Knowledge that Transforms

Distributions of income are compared under the alternative regimes of free access to, and private property in, a resource. It is shown that, in several analytically distinct cases, all those deprived of free access on conversion of a resource to private property can be better off, even though no compensating transfers are made. This resu lt can hold even if the granting of private property rights also conf ers monopoly or monopsony power.

In this paper I present an econometric investigation of the implica-tions of the irlterternporal substitution hypothesis fhr aggregate ern-ployrnent in the United States. The tests are based on a version of the hypothesis with tirne-separable preferences. On the basis of the evidence produced, the hypothesis is quite successful in explaining fluctuations in aggregate employment, although almost totally un-successf~~lin accounting for fluctuations in employee hours. These findings suggest that the hypothesis rnight have an important role to play in macroeconornic rnodeling, although they contradict attempts to account for aggregate fluctuations solely in terrns of continuous competitive equilibrium in labor markets. I.

This paper constructs a two-period, two-sector model in which there are permanent sectoral shocks. It analyzes the equilibrium path of individual labor supply, sectoral em ployment, and duration of unemployment in response to these shocks. E quilibrium allocations are shown to be easy to characterize and compa rative statistics results are provided.

This paper presents a two-country model with maximizing households, stochastic production, stochastic money growth, and perfect capital mobility. Because of the presence of nontraded goods, households in different countries consume different goods. Analytic solutions are presented for the nominal exchange rate, the real exchange rate, nominal interest rates, and real interest rates. It is shown that the model is compatible with some important features of the real-world behavior of exchange rates. When households are imperfectly informed about the distribution of money growth, the exchange rate exhibits patterns of overshooting and is more volatile than the ratio of the money stocks.

Houses in cold climates are kept warmer in winter than those in warm climates, des pite the greater cost of heating in colder climates. It is shown that this is not only consistent with, but also implied by, rationality. The contrary intuition is based on a confusion between average and ma rginal cost. The same analysis implies that it is rational to keep th e thermostat setting constant throughout the heating season rather th an changing it with changes in external temperature.

In the conventional model of labor supply, working hours are implicitly assumed to be divisible goods, which is an obviously unrealistic assumption. The purpose of this paper is to analyze working hours as indivisible goods. When working hours are indivisible, labors are differentiated in the market by their length, and wages will be a function of working hours. The main conclusions are that (1) in the market equilibrium, the elasticity of the hedo nic wage curve with respect to hourly wage rates must be positive or less than A1 and (2) generally data will reveal neither demand nor su pply structures.

A two-period model of an industry of risk-neutral processors who have nonlinear production costs and who face transact ions costs in the spot and futures markets is put forth as a countere xample to the models of commodity markets in which processors' risk a version plays the major role. The model's equilibrium exhibits the sa lient endogenous features of actual commodity markets, namely, that t he futures price is below the current spot price, that processors hol d inventories despite this opportunity cost, that those holding inven tories are short in futures, and that processors as a group hold an u nbalanced, usually net short, position in the futures market.

This paper shows that allowing wealthy individuals to influence the outcome of their trials through the purchase of legal services can be consistent with the optimal penalty literature. Using this analysis, the author reviews some of the advantages and disadvantages of varying the length of jail terms versus varying the probability of conviction. Finally, implications for the bail, prosecutorial, and plea bargaining systems are examined.