Rau,Hermann and Roscher: contributions of German economics around the middle of the nineteenth century

The main contributions to the now much neglected, though highly innovative proto-neoclassical tradition of German economics during the middle two quarters of the nineteenth century are surveyed. Particularly stressed are the creation of a subjective demand analysis with an ‘objective’, i.e. costorientated supply analysis with a rising long-run supply curve (foreshadowing Marshall); and furthermore the full development of marginal productivity analysis of factor remuneration, not only by Thuenen.     

What Is Supply-and-Demand? The Marshallian Cross Versus Classical Economics

This study argues that the supply-and-demand apparatus of the ‘Marshallian cross’ is an unsatisfactory representation of actual supply and demand forces, which are better characterized in the manner of the classical economists. Most particularly the rising supply function but also the conventional demand function, are shown to have no compelling general theoretical justification. There is no plausible basis for a presumption in favour of the former—other than the marginal productivity theory of factor pricing, which is itself unsatisfactory. Multiple reasons are suggested for the rise of the apparatus of supply-and-demand functions, notwithstanding its intrinsic implausibility. The classical conception of supply-and-demand is restated and reaffirmed.     

Sectoral Changes in Employment: An eclectic perspective on ‘good’ jobs and ‘poor’ jobs

The linkage Keynes established between the volume of employment that business firms require to make a particular number of jobs available provides an operational perspective about the way in which labor markets work. The aggregate supply or Z function is, in fact, a job offer curve. The most significant insight to derive from this curve is that job offers are inseparable from the economy's aggregate expenditure (or demand) level. This interdependency of aggregate supply and aggregate demand is necessary to understand the functioning of labor markets in the real world. This paper argues that a disaggregated model which encapsulates the economy's price-taking and price-making sectors offers a promising analytical tool to gain perspective about ‘good jobs’ and ‘poor jobs’ in post-Fordist economies. It is maintained that the sectoral deployment of workers reflects whether employing firms, as price-makers, can capture the increasing returns inherent in modern technology.     

数字产品定价中传统经济学方法失灵原因及定价策略

数字产品的高固定成本、低边际成本的成本结构导致了传统的供求曲线和均衡分析的失灵,使得传统的边际成本定价不适用于数字产品。数字产品定价中传统定价方法失灵的原因主要有：数字产品的网络外部性、成本结构的特殊性、需求曲线及供给曲线的变化、市场供求均衡的打破,研究表明采用产品差异化和差别定价、免费,捆绑销售、两段收费的定价策略有一定的积极意义。     

Oil supply and economic development strategy: A dynamic planning approach

Most oligopolistic models of the oil market begin with the assumption of rising supply curves for oil. Lack of convincing evidence that high oil prices are being maintained by oligopolistic action has raised the possibility of competitive behavior in the oil market and therefore of a backward bending supply curve. This paper presents numerical solutions of a linear dynamic planning model of an oil exporting country with a development strategy which consists of utilizing oil revenues for building an export sector to replace oil. To make a stronger case a high absorber, Algeria, is used as an example. The numerical results are consistent with the hypothesis that there may well be good economic reasons to restrict supply of oil in response to increased prices. Three important characteristics of the model which produce this result are (a) diminishing marginal utility of consumption, (b) absorptive capacity, and (c) imperfect capital markets. A ‘perverse’ supply behavior is found consistent with optimal allocation of oil resources when a price increase is expected to last for a long time. The effects of temporary price changes which can, for example, result from temporary supply shocks or demand changes during the business cycle are also studied. It is shown that in response to such short term price changes competitive behavior is ‘normal’, i.e., supply varies in the same direction as the price. This implies that reductions in OPEC production which have taken place during the recent market downturns cannot be taken as evidence of cartel coordination, as they usually are, since they are also consistent with price-taking behavior.     

Medical Expenditures and Health Status in Australia: A Story of Increasing or Decreasing Returns?

We use a three‐equation model to estimate a health production function for Australia using population data for 1996. Working at the level of the Statistical Local Area (n= 1335) we match (i) data on private practice medical services (derived from the Medicare scheme), (ii) mortality data derived from the de‐identified unit records produced by the Australian Bureau of Statistics (ABS), and (Hi) social and economic data from the Australian Census of Population and Housing (ABS 1997). We detect strong and statistically significant positive marginal effects of medical expenditure on health status as well as increasing returns. These findings are remarkably different from those of US health production studies, which have tended to lend support to the hypothesis of ‘flat‐of‐the‐curve (that is, zero marginal product) medicine’. Moreover, our conclusions are in stark contrast to those produced by Richardson and Peacock (2003, p. 6), who have argued that their econometric work indicates that ‘an increase in the [Australian] doctor supply is associated with increasing mortality’.     

