Reason rules...: the utility of rationality and the rationality of utility

Almost every theory of human behavior is based upon some assumption of rationalty. Such an assumption is commonly believed to be necessary in order to distinguish rational behavior, which is, from non-rational behavior, which is not amenable to scientific investigation. This article presents a thorough re-examination of this assumption, an inquiry which turns out to raise all the central issues of both the methodology and the theory of behavioral inquiry generally. It leads to the somewhat surprising conclusion that the notion of rationality does not have any meaningful role to play in behavioral inquiry, and that there is no sense in distinguishing rational from non-rational or irrational behavior. It also shows that the generalization of the utility notion in terms of information makes it into a much more powerful and subtle tool of analysis than it commonly appears to be taken for.     

Total factor productivity in South African agriculture, 1947‐91

Indices of total factor productivity (TFP) measure aggregate output per unit of aggregate input, providing a guide to the efficiency of agricultural production. This article outlines the relationship between production functions and TFP indices. Then, an index is constructed for South African agriculture for the period 1947‐91. The index shows that TFP grew at an average rate of 1,3 per cent per annum. However, TFP growth has increased since the reforms of the early 1980s. Since capital has been more realistically priced relative to labour, greater productivity growth has gone together with increasing employment, which must have improved social welfare.     

Estimating Systematic Risk Using Time Varying Distributions

This article proposes a dynamic vector GARCH model for the estimation of time-varying betas. The model allows the conditional variances and the conditional covariance between individual portfolio returns and market portfolio returns to respond asymmetrically to past innovations depending on their sign. Covariances tend to be higher during market declines. There is substantial time variation in betas but the evidence on beta asymmetry is mixed. Specifically, in 50% of the cases betas are higher during market declines and for the remaining 50% the opposite is true. A time series analysis of estimated time varying betas reveals that they follow stationary mean-reverting processes. The average degree of persistence is approximately four days. It is also found that the static market model overstates non-market or, unsystematic risk by more than 10%. On the basis of an array of diagnostics it is confirmed that the vector GARCH model provides a richer framework for the analysis of the dynamics of systematic risk.     

ESTIMATES OF THE VALUE OF HOUSEHOLD WORK CANADA, 1961 and 1971*

The paper presents some estimates of the imputed dollar value of household work (HW)for Canada in 1961 and 1971, finding this to be about $16 and $38 billion respectively, equal to 40 percent of GNP. From the results we derive some implications about five questions raised in the relevant literature. First, no clear evidence of a downward trend for the ratio HW/GNP is found, contrary to U.S. results. Second, addition of HW to GNP as a welfare measure does not affect the general pattern of past growth estimates. Third, a cost–by-function method of estimating HW is found superior in its theoretical support and the detail it provides, but the opportunity-cost method, despite doubts on its theoretical validity, gives a good approximation in the aggregate, and, being simpler, is likely to remain popular. Fourth, disaggregation does matter if detail by region or family type is required, in which case data by number and ages of children and market-employment status of females are needed; for the total, a reasonable estimate (6–7 percent error)is given by further aggregated data. Fifth, sensitivity of HW to accuracy in the data used is large only for female wages chosen, in particular for the function “cooking”. Finally, though available data must be manipulated to fit the needs of HW, especially for earlier years, the extent of this is not all that much more than is commonly found for GNP estimations.     

Some notes on the stability of a simple Cournot economy with a leontief technology

The stability analysis of a simple linear Cournot model is extended by including two branches producing inputs to each other and for consumption. Equilibrium turns out as stable under continuous adjustment.     

Quality differentiation and factor proportions in international trade: An empirical test of the Swedish case

Review of World Economics -     

From small to large: A systematic comparison of gradually more complex econometric models

This paper treats the problem of validating macroeconometric models. A set of nine models are estimated on the same data base and subjected to the same simulation tests. They range from the simple IS model to a relatively realistic model of the Swedish economy in the postwar period. The main conclusion is that minor specification changes may drastically alter the dynamic characteristics of models, despite the fact that the models are theoretically plausible. A second purpose of the paper is to try to bridge the gap between the simple IS or IS-LM models used in the classroom and the much larger and more complex models that are actually used.