The Division of Labor Under Homogeneity: A Critique of Mises and Rothbard

A bstract .   Even the most passionate defenders of free trade, such as Mises and Rothbard, claim that trade cannot occur under conditions of strict homogeneity of land, labor, and capital. We show that specialization, trade, and the division of labor can emerge even when resources are initially homogenous, due to "natural heterogeneity," economies of scale, and learning.     

Noisy chaotic dynamics in commodity markets

The nonlinear testing and modeling of economic and financial time series has increased substantially in recent years, enabling us to better understand market and price behavior, risk and the formation of expectations. Such tests have also been applied to commodity market behavior, providing evidence of heteroskedasticity, chaos, long memory, cyclicity, etc. The present evaluation of futures price behavior confirms that the resulting price movements can be random, suggesting noisy chaotic behavior. Prices could thus follow a mean process that is dynamic chaotic, coupled with a variance that follows a GARCH process. Our conclusion is that models of this type could be constructed to assist in forecasting prices in the short run but not over long run time periods.First version received: June 2001/Final version received: March 2003     

A Permanent Income Model of Public Consumption

This paper tests the permanent income hypothesis (PIH) for public consumption. Unlike private agents, a government is a representative national, infinitely-lived agent that usually faces no liquidity constraints. Thus, the expectation is that the PIH restrictions should not be rejected for public consumption. However, using U.S. data, the paper is unable to find evidence supporting the permanent income model of public consumption. Public consumption is found to be sensitive to lagged public income and too smooth relative to permanent public income. The results therefore cast doubt on the characterization of the public sector as a social welfare optimizing agent.     

Parallel Neutrality

This paper develops the notion of parallel-neutral technical change for inputs and outputs. It is shown that parallel-neutral technical change generalizes existing radial notions of neutral technical change. A taxonomy of the structural consequences of parallel-neutral technical change is developed.     

On the uniqueness of individual demand at almost every price system

A simple new proof, based on Fubini's theorem, is given for the uniqueness of individual demand at almost every price system, even if preferences are nonconvex.     

Bargaining under Uncertainty and the Monotone Path Solutions

Uncertainty with respect to the feasible set of utility vectors is introduced in an axiomatic bargaining model. Given a criterion for nonprobabilistic decision-making under uncertainty, a natural efficiency requirement can be imposed on a bargaining solution. Using the maximin ordering, thestrictly monotone pathsolutions (generalizations of theegalitariansolution) to the bargaining problem are characterized as the only continuous solutions that satisfy this efficiency axiom. If the maximin criterion is replaced by the maximax ranking or a strict convex combination of the maximin and the maximax criterion, imposing our efficiency axiom and continuity leads to thedictatorialsolutions.Journal of Economic LiteratureClassification Number: C78.     

Aggregation of Directional Distance Functions and Industrial Efficiency

Three main objectives are pursued in this paper. First, we intend to analyze the aggregation problem of directional distance functions from a constructive viewpoint. We provide necessary and sufficient conditions concerning the structural properties of the production technology and of the nature of groups of firms. Indeed, exact additive aggregation holds for a linear technology and for a direction solely defined in the output space. Second, since these conditions are somewhat restrictive, we are interested in providing a measure for the aggregation bias through the relationship between industrial and structural technical efficiency. Finally, we show that this aggregation bias is a lower bound for industrial allocative efficiency.     

Continuous choice functions and the strong axiom of revealed preference

Summary In this note, it is shown that a result due to Uzawa showing that the weak axiom of revealed preference together with a regularity condition implies the strong axiom of revealed preference can be derived from the regularity conditionalone, if the choice function is continuous in prices and in income. The observation that the weak axiom of revealed preference is not needed suggests that this regularity condition is remarkably strong. The main result of the paper is quite general in the sense that the only additional assumption on the choice function is that the whole budget be spent.I thank Charles Blackorby for his comments on an earlier version.