Substitution assumptions versus empirical evidence in manpower planning

Summary There exist basically two manpower planning methodologies. Firstly, the manpower requirements approach which stipulates that there are needs in the economy for given numbers of qualified persons in the labour force. Secondly, the rate of return approach which focuses on the costs and benefits of producing one extra qualified person at the margin.This paper contrasts the theoretical foundations of the two approaches with particular emphasis on the degree of substitution between different types of educated labour. The empirical evidence on elasticities of substitution is reviewed and it is concluded that the cost-benefit model fits better the real world.I am indebted to Dr. Christopher Dougherty for reading a draft of this paper and making many important corrections.     

Economische politiek en verbeeldingskracht naar een zesde fase in het proces van economische groei

Summary The M.I.T. report for the Club of Rome tries to indicate the limits of economic growth. The thesis submitted by the report requires us to reconsider the concept of economic growth that we have been handling during the last decades. Galbraith's thesis on the Affluent Society makes a reconsideration of the concept of growth more acceptable. What is necessary is not really slowing down growth but modifying the structure of the growth process. All this requires a clear picture of the society that we prefer: an enlightened utopia. The modification of the structure will cause such discontinuities in the growth process as to add a sixth stage to the five stages of economic growth that have been suggested by Rostow.Rede, uitgesproken bij de aanvaarding van het ambt van gewoon hoogleraar in de staathuishoudkunde aan de faculteit der sociale wetenschappen van de Nederlandse Economische Hogeschool, Hogeschool voor Maatschappijwetenschappen te Rotterdam op donderdag 12 oktober 1972.     

Forward exchange,short term capital flows and monetary policy

Summary This paper re-examines the relationships between short term capital flows and monetary policy, in the light of a new theoretical approach of the forward exchange market. They contend that the traditional forward exchange market theory is a misleading one as it fails to give all the importance it deserves to the distinction between covered and uncovered exchange transactions and to the actual role of the arbitrageurs. As a consequence of this analysis, they demonstrate that the problem of monetary management in an open economy must be dealt with in a way different from what has been usual, and they conclude that monetary policy, central banks' intervention on the foreign exchange market and direct controls on capital movements can still have some efficiency in the struggle against inflation, either of the domestic or the imported type.     

Post- war European economic development as an out of equilibrium growth path. The case of the Netherlands

The paper examines a number of aspects of post-war economic development of the Netherlands in the light of recent out of equilibrium growth theory. It contains a comparison of the stylized facts of the long run performance of the economies of the United States and the Netherlands which suggests that the US has been on an equilibrium growth path for more than a century, but that the Netherlands followed a radically different growth path, especially after 1945. It is attempted to explain this erratic behaviour of the investment ratio and the wage share after 1945 by examining two aspects more in detail: the financing of the acceleration of growth after 1945 and the phase of too rapid growth during the 1950s and 1960s, when the growth of the demand for labour tended to be higher than the increase in its supply.     

Exchange rate theories

Summary A four-period classification is used to categorise recent exchange-rate theories or models. In the very short period, only capital flows are relevant. In the short period, both capital flows and payments on the current account play a role. In the long period, the capital account and the current account are individually in equilibrium. In the very long period, purchasing power parity holds. Cash-in-advance models are dealt with separately. Many models that purport to explain exchange rates do in fact not provide for the exchange of currencies. No model stands up satisfactorily to econometric testing. Speculative bubbles, the peso problem and news play havoc with tests of the uncovered interest parity theorem, the core of the monetary models. This aside, the fundamental assumption of rational expectations itself is suspect. There does not seem to be such a thing as a true model.I am indebted to Dr. W.J.B. Smits and Professor J.W. Gunning for helpful discussions on a number of issues pertinent to this article.     

Health care system collapse in the united states: Capitalist market failure!