On the comparison of price and quantity competition under endogenous timing

This paper compares Bertrand and Cournot equilibria in a differentiated duopoly with linear demand, and asymmetric constant marginal cost under endogenous timing. It shows that endogenous timing leads to two sequential play with both leader–follower configurations in Bertrand, but simultaneous play in Cournot. Moreover, every firm’s mark-up/output ratio and the two firms’ weighted ‘average’ price are all lower, but the two firms’ weighted ‘average’ output is higher in either of the two sequential Bertrand equilibria than in the simultaneous-move Cournot equilibrium.     

Tax revenue and the marginal cost of public funds in Sweden

We assess the welfare cost of raising a marginal unit of tax revenue in a balanced-budget, general-equilibrium framework. The calculated social cost of an increment of public funds is sensitive to both the specific type of tax increase and the type of public spending used on the margin. ‘Best-guess’ assumptions on labor supply elasticities yield marginal costs of public funds for different fiscal mixes of between 0.67 and 4.51 at prevailing tax rates in Sweden. Alternative labor supply assumptions well within the range of current estimates substantially affect the results and can imply infinite marginal welfare costs. Marginal welfare costs are also sensitive to assumptions about both the income and substitution effects of labor supply.     

Joan Robinson and the three cambridge revolutions

Joan Robinson's association with three Cambridge ‘revolutions’—imperfect competition, effective demand and capital theory—is examined in the context of her personal and intellectual partnership with Richard Kahn, John Maynard Keynes and Piero Sraffa. Initially, imperfect competition appeared to have successfully extended marginal analysis to all market forms. It also allowed Richard Kahn and Joan Robinson to persuade Keynes to present the main argument of The General Theory in terms of aggregate demand and aggregate supply. By the early 1950s, however, Joan Robinson had rejected the Marshallian methodology and had become a strenuous censor of neoclassical theory. In this paper the origin of her critique is traced to her reading of Sraffa's Introduction to Ricardo's Principles.     

Evolutions and Contradictions in Mainstream Macroeconomics: The Case of Olivier Blanchard

This article traces the complex intellectual path of Olivier Blanchard, a personification of the controversial evolution of macroeconomic research over the last three decades. After contributing to consolidation of the core of mainstream macroeconomics, Blanchard recently suggested ‘rethinking’ some of its key aspects to take stock of the lessons of the 2008 Great Recession, which he witnessed as the International Monetary Fund’s Chief Economist. This welcome discussion, which according to Blanchard should open mainstream macroeconomics to heterodox thinking, has so far produced a certainly interesting albeit theoretically contradictory synthesis and limited policy consequences. The most paradigmatic aspect of this rethinking of macroeconomics is represented by the abandonment in teaching of aggregate supply and demand in favor of a revival of the IS–LM model complemented by the Phillips curve. While this change of perspective does allow for the instability of ‘natural’ equilibrium to be emphasized, a deeper reading may prove incompatible with the neoclassical foundations of the mainstream approach.     

On the possibility of an inverse relationship between tax rates and government revenues

When Arthur Laffer and other ‘supply side advocates’ plot total tax revenue as a function of a particular tax rate, they draw an upward-sloping segment called the normal range, followed by a downward-sloping segment called the prohibitive range. A brief literature review indicates that tax rates on the prohibitive range in theoretical and empirical models have been the result of particularly high tax rates, high elasticity parameters, or both. The labor tax rate which maximizes total revenue, for example, will depend on the assumed labor supply elasticity. This paper introduces a new curve which summarizes the tax rate and elasticity combinations that result in maximum revenues, separating the ‘normal area’ from the ‘prohibitive area’. A general- purpose empirical U.S. general equilibrium model is used to plot the Laffer curve for several elasticities, and to plot the newly introduced curve using the labor tax example. Results indicate that the U.S. could conceivably be operating in the prohibitive area, but that the tax wedge or labor supply elasticity would have to be much higher than most estimates would suggest.     

