Kinky perceived demand curves and Keynes–Negishi equilibria

The label "Keynes–Negishi equilibria" is attached here to equilibria in a monetary economy with imperfectly competitive product and labor markets where business firms and labor unions hold demand perceptions with kinks: as posited in Negishi's 1979 book Microeconomic Foundations of Keynesian Macroeconomics . Such equilibria are defined in a general equilibrium model, and shown to exist. Methodological implications are briefly discussed in a concluding section.     

Negishi's contributions to the development of economic analysis: Research programs and outcomes

This paper surveys Negishi's significant contributions to economics and the research programs they have generated. In a series of papers and books, Negishi developed a number of models and methods of analysis that changed the course of modern economics and catalyzed research in areas that range from welfare and theoretical to applied and computable general equilibrium analysis, and the extension of imperfect competition to general equilibrium. trade theory and international economics. This paper shows that the Negishian research programs that emanated from his works are progressive, and still have an ongoing impact on mainstream economic analysis decades after their publication.     

Sticky prices as a coordination success

Recent contributions have articulated ways in which price rigidities signal breakdowns of coordination. These contributions are aimed at unifying New Keynesian economics by linking the issue of nominal price flexibility with that of between-firm coordination. By contrast, this paper demonstrates that sticky prices can signal a coordination success rather than a coordination failure. A model is developed in which N firms face a stochastic industry demand and engage in (infinitely) repeated Bertrand competition. In each period, firms are able to learn the realization of the demand shock but at a positive cost. The existence of two equilibria—one featuring sticky prices and the other featuring flexible prices—is proved. These equilibria are then compared. The equilibrium featuring sticky prices Pareto-dominates that featuring the flexible ones.     

Observations on technical change and paretian welfare economics

Summary This article brings together two major topics of economic theory: technical change and Paretian welfare economics. Until now, the tendency has been to study these topics separately. By introducing economic search behaviour in the first phase of technical change, the analysis of technical change is broadened by means of a link between this behaviour and so-called virtual goods. The concept of Pareto optimality is broadened by expanding the space of goods with new and virtual goods. The question is whether the generalized Paretian theory makes it possible to compareex post equilibria after the process of technical change with theex post situation before this process takes place. Although generalized Pareto optimality does not allow a welfare judgement on aprocess of technical change, the theory still provides us with an explanation for the allocation of resources of R&D in terms of consumer preferences and with an analytical device to compare actual economic structures with a generalized Pareto optimum in a static setting.If they (i.e. economists) are to perform their guiding task as conscientiously as possible, it is first necessary that they themselves have proper insight into the regrettably narrow limits of what economics has to offer to politics in terms of purely economic criteria; secondly, that they are aware of the foundations and the substance of their additional sociopolitical valuations and finally, that they do not fail to make these known when advising society. (Hennipman, 1995, p. 174).This article is a condensed revised version of my Prof. dr Pieter Hennipman Lecture of February 23, 1993. Some time after the presentation of the lecture, I had the opportunity to discuss several issues with my beloved teacher. No doubt this version benefited from his comments. 1 A notable exception is K.J. Arrow (1962, pp. 210–228).     

Stability of a competitive economy: A reconsideration

Negishi (1962) suggested that price adjustment was a means of attaining a particular optimum rather than an equilibrium; this provides the starting point for the present paper. Using a gradient process to arrive at an optimum, the paper shows that with proper distribution of endowments, this process may be considered to be an actual price adjustment process. The role of a proper distribution is investigated further and related to the existing published literature. It is also shown that if the distribution of endowments satisfies certain regularity features then the equilibrium will be globally stable under the classical price adjustment rule where price adjustment is proportional to excess demand.     