Summary When compared with other industrialized free-market economies, the United States has the highest per capita health expenditure, yet, Americans are the least satisfied with their health care system. This industry has been confronted with serious problems resulting in a departure from the Pareto efficient conditions. There are many circumstances under which this departure may occur, one such cause is market failure. Sources of market failure in the health care industry are identified as: 1) lack of competition; 2) insufficient information; 3) inadequate access to health care services; 4) presence of externalities; and 5) a persistent disequilibrium in the hospital, physicians, and nurses markets. The pricing of physician's services has often been described as that of a discriminating monopolist. Through market segmentation and patient demand manipulation the physician is able to charge different prices for virtually identical services. One form of market segmentation is that of physician specialization and sub-specializations thus contributing to the explosion in medical costs. This paper concludes that America's health care industry has reached a crossroad. A national health insurance is needed including the implementation of uniform pricing and the discouragement of sub-specializations with its price discriminatory practices. But National Health Insurance comes with a price of its own, the possible development of a medical-industrial complex.We are grateful to the anonymous referee(s) for valuable comments that enhanced the writing of this paper and we would like to extend our appreciation to Mr Qi Zhou, Graduate Assistant at Bryant College, for his contributions to this research project.     

The golden rule of accumulation and the open economy

Summary This paper examines the factors which determine the volume of consumption per capita in a small open economy in the long run. The analysis is based on a neoclassical model. It is proved that-in general — Phelps' golden rule of accumulation does not hold for an open economy. This conclusion follows from the decline in the terms of trade, which is generated in an open economy by an increase in the share of investment. The influence of labour supply and world expenditure on the consumption per capita also depend heavily on the induced change in the terms of trade. The analytical results of the model are illustrated by means of a few numerical examples.This paper is written within the framework of the research program Possibilities and Limitations of National and International Economic Policy, code K.H.T. XIII-85-44.     

Game equilibrium modelling

Summary Non-cooperative game theory has in recent years become one of the main tools in the social sciences and economics. It deals with decision problems of more than one (rational) player. The actions of those players result in outcomes that are the best that may have happened to a player, given the actions of the other players. This is precisely the content of the 'Nash equilibrium' concept. It would be nice when each game had a unique Nash equilibrium. Unfortunately, both non-existence and multiple equilibria occur. An important role in game theory is played by the information available to the players. Among the economic applications are: the Theory of Industrial Organisation, Bargaining and the Economic Theory of Information.Comments by Eric van Damme and Casper de Vries on an earlier draft of this paper have greatly improved the presentation. I have benefited from the comments of the editor and an anonymous referee ofDe Economist. For all omissions, all possible errors and the revealed views in this paper, I alone am responsible.     

Charles Kindleberger: An Impressionist in a Minimalist World

Minimalist economists stubbornly resist Charles Kindlebergers characterization of investor expectations in a financial bubble as irrational. This paper seeks to resolve the controversy by imbedding Kindlebergers well-researched, impressionistic theory of financial crises into an expanded, but still-minimalist model of rational expectations. Introducing the concepts of malicious disinformation and rational overpromotion creates an informational environment in which it is time-consuming and costly to distinguish fact from fiction. Rationality still requires that expectations and market fundamentals move together over long periods of time, but dishonorable overpromoters can earn substantial profits in the interim.     

The effects of external trade,foreign resources,and domestic Policies on Domestic Savings in some developing Countries: a regression analysis

Summary This paper examines the impacts of some external and domestic factors on two measures of domestic savings (DS) in a sample of developing countries over the period 1980-82. No strong statistical evidence is found to support the hypothesis that external resources (i.e., official aid and borrowed capital) inhibit DS by substituting for them. On the other hand, favorable trade conditions (as represented by the rate of growth of the external terms of trade) are consistently found to be positively and significantly correlated with DS. These results are suggested to support the old slogan trade not aid, if it is interpreted to mean that aid should not be considered as an alternative to profitable trade opportunities.     

