Welfare criteria for tax reforms: Efficiency aspects

This paper provides unexpected support to Nash's view of how bargaining determines the social choice. We first present a spatial model of electoral competition with probabilistic voting and a very close relation between voters' preferences and their choice probabilities. The outcome of the electoral competition game is then shown to be precisely the social alternative that maximizes a Nash-type social welfare function (theorem 1). This electoral outcome is also interpreted as a unanimity likelihood maximum (corollary 1). Within our framework, existence and uniqueness of such an outcome are guaranteed (corollaries 2 and 3).     

A note on ‘trying to value a life’

Broome's alleged paradox that application of the usual compensation test to the valuation of life would produce an infinite monetary value is shown to be false because it is based on illegitimate generalisation from a special case in which no effective compensation is possible. In the general case, relevant to public sector project appraisal, such compensation is possible, and finite values are to be expected, judging by people's ordinary behaviour.     

Trade,structure and linkages in Costa Rica: An input-output approach

Input-output tables for Costa Rica are used first to assess the country's trade performance; it is argued that trade with the rest of Central America has produced a Costa Rican comparative advantage in consumer durables. The paper then uses the input–output tables to examine the economy's structure, which is shown to be block triangular. Finally, measures of linkages are derived from the tables and a critique of the growth-inducing linkage mechanism is presented.     

The so-called “transformation problem” revisited: A comment

This comment shows that Lipietz's Marxist transformation theorem represents but a simple, though useful reinterpretation of obvious mathematical consequences of a standard Sraffa model—by making appropriate use of its known degree of freedom. Labor values are not involved in this new interpretation of conventional prices of production. A proposal is therefore made how their role in Marx's transformation may be investigated further on the basis of Lipietz's theorem and its interpretation of the “value of labor power”.     

Terms-of-trade policy in a model with non-produced means of production

Terms-of-trade policies between agriculture and industry are analysed in a two-sector Sraffian model. If both sectors use only produced means of production and labor, it can be shown that an improvement in agriculture's terms of trade always leads to higher profits in agriculture. However, when non-produced means of production are introduced an exogenous increase in the relative price of agricultural commodities may cause the rate of profit in agriculture to increase, remain constant, or even decrease. Two preconditions are identified for the case in which a favorable movement in agriculture's terms of trade decreases that sector's profit rate. First at least one quality of competitively priced land must be scarce relative to the total output required. Second, the initial, economy-wide rate of profit must be positive. Finally, the effect of an input subsidy used in conjunction with terms-of-trade policy is considered. It is shown that under certain conditions reducing the price of production inputs can also cause profits to fall and rents to rise in agriculture.     

Income instability,terms of trade,and the choice of exchange rate regime

In this article terms of trade fluctuations, which constitute an important source of income instability in many LDC's, are decomposed into three principal components: (a) shifts in world market conditions, (b) shifts in home market conditions and (c) changes in exchange rates. The appropriateness of a ‘basket peg’ is then analyzed in terms of a country's net export-side market power and a weighting formula is derived which would offset variations in third countries' exchange rates on the home country's terms of trade. Initial empirical results tend to support the hypothesis that basket pegs are usually adopted by countries with net export-side market power.     

Social choice and telling the truth

This paper presents a straightforward proof of Gibbard's theorem that any non-manipulable choice rule with at least three outcomes is dictatorial. The proof is similar to proofs of Arrow's impossibility theorem, but does not rely on that theorem. The last part of the paper discusses the relation between Gibbard's and Arrow's theorems. The paper contains no new result, and is intended to make this important area of social choice theory accessible to a wider audience.     

Technology and social change: William Fielding Ogburn revisited

This paper reviews William Fielding Ogburn's work on technology and social change. An overview of his basic theory is presented, as well as later refinements found in such works as Recent Social Trends in the United States, Technological Trends and National Policy, The Social Effects of Aviation, and other books and articles. It is suggested that while Ogburn is most widely remembered for his thesis of cultural lag, some of his later work on technology and social change is actually more important and deserves reconsideration and extension. One kind of extension might follow the lines of a systems approach rather than continuing the technological primacy strategy that Ogburn is normally considered to have used. The paper also surveys Ogburn's important work in the areas of technology, planning, and social policy, including materials on technology assessment. Ogburn's nontechnocratic approach to these questions, as well as his insistence that social scientists have a great deal to offer to the formulation of technological and social policies, are some of his most important contributions. Questions of technology and social change remain important contemporary issues, yet there is a surprising paucity of social science work on these crucial topics. Further study, extension, and reformulation of Ogburn's pioneering ideas offer fruitful means of embarking on new social science analyses of technology and society.     

Competitively awarded government grants

The model of consumer behavior subject to a budget constraint, often applied to such programs as Federal grants to local governments, ignores the fact that the terms and size of the grant may be influenced by the potential recipient's own efforts. This is most clearly true for competitively awarded grants. In a simple case the marginal recipient of a competitively awarded grant receives no net private benefit and imposes a net loss on society for his effort. The issue is general and should be considered in adopting a grant program to achieve social goals.     