Instability of Equilibria in Experimental Markets: Upward-Sloping Demands,Externalities, and Fad-Like Incentives

The objective of the paper is to study markets in which the value of the activity to any one person increases with the level with which the activity is undertaken by others. The general interpretation could be fads, mimicking behavior, or some sort of belief formation process in which the beliefs or expectations of agents about some underlying state of nature are influenced by the buying behavior of other agents. The result is to create a market that can be modeled as having an upward-sloping market demand curve. The questions posed are (i) in the fad-like environment, does the classical concept of equilibrium (as an equating of market demand and market supply) accurately predict market behavior; (ii) can both stable and unstable equilibria be observed; and (iii) which of the two classical concepts of stability best describes the conditions under which instability is observed? Under the conditions of a fad-like demand side externality in a market organized by the multiple unit double auction (MUDA), market equilibration occurs at a point where demand equals supply. The disequilibrium behavior follows the dynamics of the Marshallian model of dynamics, as opposed to the Walrasian model. These results confirm and extend the major findings of Plott and George who studied a similar environment with a downward-sloping supply.     

Between micro and macro — what economic history can learn from modern economics

Abstract

The aim of this paper is to discuss the role of economic history to modern economic theory. Taking my point of departure from the division that still haunts economic history — between micro and macro approaches — the paper argues that economic theory today is significantly different from what it was only twenty or thirty years ago. Hence, for example, the division between micro and macro has been upset in modern economics. Also the development of institutional economics, the use of concepts like “bounded rationality” or “path dependence” makes it necessary for economic historians to learn from and confront modern economic theorizing. Many economic historians criticise a version of (neo-classical) economics) that belongs rather to the past than to the present.     

The macroeconomics of self-fulfilling prophecies Roger E. A. Farmer MIT Press, 1993, 259 pp.

In The Macroeconomics of Self-Fulfilling Prophecies, Roger Farmer argues that dynamic general equilibrium models represent a useful means for organizing and representing one's understanding of macroeconomic behavior. Reasonably small departures from the standard assumptions of Arrow-Debreu economies can lead to equilibria with non-trivial roles for macroeconomic policy. Farmer demonstrates through theory and example the potential for multiple equilibria, which he suggests can be treated by better specification of agents' beliefs. The existence of multiple equilibria creates the possibility of bounded fluctuations due to animal spirits or "self-fulfilling prophecies." The author is indebted to Robert Holland and Chris Waller for comments on a previous draft.     

An Austrian Foundation for Microeconomic Principles

Teaching Microeconomic Principles well, a blend of good pedagogy and good economics, is the professional obligation of many economists. Since such courses are conventionally grounded in neoclassical theory, professors who embrace the theoretical perspective of the Austrian School may seem to confront a dilemma unfamiliar to other teachers: Teach the course well, or teach good economics? The thesis of this paper is, simply, that there is no such conflict. Incorporating properly chosen attributes of Austrian theory makes one’s Microeconomic Principles course better. This conclusion would be rejected by those who identify Austrian economics as adding complex disequilibrium propositions to an equilibrium analysis indistinguishable from that of neoclassical theory, or who think it dismisses equilibrium entirely, but both positions misunderstand the School’s nature. Among Austrian theoretical attributes that enrich a Microeconomic Principles course are methodological individualism, ordinal subjective utility and cost, future orientation, entrepreneurship, a process view of competition, and consideration for market participants’ knowledge. In this paper these characteristics—many ostensibly shared, but not consistently respected, by neoclassical theory—are applied by developing conventional smooth supply and demand curves, and their interaction in markets, from individuals’ value comparisons of discrete units. The paper concludes that an Austrian foundation is simultaneously more theoretically accurate and closer to the student’s everyday life, a combination that means a better Principles course.     

Professor Ronald W. Jones and his influence on Asia Pacific economics

Professor Ronald W. Jones is one of the greatest general equilibrium theorists, who has illustrated the economic force underlying a general equilibrium adjustment in a very elegant manner. With his friendly personality, at the same time, he has made an enormous contribution to Asian Pacific economic research and the formation of a strong network of economists in our region. This essay intends to explain what I think of as the essence of his economics and his contributions to Asia Pacific economics.     