Estimating the economic costs of electricity deficit using input–output analysis: the case of Brazil

The objective of this article is to present a methodology to estimate the marginal cost of electric energy deficit in the long-term using input–output (I–O) analysis. We obtain a deficit marginal cost (DMC) curve that is not limited to a small number of levels, such as the curve used currently in Brazil, which is limited to four levels. The marginal cost of deficit is an important exogenous parameter used in the model’s chain to calculate the operation’s marginal cost and short-term market pricing. The electric energy deficit is a temporary lack of continuity in meeting demand, which is usually predictable and involves prior notice to the consumer. The cause of this deficit may be a lack of investment and/or low water inflows that impact the production of hydroelectric power plants. In this study, the marginal cost of the deficit is obtained from restrictions on the provision of electricity for productive sectors and by calculating the corresponding impact on the gross domestic product. The proposed methodology can be used with data from the I–O matrix of any country to estimate its marginal cost of electric energy deficit.     

Market structure and casino taxation in tourist resorts

This article examines the association of tax effects with market structure for casino gaming. We show that if market structure is uncompetitive, much of casino taxation falls on tourists whose demand is inelastic relative to supply. The tax is likely to be efficient under strong external demand if imposed on oligopoly casinos with a monopoly location in a cross-border market. The likelihood of economically ‘good’ taxation is greater under oligopoly than under competition but lower than under monopoly. Casino taxes should be lowered in a more competitive market with weaker external demand. Our prediction is consistent with the evidence found from casino tourism development in Macao with ‘high’ gambling taxes.     

Firm turnover,restructuring and labour productivity in transition: the case of Poland

Many studies have found strong and positive relationship between per capita income and health care expenditure. These studies usually adopt the assumptions that (1) the relationships among the variables are constant; and/or (2) the supply-side market for health care could be treated by using standard demand functions models. To take into account of the supply side of health care, we use the demand and supply approach with the cointegration model to re-examine this issue. By using Taiwan health care expenditure data, our results show that the real income elasticity is smaller than unity and the health care expenditures are primarily for ‘curing’ rather than ‘caring’.     

Money and prices: evidence from the G7 countries

This paper examines the exogeneity of money and prices within a money demand vector error-correction model. The exogeneity of the variables is central to several ‘buffer stock’ models. However, the paper makes two modifications to the traditional approach. The first is to explicitly acknowledge the importance of the supply of money function by including the function alongside its demand counterpart. The second is to estimate the behaviour of the nominal sector and real sector simultaneously. Overall, the results from the G7 countries suggest that the concerns raised by ‘buffer stock’ models are relevant.     

Activity choice: A new approach to economic behavior

An individual's work and consumption behavior is modeled as the outcome of an optimal choice among activities at each moment within a ‘day’. The model describes the time-shapes of his demand for goods and services, labor supply, and activities within the day and it allows the analysis of choices in which unusually complex motivations are incorporated. It is applicable to questions of job satisfaction, peak demands, shift working and capital utilization, estimation of ‘the value of time’, goal and process utilities, intrinsic and extrinsic satisfactions, ‘labor’ versus ‘labor power’, and to the issues of compulsive consumption and self-control.     

Krishna Bharadwaj's “Return to Classical Theory”: an attempt towards an archaeological reconstruction

Abstract

In the wake of Sraffa's ‘return to classical theory’, Krishna Bharadwaj undertook a critical reassessment of Marshall's claim to continuity with classical theory in general and Ricardo's ‘intensive margin’ in particular. Her analysis is based on an analytical separation between two distinct ways of economic reasoning: the ‘surplus based’ and the ‘demand and supply based’ theories. Calling it an ‘archaeological reconstruction’ of the history of economic theories, I will examine how such an interpretation of theoretical shifts clarifies both the presuppositions behind analysing at the ‘margin’, and hence its radical departure from the conceptual content of the classical theory.     

Effect of the global financial meltdown on India’s aggregate export volumes

ABSTRACT

This paper sets up a demand-supply model to analyse India’s export performance (in terms of volumes rather than values) between 2000Q1–2014Q4. The main objective is to determine the impact of the financial meltdown of 2008 on India’s export performance. During the meltdown period, decline in price by India’s competitors in the international market resulted in (1) loss of competitiveness of India’s export goods and (2) a complete breakdown of the price mechanism affecting India’s export demand. Though export supply was not significantly affected by the meltdown episode we find evidence that exporting firms turned towards the domestic market to cope with the loss in export. The meltdown episode began to significantly affect India’s export demand and supply equations from 2009Q3. The demand and supply equations after that period became so unstable that ‘nothing worked’ for India’s exporters as they tried to counter the decline in export. Hence there was ample reason for them to panic and seek the government’s help. Government policies aimed at boosting export demand did have a positive impact on India’s export performance. Government policies to boost export supply had no impact except being palliative for the exporters at their moment of crisis