Consumer's surplus and income redistribution

In reformulating consumer's surplus analysis, Hicks focused on a single household. The present essay extends the analysis to many households in a manner that seems not yet to have been explored systematically: by integrating consumer's surplus with the social welfare function. This is done in a general, as distinct from the usual partial, equilibrium context. A resulting formula, relating the community's gain from a resource reallocation in a novel way to the associated changes in volume and distribution of income, inclusive of surpluses, may facilitate applications. The analysis may also clarify some recurring issues regarding consumer's surplus.     

Pareto vs. Wicksell on adjustment costs in consumption: A reformulation

Pareto's adjustment cost model generating cyclical consumption patterns and Wicksell's observation that it contains mathematical errors are analyzed. An alternative model capturing the essence of Pareto's model and meeting Wicksell's criticisms is proposed where it is shown that consumption and leisure patterns may be cyclical over time.     

Envy,wealth, and class hierarchies

A persion i is said to not envy another person j if he likes his own bundle of goods as well as he would like j's bundle. This paper explores the social structure defined by the non-envy relation, and relates it to the social structure defined by market values of bundles, or wealth.     

Essential aggregation procedures on restricted domains of preferences

The restricted domains of individuals' preferences that permit the construction of Arrow social welfare functions and nonmanipulable voting procedures in which each of n voters has some power are characterized. In this context a domain is the Cartesian product of n sets of strict preference orderings. Variants of this result are obtained under the additional requirement of neutrality and in the case when alternatives are vectors whose ith components affect only the ith voter. Kalai and Muller's analogous result (J. Econ. Theory16 (1977), 457–469) concerning nondictatorial procedures is discussed and proved as a corollary to the main theorem.     

On the existence of lindahl equilibria in economies with a measure space of non-transitive consumers

We present a generalization of Roberts' theorem on the existence of Lindahl equilibria in economies with a measure space of agents. The principal contribution of this paper is methodological. We show that by formulating the problem in what we consider to be its natural infinite dimensional setting, the basic structure of Debreu's proof in the theory of value can be applied. Our proof makes use of functional analysis and relies, in particular, on Artstein's characterization of weak sequential convergence in L₁(μ).     

Arrow-Debreu preferences and the reopening of contingent claims markets

The Arrow-Debreu intertemporal general equilibrium paradigm is typically interpreted as suggesting that contingent claims markets need not reopen as time passes and uncertainty resolves. We show that this property, if satisfied, has strong implications for the structure of agents' preferences and for the updating of probabilistic beliefs.     

The cost of equity capital: A simplification

Modigliani-Miller's theorem, which asserts that corporate financing policy is of no consequence, has been shown to hold true under a set of assumptions which is less restrictive than the original set used by MM. Preceding proofs were based on the theory of general equilibrium. Basically, this paper examines MM's second proposition—the linearity of the cost of equity capital with respect to financial leverage—when dropping a few of their basic assumptions but retaining their assumption about incomplete markets. In particular, this paper relaxes the assumptions that (a) the inflows are perpetual and that (b) the firm's future returns belong to the same risk class. The results of the analysis indicate that the linearity will be sustained. The nature of the financial risk premium (the slope), however, has to be modified.     

Empirical evidence on the two-gap hypothesis: A revised analysis

This paper reconsiders the problem, analyzed by Weisskopf (1972a), of empirically classifying a set of low-income countries as having had their growth performance primarily constrained by the availability of foreign exchange or of domestic savings. Ambiguities in Weisskopf's procedure are noted, and an alternative, based on the extension of classical likelihood-ratio methods to the case of regression parameters subject to linear inequality constraints, is suggested. Reclassifying a subset of countries from Weisskopf's sample, we find stronger evidence against the importance of an independent foreign exchange constraint than indicated by Weisskopf's original results.     

Prometheus rebound: An inquiry into technological growth and psychological change

Western Man's philosophy of power over nature has led to the present excesses of technology. The technological environment in turn, has had profound and questionable influence on the human physiological and psychological organism—resulting frequently in both personal and social breakdown. The body-mind needs a new kind of nurturing and educational process involving the potentiation of latent human capacities if it is to successfully withstand and recreate the technological process, as well as facilitate a more humane use of human beings.     

On the theory of aggregation

Kenneth Arrow's famous General Possibility Theorem, which describes logical restrictions on the possible ways of aggregating individuals' preference orderings into a social preference ordering, is extended and proved in general for aggregation procedures on arbitrary domains.     

Monopoly,product differentiation and economic welfare

This paper discusses the pricing behavior of a monopolistic producer supplying several quality-differentiated goods by using a model of a Lancasterian characteristic approach with consumer's taste pattern dispersed. It examines how finer product differentiation, which is made by the producer by means of the introduction of a new good, changes the price structure and consumer's welfare. It will be establised that the entry of a new good imposes quite different impacts on the price of the goods of higher quality and on those of lower-quality goods.