Knowledge that Transforms

The paper develops a general stochastic macroeconomic model that can be used to study the international transmission of disturbances under four alternative exchange-rate systems: uniform flexible exchange rates, uniform fixed exchange rates, and two versions of two-tier exchange rates. The analysis makes two general points. First, one cannot assume stability of structure when assessing the consequences of alternative exchange-rate regimes. For example, the slope of the aggregate supply curve and the rationally formed expectations in the asset markets can respond dramatically to the government's choice of exchange-rate regime. Second, exchange-rate regimes that provide full insulation from foreign disturbances may nevertheless be inferior to other regimes in terms of their ability to maximize social welfare.

Journal Article Gottfried Haberler on Inflation, Unemployment, and International Monetary Economics: An Appreciation Get access Thomas D. Willett Thomas D. Willett Claremont Graduate School and Claremont Men's College Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 97, Issue 1, February 1982, Pages 161–169, https://doi.org/10.2307/1882633 Published: 01 February 1982

An empirically grounded micro-simulation of saving, with bequests related negatively either in total to average children's income or separately to individual children's incomes, is constructed for a single generation in a steady growth economy. Behavioral parameters are set so that predicted bequests to the next generation are consistent with both the scale and assignment of inheritances (taken from a real-world source) for the simulation generation. The relative impact of inheritance and other factors on different aspects of economic inequality is assessed. While inheritance is a major cause of wealth inequality, its influence on annual income and lifetime resources is small, and in the latter case ambiguous. … Inheritance perpetuates and may intensify inequalities arising originally from other causes. In that sense, it is a secondary cause of inequality; but that is not, of course, to say that it is of secondary importance. The extent of its influence on distribution remains an open question, which cannot be decided merely by theoretical reasoning … but requires in addition something in the nature of a quantitative analysis of the relevant facts. -Wedgwood, 1929, pp. 60–61.

This paper analyzes the welfare implications of imperfectly categorizing risks in the insurance industry under conditions of asymmetric information. Firms, initially unable to distinguish the risk type of individuals, are provided with imperfect infor-mation concerning risk membership. The paper then compares various Wilson-type equilibria to determine the welfare implications of firms imperfectly categorizing risks. It is shown that only in the case where the initial equilibrium is of the Nash no-subsidy type is there a Pareto-type improvement in welfare. I.

Analyses of corporate pension plans often make unstated assumptions about an implicit labor contract. An example of the effect of such an assumption is that many mistakenly believe that if a worker's benefits are tied to final salary, he is protected against inflation until retirement. Also, the value of a worker's claims is often considered to be independent of the status of the firm's pension fund. These “implicit contract†assumptions are examined and questioned. The implications of analyzed pension liabilities in a manner consistent with the analysis of other corporate liabilities are explored.

The recent literature on “the reappraisal of Keynes” has viewed Keynesian equilibria as arising when prices are fixed and effective demands and supplies are equilibrated through the adjustment of quantities. One problem with this approach is that it lacks a theory of price determination—in particular, of why prices are fixed. In the present paper, we show that a number of Keynesian features arise in a model in which prices are fully flexible, but where agents have some monopoly power. One advantage of this approach is that it provides a theory of the determination of both prices and quantities.

Journal Article Favorable Selection with Asymmetric Information Get access Boyan Jovanovic Boyan Jovanovic Bell Laboratories Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 97, Issue 3, August 1982, Pages 535–539, https://doi.org/10.2307/1885876 Published: 01 August 1982

This paper analyzes the effect of commodity price stabilization on producers and consumers, both in the short run, and in the long run, when producers have adjusted their production decisions to take account of the change in the price distribution. We derive conditions under which (a) both producers and consumers may be better off; and (b) both producers and consumers may be worse off. Moreover, we show that the long-run effects may differ not only quantitatively but also qualitatively from the short-run effects. The anomalous results may occur even with reasonable assumptions concerning production functions and utility functions of producers and consumers.

Journal Article The Harvard Department of Economics from the Beginning to World War II Get access Edward S. Mason Edward S. Mason Thomas S. Lamont University Professor, Emeritus Harvard University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 97, Issue 3, August 1982, Pages 383–433, https://doi.org/10.2307/1885870 Published: 01 August 1982

In this paper we specify a model in which Congressmen, constituents, and campaign contributors simultaneously decide on behavior. Constituents and contributors desire to influence the voting behavior of Congressmen; Congressmen, on the other hand, want to be elected and vote accordingly. We empirically test this model using roll call voting on eight bills dealing with economic regulation and find support for the model. Our results indicate that part of the voting behavior of Congressmen may be explained by noneconomic factors. We also find that unions and businesses as campaign contributors are sometimes influential; unions are more often influential than is business. Ideological factors are also important in explaining voting.