Utility and economics

Summary Although utility has been the central concept in economics, economists have paid relatively little attention to its measurement. Generally, utility is measured indirectly via the revealed preference approach. We discuss problems with this approach and next introduce alternative direct measurement methods. The direct measurement methods are seen to spawn a so-called theory of preference formation, which explains differences in utility functions of different individuals. The similarities of this theory with related theories in sociology and psychology, and various sorts of empirical evidence, are reviewed. The paper concludes with a discussion of the implications of these findings for economic theories.This is a slightly adapted version of my inaugural address at Tilburg University. I thank Tom Wansbeek for his helpful comments.     

The Dutch Transportation System in the nineteenth Century

The actual discussion on the Betuwe-line and the construction of this new railway for freight transportation from Rotterdam to Germany is placed into a historical perspective. Right from the beginning of railway history in the Netherlands, the construction of an Iron Rhine was disputed. As analytical tool, the social saving approach is used. The conclusion of this cost-benefit analysis is that it did not and does not matter that much for the level of welfare in the Low Countries or the Rhineland whether the goods from major coastal ports are transported on the river Rhine or by the four Iron Rhines.     

Trade policies,imperfect competition,and endogenous growth

Summary This paper analyses the effects of trade policies in a general equilibrium two-conutry model with imperfect competition. This model generalizes the models of monopolistic and Cournot competition. Trade is shown to be welfare-increasing in the monopolistic completition model. The same holds true in the case of endogenous growth. In the model of Coumot competition, the welfare effects of trade policies depend upon the type of entry and exit. Indeed, it is possible for two countries to increase their welfare by pursuing a coordinated policy of protection. In an endogenous growth setting, the validity of the latter finding depends upon the consumer rate of time preference.At the time of writing, the author was affiliated with the Ministry of Economic Affairs. An earlier version of this paper was presetned at the ECOZOEK-day, June 11, 1993, Tilburg and was awarded theKVS-prize 1993 of the Royal Netherlands Economic Association. The author would like to thank an anonymous referre, P.A.G. van Bergeijk, R.A.de Mooij, A. Nieuwenhuis, F. van der Ploeg, J. van Sinderen, S. Smulders, and P.M. Waasdorp for useful comments. The views expressed in this paper are strictly presonal.     

Economische orde,economische politiek en sociale politiek

Naar aanleiding van een bundel opstellen van dr J. Zijlstra, Economische Orde en Economische Politiek, H. E. Stenfert Kroese N.V., Leiden 1956, 143 blz. en een bundel opstellen van dr G. M. J. Veldkamp, Economische Orde en Sociale Politiek, H. E. Stenfert Kroese N.V., Leiden 1957, 156 blz.     

Policies for economic growth

Summary The old growth theory of the 1950s led to certain conclusions about the sorts of economic policies that would promote economic growth, and also about their limitations. The new growth theory of the 1980s makes much stronger assumptions and leads to correspondingly stronger conclusions about the scope of growth-promoting policy. This article argues that: (1) empirical work so far has neither confirmed nor denied the strong assumptions underlying the new theory; (2) the theory is worth pursuing because of its intrinsic interest and the possibilities it opens up; (3) whatever the final verdict on the new theory, both theory and evidence support the belief that significant long-run gains, even if not permanent changes in the growth rate, can be achieved by increased investment in the broadest sense, including human capital, technological knowledge, and industrial plant and equipment.Fifth Tinbergen Lecture delivered on October 4, 1991, in Amersfoort for the Royal Netherlands Economic Association     

Differentiation of Skills, Firms’ Recruitment Strategy and Unemployment Benefits in an Efficiency Wage Model

It is well known that the recruitment strategy of firms depends on the state of the labour market. In order to account for this fact, we build a matching model where the differentiation of skills is explicit. Along the line of Salop (1979b) workers and firms are distributed on the same circle and the distance between two points on this circle measures the mismatch between a firm and a worker. Another feature of this model concerns wage setting. In a natural way, wages are subject to the constraint that good workers (i.e. workers who are not too far on the circle) prefer to keep their job. In addition, on a suggestion by Phelps (1992), we assume that workers who quit their job are not eligible to unemployment insurance. Two main results are established. First, the lower the tightness of the labour market the more stringent the requirements of firms are. Second, as a consequence of the incentive constraint, unemployment benefits appear to raise employment.     