Comments on “interpreting Chinese contributions to development policy from aspects of Chang'e 4”

This article is a comment on The Fallacy of Washington Consensus and the Role of the Government: Interpreting Some Chinese Contributions to Development Policy from Aspects of Chang'e 4 by Jinghai Zheng.The comparison between how equilibrium concepts are used in economics and natural sciences is extended to areas such as biology, chemistry and convex optimization in mathematics and is discussed on the basis of the state's role in economics and general equilibrium theory.     

Why organizations matter: A journey away from the fairy tale

This paper contends that a major breakthrough has occurred in economics, that this breakthrough is related to the matching of economics and organization theory, and that this breakthrough is already remodeling our understanding of how economic systems work. Section I comes back to the problem of the existence of organizations and to its generalization through the concept of "governance" structures. Section II develops the explanation provided by transaction cost economics of the trade-off among these structures. Section III compares recent contributions of agency theory and of transaction cost economics to the analysis of the structuring mechanism of formal organizations. Section IV explores some properties of the government of organizations. Section V argues that what precedes may have major consequences on public policies and regulations. Distinguished Address presented at the Forty-First International Atlantic Economic Conference, Paris, France, March 12–19, 1996.     

论诺齐克与自由至上主义

自由主义是西方政治理论中一个历史悠久的话题,也是一个经久不衰的话题。自由主义在历史上既是一种学说,也是一种运动、一种意识形态。自由至上主义是自由主义一种重要的论证路径,它主要指的是一系列能得到大多数社会理论家(如自由至上主义者或古典自由主义者)赞同的经济学说和道德、政治原则。本文将结合诺齐克的相关思想简要地论述自由至上主义的相关内容。     

Monopoly supply

Summary and Conclusions In the preceding sections, it is shown that a supply curve in the ordinary sense does exist and can be derived, which corresponds to a specified family of demand curves described by changes in a single parameter of demand. If the demand curve hasn parameters, an equal number of supply curves can be derived, one corresponding to each family of demand curves generated by variation in one of the parameters, holding the remainingn–1 constant. Since the demand curve family facing the perfectly competitive firm has the formP =a, there is only one supply curve in this case. Further, that supply curve does not involve demand parameters since the sole demand parameter,a, is eliminated in its derivation. In general, this is not the case and the marginal cost schedule will be insufficient to describe the supply relation for imperfectly competitive firms.In the teaching of graduate and undergraduate microeconomics, students often become confused by conflicting discussion suggesting that monopoly nopoly supply is meaningless, irrelevant, or a point. If there is only one demand curve, the equilibrium price-quantity supply will be one point regardless of whether monopoly or perfectly competitive firms are being considered. The broader definition of supply advocated here offers the pedagogic advantage of stressing the fundamental uniformity of the supply concept in the theory of the firm. With shifting demand, there is a meaningful supply relation in both the competitive and monopoly case.As indicated in Section III, this generalized definition of supply has strong implications for empirical work, showing that it is tractable to estimate monopoly supply relations as well as marginal cost curves in the monopoly case and thus opening the door to useful new empirical work.     

经济学中演化分析和均衡分析的历史争论与现实反思

在经济现象的产生和发展上,经济学界长期存在两种解释思路：一是基于异质性个体互动的基础之上的动态演化分析,这是以有机的、动态的和开放的世界观为基础的结构主义思路,它把行为主体看成是异质的;二是基于同质性个体假设基础上的静态（或比较静态）均衡分析,这是以机械的、静态的和封闭的世界观为基础的新古典主义传统,它强调行为主体的同质化。显然,现代经济学的基石就是一般均衡理论,因而静态均衡分析也就是现代经济学的基本方法;在均衡框架下,现代经济学研究理性经济人如何按照效用最大化原则实现资源最优配置。但是,这种均衡分析用于分析现实时却遇到非常严峻的问题：一者,它所依赖的假设条件是非现实;二者,无法考察人类行为和经济现象的动态演化。因此,现代主流经济学也正面临着严峻的挑战。     

Is debased language an economic problem?

