Knowledge that Transforms

Virginia State Corporation Commission

Prepared in association with the Sloan School of Management and the Dept. of Economics

In Starrett's [1] elegant and important study, there is an oversight in the statement of Lemma 1 (p. 446). The sense of the inequality in equation (

Agricultural and Food Policy, Risk and Uncertainty

Agricultural and Food Policy, International Relations/Trade

In recent years there has been a systematic exploration of the implications of relaxing the strict assumptions of the textbook version of the Heckscher-Ohlin theory of international trade. Some of the bestknown propositions have turned out to be highly vulnerable to changes in assumptions. Thus if the assumption of constant returns to scale is relaxed, one must be prepared to sacrifice the Stolper-Samuelson and Rybczynski theorems (see Ronald Jones, 1968, and Kemp), and one must accept the possibility that commodity prices and outputs are negatively associated (see our 1969 paper). And if factor-market distortions are admitted, one must be prepared for the possibility that the ranking of industries by value factor intensities may be opposite to the ranking by physical factor intensities, implying in turn that outputs and prices may be negatively associated and that the Stolper-Samuelson and Rybczynski theorems must be rephrased and then cease to be dual to each other (see our paper with Stephen Magee; Jones, 1971). Against the background of traditional results, the new findings have been viewed as perverse and paradoxical.

Analysis of longitudinal earning data indicates higher earnings growth for scientists of the same experience but more recent vintage. Theoretical justification for such a relation is suggested, and the implied biases in cross-section data are noted. Because of a basic identification problem, an alternative interpretation, time-experience interaction, is also considered. The general conclusion is that earning growth is not uniform or neutral. There is no simple mechanical method by which lifetime profiles can be inferred from single cross-section data.

The paper addresses the problem of deriving shadow prices for use in project evaluation when the existing allocation is characterized by ad valorem trade distortions. The analysis is used to clarify and resolve the long-standing debate among effective-rate-of-protection and domestic-resource-cost proponents as to the respective merits of their measures as methods of project evaluation. The derivation of shadow factor prices is then extended to three major factor market imperfections familiar from extensive trade-theoretic analysis.

In this paper the issues raised in the turn-of-the-century American debate over the quantity theory of money are examined. J. Laurence Laughlin of Chicago,the leading antiquantity theorist, provoked the controversy with theoretical and empirical criticisms of the quantity theory, while Irving Fisher emerged as the chief defender of the monetary orthodoxy. Laughlin argued that issues of convertible paper money would not raise prices or the money supply but would instead lead to losses of monetary gold. His position was regarded as incompatible with the classical neutrality-of-money theorem. To identify the fundamental sources of disagreement between Laughlin and the quantity theorists, the neutrality-of-money proposition is decomposed into two components the neutrality proposition per se and the assumed causal role of money.