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The Structure of Utility Functions

W. M. Gorman
Review of Economic Studies 1968 35(4), 367
Journal Article The Structure of Utility Functions Get access W. M. Gorman W. M. Gorman London School of Economics Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 35, Issue 4, October 1968, Pages 367–390, https://doi.org/10.2307/2296766 Published: 01 October 1968

Investment Behavior and Neo-Classical Theory

Robert Eisner; M. I. Nadiri
The Review of Economics and Statistics 1968 50(3), 369
p HE role of relative prices as determinant of factor demand has received wide attention in recent work. Major contributions 1 have been made by Dale W. Jorgenson who, either alone or with associates, has presented, along with various empirical results and certain policy conclusions, what is called a theory of investment behavior based on the neo-classical theory of optimal accumulation of 2 We shall endeavor in this paper to direct number of tests to critical points of departure in the Jorgenson model. This task has been greatly facilitated by Jorgenson, who has made available to us his own basic quarterly data for total United States manufacturing, thus permitting our re-examination to go forward without confusing the analysis with questions of data comparability.3 The essential burden of Jorgenson's argument is that substitution parameters have been improperly neglected or ignored in most work on the investment function. He accepts the widely held view of the demand for capital stock as function of the output produced but argues that it is also function of the relative price of output and capital. Investment itself then consists of the replacement of depreciating capital stock and distributed lag adjustment of capital to its (usually changing) equilibrium value. Jorgenson also argues that, in quarterly data at least, particular generalization of the techniques by Chenery and Koyck for estimating distributed lag relations is essential. Jorgenson seeks to capture the price or substitution effect in investment with various measures of, or proxies for the implicit rental or 'shadow price' of unit of capital services. ' In his original formulation 5 this depends upon the price of capital goods, q, the rate of depreciation, 8, the rate of interest, r, the relative rate of change of capital goods prices, q/q (capital gains), the rate of direct business taxation, u, and the proportions, v, w, and x, of depreciation, cost of capital, and capital losses (gains) chargeable against taxable income; his rental price for capital services is

A Planning Model for the Divisionalized Enterprise.

Shawki M. Farag
The Accounting Review 1968 43(2), 312-320
The article presents a micro input-output model, based on some basic concept of input output theory, which can be used for planning the activities of divisionalized enterprises. The continuing growth of the business enterprise in size and complexity places steady pressure on business accounting to find more effective ways of planning and controlling business operations. The author states that there are three pure types of models, iconic, analog and symbolic. The micro input-output model proposed here is a mathematical model of the deterministic type. The accountant who wants to use mathematical models in solving practical business problems has two main tasks. The first is to formulate a description of a problem in terms of mathematical equations. The second is to solve and interpret the equations. The first of these, frequently referred to as the building of the mathematical model, is often the more difficult. The underlying assumptions involved in the model are also stated in the article in order to clarify the nature and structure of the micro input-output model.