Knowledge that Transforms

Journal Article An Asymptotic Theory of Growth Under Uncertainty Get access Robert C. Merton Robert C. Merton Massachusetts Institute of Technology Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 42, Issue 3, July 1975, Pages 375–393, https://doi.org/10.2307/2296851 Published: 01 July 1975

Journal Article Aggregation, Income Distribution and Consumer Demand Get access John Muellbauer John Muellbauer Birkbeck College Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 42, Issue 4, October 1975, Pages 525–543, https://doi.org/10.2307/2296792 Published: 01 October 1975

K-equilibrium concept 3/ The existence of a K-equilibrium V -EFFICIENCY PROPERTIES OF K-EQUILIBRIUM 1/ The criterion 2/ Properties of a K-equilibrium 3/ Inefficiency and multiplier effects 4/ The cause of inefficiency VI -AM EXA/vlPLE 1/ The economy 2/ Computation of equilibrium transactions

B. Curtis Eaton, Richard G. Lipsey; The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition12, The Rev

Journal Article The Political Business Cycle Get access William D. Nordhaus William D. Nordhaus Yale University Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 42, Issue 2, April 1975, Pages 169–190, https://doi.org/10.2307/2296528 Published: 01 April 1975

Comments on S. Besen and R. Soligo's article about the economics of the network-affiliate relationships in the television broadcasting industry in the U.S. Sale of advertising time on network programs; Supply curve of cleared time; Definition of the nondiscrinating monopsonist solution; Demand for network programming. (Из Ebsco)

The comment by John Barron constitutes a very interesting extension of earlier work rather than a correction of it. He introduces the additional dimension of searching firms to find vacancies. The earlier work had concentrated on the searching of vacancies to find job offers. Clearly both are relevant and, not surprisingly, he finds that when different assumptions are made, different conclusions follow. He introduces the concept of mean (firm) search time T to find a particular firm with a vacancy in a given set of firms. Assuming random search, this time depends on the number of firms in the set. Thus, he finds that when a labor market is divided into N equal compartments, mean search time in each compartment is reduced by a factor of (1/N). The earlier work to which he refers implicitly assumed that the vacancies in a compartment could be located fairly readily. The hiring firms could be easily located but time consuming search was required to determine the particular vacancies which would produce job placements for particular workers. Thus, the relevant search time measure is the mean (vacancy) search time to locate a placement from the set of vacancies in the

I find myself in a situation like that of Moliere's M. Jourdain who was surprised to learn that he spoke prose. I am surprised to learn that-according to Maurice Allais, at least-I commit paralogisms. If all I wanted to do was dispute that, I would not take up space with this rejoinder; the law of diminishing returns applies with special force to these running controversies. The problem is, however, that Allais does not address himself directly to my criticism, and I think the criticism is important because it is fundamental. My point was a methodological one: that the tests of Allais' theory are probably quite weak. Allais' skirting of this point is unfortunate for two reasons. The first is that one might get the idea, from reading his reply, that his hereditary and relativistic formulation of the demand for money was under attack. The second is that one might think that he provides confirmation of his theory when I think that a careful scrutiny of his test procedures suggests otherwise. On the first point, nothing was further from my mind when I wrote my comment than an attack on the ideas in the hereditary and relativistic formulation of the demand for money. Quite the opposite was the case. I had then, and I continue to have, nothing but admiration for Allais' theory, which I think is original and may ultimately prove fruitful. I addressed myself only to the second point. The nub of the problem is that, in going from theoretical to empirical specification, Allais introduced an approximation which very likely robbed his tests of much power. That approximation consists of using velocity as a measure of the rate of forgetfulness (1966, p. 1135, equations (2.38) and (2.41)). That means that the estimated coefficient of psychological expansion' is a function, among other things, of past velocity. Since that coefficient is used to predict velocity, Allais' testing comes down to estimating velocity as function of its past. It could come perilously close, in other words, to estimating velocity as an autoregressive process. And if that is true, the test of the structural content of the theory is minimal. Allais' characterization of the above argument is that I accuse him of circularity. That is simply not true. What I suggest is that his tests have little power against the naive alternative of an autoregressive specification for velocity. It may be that velocity is a good measure of the rate of forgetfulness. But I have serious doubts as to whether we are going to be able to test that-or the other parts of the theory by appealing to the behavior of velocity. Allais in fact concedes that his test must be weak, although he does not say so explicitly. He grants that my argument is correct if we can identify measured with desired velocity (what he calls observed and estimated velocity): ... Scadding unfortunatelv fails to make the distinction between the observed and estimated values V and V*. In fact, his mathematical reasonings are valid only if V and v are replaced therein by V* and v* (p. 456). Yet in his original paper, Allais makes the same assumption in deriving the empirical form of his hvpothesis: . . but it can reasonably be suggested that the discrepancy between the actual and the desired value of money holdings is always relatively small. . . . It further follows that it is possible to write as a first approximation . . . (3.2) . .. (3.3) OD . . . * (1966, p. 1138).