THE AD-AS MODEL AND ITS SOLUTIONS: SOME NEW RESULTS IN A DISEQUILIBRIUM PERSPECTIVE*

This paper discusses the logical foundation and the solutions of a microfounded aggregate demand … aggregate supply model under the disequilibrium hypothesis. We first show that a) the latter hypothesis is the only one ensuring model consistent expectations and that b) price predetermination, more than price flexibility, should be embodied in an AD-AS framework. Then we develop a full AD-AS scheme, both under excess supply and excess demand for labour. We prove that in the latter case no well defined equilibrium exists. Finally, we discuss stability and perform some comparative statics exercises.     

CAPACITY UTILISATION IN THE LONG RUN: SOME FURTHER CONSIDERATIONS

The variability of long-run capacity utilisation has to be consideredas an expression of the determining role played by aggregatedemand in the process of growth. This paper discusses the modelproposed by Serrano in which such a determining role is apparentlyreconciled with the condition of normal utilisation of existingcapacity in the long run. It is shown that Serrano's conclusionslie on the hypothesis of the constancy of the growth rate ofautonomous demand, an assumption which seems to originate froman erroneous interpretation of the property of ‘relativepersistence’ of ‘normal’ magnitudes. The paperargues that if that assumption is abandoned, the autonomy ofaggregate demand necessarily shows itself through the variabilityof capacity utilisation in the long run as well as in the shortrun.     

VOTING AND THE INTERTEMPORAL SELECTION OF TAX RATES IN A MACRO-ECONOMY*

This paper presents a macroeconomic model where governments are motivated both by their ideological preference for alternative fiscal policies that vary in their short run and long run consequences and by their reelection prospects. I prove that a sequential equilibrium exists in which moderate incumbents compromise their ideologies in order to get reelected, while extreme governments forego reelection but tie the hands of their successors. The view implied by this model is that incumbent governments, in order to get reelected, do not ideologically differentiate themselves from one another since such behavior is likely to result in loss of office. Alternatively, governments that are either subsequently not reelected or are lame ducks pursue ideologically preferred policies since they are less constrained by the electorate.     

SOME INEFFICIENCY IMPLICATIONS OF GENERATIONAL POLITICS AND EXCHANGE*

This paper explores the implications of generational selfishness in a model in which each generation has its own government. Such selfish generational governments will potentially distort the economy along a number of dimensions. One is the monopolization of factor supplies; another is the under- or overprovision of durable public goods. We demonstrate that selfish generations may place sizable marginal taxes on their factor supplies in order to monopolize their factor markets. We also show that selfish generations will provide inefficient levels of durable public goods both at the local and national levels. Finally, we demonstrate that generational inefficiencies can arise even in models of cooperative bargaining because of the first-mover advantage of earlier generations.