Neo‐classical theory is often attacked because of its alleged lack of realism and nowhere is this said to be more conspicuous than in the Held of development economics. However, when one examines the terminology used in support of such criticism, it tends to lose much of its apparent force. The present article sets out the meaning of positive and normative economics in a neo‐classical setting, and briefly considers the implications of the market system and the unequal pattern of income distribution with which it is associated. Our general conclusion is that debased language serves to sustain obsolete ideas.     

Complete solution of the integrability problem for homothetic demand functions

For any Walrasian demand function, the Strong Axiom implies (and is implied by) rationalizability by a complete preorder. However, these equivalent conditions do not ensure the existence of a continuous utility function or complete preorder giving raise to the primitive demand. We here propose a self‐contained proof of a related fact: if the demand is homothetic and continuous, the Strong Axiom characterizes the existence of a continuous and homogeneous of degree one subjective utility function (or a continuous and homothetic complete preorder) representing the demand. Our contruction depends upon standard tools and overturns the need for ad‐hoc axioms that were used in prior published literature on the topic.     

Existence of Bertrand equilibrium revisited

In this paper we reconsider existence of Bertrand equilibrium in a symmetric‐cost, homogenous‐product oligopoly. We prove the following main results. (a) If the cost function is strictly superadditive on [0, ∞) then there exists a pure strategy Bertrand equilibrium. Such Bertrand equilibria are necessarily non‐unique. (b) If the cost function is strictly subadditive on [0, ∞) then there exists no Bertrand equilibrium, either in pure strategies or in mixed strategies.     

Is System Dynamics Modelling of Relevance to Neoclassical Economists?

System dynamics modelling is a technique that is widely used in business, environmental and ecological applications. In the field of economics, however, it is less frequently used, and those that do use it are usually not professionally trained economists. One of the reasons for this is the perceived ideological differences between system dynamics modelling and neoclassical economics. System dynamics is classified in the literature as a heterodox approach. This article utilises a reputable framework from social theory to compare system dynamics modelling and neoclassical economics on ontological and epistemological grounds. This is the first known study to find congruency between these two approaches on this basis. System dynamics modelling has the potential to increase the range of modelling tools at the disposal of neoclassical economics, so long dominated by econometric and general equilibrium modelling approaches.     

The Mundane Economics of the Austrian School

The Austrian School of economics—the causal-realist, marginalist, subjectivist tradition established by Carl Menger in 1871—has experienced a remarkable renaissance over the last five decades. It is not always clear, however, exactly what distinguishes the Austrian School from other traditions, schools of thought, approaches, or movements within economics and its sister disciplines. This paper argues that Austrian economics, while part of a broader tradition emphasizing the coordination of the market order, is nonetheless a distinct kind of economic analysis, and that its essence is not subjectivism, the market process, or spontaneous order, but what I call “mundane economics”—price theory, capital theory, monetary theory, business-cycle theory, and the theory of interventionism. Call this the “hard core” of Austrian economics. I argue that this hard core is (1) distinct, and not merely a verbal rendition of mid-twentieth-century neoclassical economics; (2) the unique foundation for applied Austrian analysis (political economy, social theory, business administration, and the like); and (3) a living, evolving body of knowledge, rooted in classic contributions of the past but not bound by them. Most Austrian economists from Menger to Rothbard devoted their energies to developing and communicating the principles of mundane economics, not because they failed to grasp the importance of time, uncertainty, knowledge, expectations, institutions, and market processes, but because they regarded these issues as subordinate to the main task of economic science, namely the construction of a more satisfactory theory of value, production, exchange, price, money, capital, and intervention.