasing returns to scale and the possibility of equity financing of capital investment are allowed. A corporate tax that falls in part on the returns of equity owners or entrepreneurs can, under certain conditions, reduce risk taking. If the government taxes only risk, then a corporate tax with a full loss offset can encourage investment in risky projects.

An opportunity to compare economic performance under substantially different levels of regulation is afforded by the differences in the regulatory environments of U. S. and Canadian railroads. We find that the less regulated Canadian railroads have achieved far higher productivity growth than have U. S. railroads. Furthermore, in spite of natural conditions favoring U. S. railroads, Canadian railroads have achieved a higher level of productivity. These findings for the typical U. S. and Canadian railroad are borne out by similar results for specific railroads. Had U. S. railroad productivity grown at the Canadian rate, U. S. railroad costs would be several billion dollars less each year.

Such issues as the freedom of speech or the right to vote are usually discussed as matters of principle or public policy, without concern for the preferences of the potential users of these rights. Yet it is interesting to see how strongly valued they are. This paper develops a method to derive the demand for legal and constitutional rights and rules, the values attached to them, and their sensitivity to income and education. The model is based on referendum data and on the interpretation of nonvoting behavior.