Knowledge that Transforms

We construct a general equilibrium model of international trade where each government agent has a system of tariffs as his strategic variables. Our general equilibrium model follows recent contributions allowing incompleteness and intransitivity of consumer preferences. Government agents are assumed to have incomplete information on the preferences of domestic consumers and the availability of commodities. The behavior of each government agent is to choose a system of tariffs to maximize the estimated preferences of domestic consumers with a constraint on an estimated availability of commodities. We introduce an equilibrium concept so that (a) estimated preferences and an estimated available set of commodities are compatible with an observed state of the world economy and (b) a consumption bundle intended by each government agent coincides with a consumption bundle chosen by its domestic consumers. Our major goal is to provide the existence of such an equilibrium.

[In a broad class of situations not covered by the Gibbard-Satterthwaite Theorem it is shown that one cannot design a strategy-proof choice mechanism which attains Pareto optimal outcomes. The results are shown to be genetic in character--i.e., any nonmanipulable mechanism will attain nonoptimal outcomes virtually everywhere--and they cover, in particular, certain problems of allocating public and private goods. The analysis is carried out in transferable utility environments, and makes extensive use of the mechanisms recently introduced by Groves.]

The purpose here is to make explicit the sense in which two dynamic processes, due to Malinvaud and others (whose solutions determine an efficient allocation for a given economy), are related to the gradient projection method known in the nonlinear optimization literature. The connections we establish derive from simple observations on first order characterizations of efficient allocations; they also lead to the formulation of another process, that applies to a classical welfare maximization problem; finally, they provide a common basis for an a priori justification of each of the three processes involved, which supplements the intrinsic properties that they can be shown to have.

In this paper we discuss the (Pareto) optimal provision of a public good (desirable or undesirable) in an intergenerational model of an economy, where regeneration is an endogenous decision variable of the households in the economy. We show that in addition to providing desirable public goods and/or levying the well known Pigouvian taxes on polluting industries, a government must subsidize households who are consuming a desirable public good and tax consumers who are consuming an undesirable public good (pollution). In addition, we show that there is a public rate of return, distinct from the market rate of return, that should be used by the government for the evaluation of investments in public goods. This public rate of return is smaller than the market rate of return in a growing economy and larger than the market rate of return in a declining economy. We investigate biases in both the public and market rates of return, as well as in other parameters which characterize the economy, as a result of nonoptimal governmental behavior. We discuss the question of how to aggregate biases due to different public goods. 1. INTRODUCTION THE RENEWED INTEREST in the interrelationship between household behavior and economic growth has recently been emphasized by the contributions of Nerlove [15] and of Razin and Ben Zion [17], both of which offer an intergenerational model of population growth. In this paper we follow the lead of Razin and Ben Zion but add to the economy a public good (desirable or undesirable) and a government whose function is to insure the (Pareto) optimal provision of this public good. We assume a homogeneous population with respect to tastes, abilities, and initial endowments and thus we address only efficiency considerations.

[This paper is concerned with giving general conditions for the validity of a approximation to a distribution function by means of the weighted sum of a set of Chi-squared distribution functions. The conditions are very similar to those of [3]. The approximation is illustrated by an example of its use.]

This paper builds a formal theory of consumer behavior under imperfect information when goods are described by multiple characteristics which vary in their degree of "observability." An optimal strategy for the consumer is shown to exist. In general, this strategy is shown to involve both inspection (sampling to observe general characteristics of goods) and evaluation (consumption of goods to observe specific characteristics). Comparative statics of the optimal strategy are also analyzed.

[This paper constructs a life-cycle model of the consumer's allocation process in which the capital market is imperfect and the consumption bundle at each instant includes both durable and nondurable goods. The nondurables are instantaneously consumed at the moment of purchase, while the durable good is accumulated and yields a flow of services over its lifetime. The durable investment is assumed to be irreversible. The consumer's optimal allocation program is shown to vary between the periods of borrowing and lending with each phase defining a different relationship between consumption and the "truncated" permanent income.]

This paper is a revised version of a paper originally en.titled "Asymptotic Properties of Nonlinear Weighted Least Squares Estimators with Independem not Identically Distributed Regressors." In Section 2, the strong consistency of a class of weighted least squares (WLS) estimators is proven under general conditions, as well as the strong consistency of weighted least squares with estimated weights (EWLS). Conditions which ensure asymptotic normality of the estimators are provided in Section 3, and a general statistic for testing hypotheses is given. In Section 4, consequences of misspecification are discussed and a test for misspecification is given. Section 5 contains a summary and concluding remarks. As should be expected, the condi- tions obtained are natural extensions of those found in the fixed regressor case. Also, the unconditional covariance matrix of the parameter estimates has a more general form than the usual conditional covariance matrix