International mass migration: A threat to Europe's borders and stability?

Summary Western Europe has become an epicentre of international migration. Theoretical considerations about the onset and persistence of international migration flows suggest that major inflows over extended periods would result if the migration process would be allowed to unfold in a natural fashion. However, massive migratory inflows would put severe strains on the receiving countries and, consequently, the governments will resist them. A systematic examination of current entry gates shows that these gates have already narrowed down considerably. From that perspective mass migration does not, at the moment, seem to offer a serious threat to Western Europe's borders or stability. Nevertheless, for the longer term a largely administrative response to the phenomenon of increased migration pressure is likely to be inadequate. Those politically responsible should re-establish their primacy in this area of policymaking, and should insist on a Western European approach which is neither altruistic nor harsh, but seeks to combine humanitarian and socio-economic considerations in a way acceptable to both the major sending and receiving countries. Setting quota would have to be an essential element of that new approach.     

Smoke of leets

Summary This is a review of some of Mrs. Joan Robinson's ideas, and the author's conclusion is that these ideas do not contribute to the present state of economic theory. Her view on international trade is lopsided, her criticism of traditional capital theory goes too far, her refutation of income distribution theory is mainly unfounded. Basically, Mrs. Robinson rejects the notion of relative scarcity of capital; the author believes that this is a useful notion in economics. Moreover, her recent work shows a strong anti-empiricist tendency. If Mrs. Robinson's negative train of thought were to be applied to all concepts of macro-economic theory (total labour force, real national income etc.) these concepts would vanish in thin air. The whole of macro-economics might go up in smoke.     

The perspective of the SDR's position in monetary reserves on the robustness of optimal portfolio results

Summary To gain an empirical impression of the SDR's attractiveness as a reserve asset, an amended mean-variance analysis is applied to official reserves. The main amendments bear upon the choice of the numeraire and the rejection of both the capital market line and the effective yield's positive marginal utility-frequently assumed in empirical analysis. Comparison of the outcome with that recently obtained by Ben-Bassat shows a large sensitivity of optimal portfolio results for slight differences in assumptions. A second, substantial kind of sensitivity of an asset's position in a portfolio appears to ensue from the influence of other competing functions of reserves.The authors are Professor and Assistant Professor of International Economics, University of Amsterdam, The Netherlands. The research of the second author was financially supported by the Netherlands organization for the advancement of pure research (Z.W.O.), no. 46-108. This research is part of the project Exchange-rate and monetary policy in international dependence. The paper was presented earlier at the conference Research in international finance, Jouyen-Josas, France (June 19 and 20, 1986). Computational assistance by Jeannette Capel, Reiner Gratama, and Martin O. Nijkamp and comments by an anonymous referee are gratefully acknowledged.     

International dollar liquidity and the Eurodollar market

Summary Transactions of Eurodollar banks affect international dollar liquidity (and the US payments balance) exactly as would identical transactions of US banks. Eurodollar banks are, however, usually more likely to grant credits to foreigners than US banks, and thus to raise foreign gross (thought not net) dollar liquidity. In times of international dollar glut, an expansion of the Eurodollar market (e.g., through shifts of deposits from US to Eurodollar banks or through US banks repaying Eurodollar borrowings) thus tends to aggravate unwanted dollar flows to foreign central banks and the US reserve transactions (though not the net liquidity) payments deficit.This paper is a by-product of the author's contribution to the study Foreign Dollar Balances and the International Role of the Dollar, conducted jointly with Professor Raymond F. Mikesell and sponsored by the National Bureau of Economic Research. Neither Professor Mikesell nor the National Bureau (nor the Foreign Service Institute) bears, however, any responsibility for the views expressed in this paper.