A note on stabilization and the World Bank

Balance-of-payments support has long been regarded as requiring only short-term or medium-term financing. It is not generally realized that the original intention at the time of Bretton Woods was that since balance-of-payments problems sometimes call for long-term financing, the World Bank should be empowered to provide such financing. The Bank's clear authority in this regard was allowed to atrophy, with the result that a major gap opened up in the operating functions of the Bretton Woods institutions.     

Binary choice and the supply of memory

In a binary choice experiment, the subject predicts on a series of trials whether a particular random event will or will not occur. The results of such experiments show systematic departures from expected value maximization, but to a degree that decreases as the reward for successful prediction increases. This paper proposes that the mechanism underlying these results involves the supply of memory. Subjects are influenced by the outcomes of recent trials, but tend to respond to the evidence in a larger number of trials as reward (and hence attention) are increased. Broader conceptual issues surrounding the notion of rational choice are also discussed.     

Attention allocation and input proportions

This paper presents an alternative to the standard microeconomic analysis of the effects of a change in relative input prices. Managers are portrayed as struggling to control costs. Because a rise in the price of a given input ‘promotes’ operations intensive in that input in the managerial attention priority list, it induces tighter control of such operations and thus a lower relative utilization of the input. The deterministic model analyzed is akin to stochastic models studied by Radner and Rothschild.     

Control your inventory in a world of lean retailing

As retailers adopt lean retailing practices, manufacturers are feeling the pinch. Retailers no longer place large seasonal orders for goods in advance-instead, they require ongoing replenishment of stock, forcing manufacturers to predict demand and then hold substantial inventories indefinitely. Manufacturers now carry the cost of inventory risk--the possibility that demand will dry up and goods will have to be sold below cost. And as product proliferation increases, customer demand becomes harder to predict. Most manufacturers apply one inventory policy for all stock-keeping units in a product line. But the inventory demand for SKUs within the same product line can vary significantly. SKUs with high volume typically have little variation in weekly sales, while slow-selling SKUs can vary enormously in weekly sales. The greater the variation, the larger the inventory the manufacturer must hold relative to an SKU's expected weekly sales. By differentiating inventory policies at the SKU level, manufacturers can reduce inventories for the high-volume SKUs and increase them for the low-volume ones--and thereby improve the profit-ability of the entire line. SKU-level differentiation can also be applied to sourcing strategies. Instead of producing all the SKUs for a product line at a single location, either offshore at low cost or close to market at higher cost, manufacturers can typically do better by going for a mixed allocation. Low-variation goods should be produced mainly offshore, while high-variation goods are best made close to markets.     

Dynamics of social factors in technological substitutions

Diffusion models of technological innovations are often based on an epidemic structure which has a good fit to historical data but whose communication assumptions lack explanatory power. They assume a simplified decision process, uniform decision criteria across adopters categories, and a fully interconnected social structure. The objective of this paper is to show that the dynamics of social factors during technological substitutions have significant effects on substitution patterns. The success of a paradigmatic shift is not only a function of technological characteristics but also depends on change agents and many social dynamics. Such complexity requires analysis at several levels of granularity. We start with cognitive processes at the individual level using concepts from cognitive psychology and decision making under uncertainty and then move to interpersonal communications at the aggregate social level. We show that population heterogeneity generates different decision criteria and a social topology which greatly affect perceptions and the formation of expectations. The structure of interpersonal networks also explains how the relevance and credibility of information impact the critical mass dynamics of technology adoption. A more complete model accounting for social interactions provides a useful framework for understanding complex substitution patterns and reducing the risk of misreading the market.     

Comparison Utility in a Growth Model

We examine the dynamics of two endogenous-growth modelsin which agents have comparison utility. In the inward-lookingeconomy, individuals care about how their current consumptioncompares with their own past consumption. In the outward-lookingeconomy, they care about how their own consumption compares withother peoples consumption. In response to a negative shock tocapital, saving and growth will temporarily fall in both of themodels that we consider but will remain constant in a model withstandard preferences. The decline will be smaller in the outward-than in the inward-looking case, but utility will be lower inthe former case because of a negative externality.     

Consumption in the closed von Neumann model

Conclusion This new method for introducing extra consumption into the closed von Neumann model is not without flaw. In addition to requiring collusion by labor, the mechanism increases the dimension of the commodity space so that comparisons between intensity (or price) vectors before and after the introduction of consumption are difficult to make. It is claimed, however, that the method is free from the objection of Malinvaud. The method allows alternative processes for producing extra consumption and provides a mechanism for selecting among the alternative processes. Further, the new method solves the problem of allocating the extra consumption to the labor force.W. W. Cooper, Leif Johansen, and M. C. Lowell made helpful suggestions on earlier darfts of this article. This version is better for their help but any remaining errors are to be credited to my account.