The theory of involuntary international transfers (war indemnities) has been constructed on the assumption that the donor and recipient are completely indifferent to each other’s well‐being. The assumption is hard to justify since usually the transfers closely follow periods during which the countries have been dropping bombs on each other. In the present paper, we rework the theory on the more plausible assumption that the well‐being of each country is negatively influenced by the well‐being of the other country. It is shown that, contrary to the conventional theory, the donor might benefit at the expense of the recipient, even when local Walrasian stability is imposed.

Monopoly, 346.—Competition, 347.—Comparison of the monopolistic and competitive paths, 349.—The socially optimal path, 351.—Final remarks, 351.

Consider a closed economy with several deposits of an exhaustible resource, with the marginal cost of extraction differing from deposit to deposit but constant for each deposit. It is widely believed that social optimality requires that deposits be exploited in strict sequence, beginning with the lowest cost deposit. It is shown that, in a general equilibrium context, with Ricardian techniques of extraction, the validity of the proposition depends on what is meant by constancy of cost. It is also believed that if there exists a high-cost substitute for the resource then the resource should be exhausted before production of the substitute is begun. It is shown that this proposition is false.

John S. Flemming, Stephen J. Turnovsky, Murray C. Kemp; On the Choice of Numeraire and Certainty Price in General Equilibrium Models of Price Uncertainty,