Traditional Neoclassical Theory Research Articles

A multiregional perspective on growth and environment: The role of endogenous technology and trade

Until recently, the interaction between environmental quality, economic activity and growth is predominantly considered in an a-spatial context. Traditional neoclassical growth theory following Solow/Swan has mainly addressed questions about environmental and resource limits to growth. Recently, much attention is also devoted to the environment-growth interface from an endogenous growth perspective. However, an important element that is missing in both the neoclassical and endogenous growth approaches is a multiregional perspective. The present theoretical study tries to present one of the first attempts to fill this gap. The analysis is based on a model of two interactive regions, with possible interaction between the regional environments via the global environment. The implications of this type of analysis are manifold. One is that endogeneity of growth is not only due to technology and knowledge formation but also to the effects of trade, resource scarcity and environmental degradation. Another implication is that a coordinated environmental policy of regions should address long-term sustainability, and take account of the positive technological and negative environmental dynamic externalities.

The Japanese Firm as a Worker-Managed Enterprise

It is well known that the Japanese firm is characterized with a behavioral mode and organizational structure that are quite different from the model of the firm portrayed in traditional neoclassical economics. In general, a firm is an economic organization composed of three different groups—namely, employees (workers), managers, and stockholders (capitalists); but, of them, in traditional neoclassical economic theory workers are in essence outsiders who are recruited in the labor market in exchange for wages while the firm is pictured as belonging in name and substance to the stockholders who are the rightful owners. Therefore, the managers, who are given the responsibility of conducting the actual management of the firm are portrayed as mere agents for stockholders with the objective of maximizing the profit (or, the value of the firm) to be distributed among the stockholders.

A reformulation of the theory of demand by compensated demand functions

We present a formal approach to consumer demand by compensated demand functions. In accordance with the integrability theory or with the theory of revealed preference, we do not require the existence of a utility function, but we do assume certain hypotheses concerning functions describing rational behavior. In view of their properties, these functions can be interpreted as compensated demand functions. According to traditional neoclassical consumer theory, Shephard's lemma and the symmetry and negative semidefiniteness of the Slutsky-Hicks matrix can be shown. We shall also see that a convex, continuous, and monotonic preference ordering, which is representable by income compensation functions, can be introduced. It can also be shown that the existence of a compensated equilibrium can be derived within this approach by compensated demand functions. In order to obtain the existence of a compensated equilibrium under less stringent conditions we finally generalize the axioms assuming that a compensated demand correspondence is given.

From plan to market: On the nature of the transformation crisis

From Plan to Market: On the Nature of the Transformation Crisis. — Traditional neoclassical theory is ill-suited to explain why the transition from a grossly distorted to a far more rational economic system is going along with a fall in value added in Europe’s emerging market economies. Whereas Keynesian-type arguments, including the credit-crunch hypothesis, may account for some features of the exact time profile of the slump, the transformation crisis itself cannot be explained by these considerations. The paper argues that an institutional near-vacuum is a major cause of the crisis. While the old institutions for coordinating a complex pattern of economic activities are defunct, the new and ultimately far superior arrangements are not yet firmly established. The resulting institutional deficiencies, together with some inconsistencies in the time profile of the transformation process, impair an effective and reliable coordination of an extended division of labour in space and time.

True Commitment or Empty Rhetoric? An ARIMA Analysis of the Deconcentration of Public Investment in Peru

MORRISON A. R. (1993) True commitment or empty rhetoric? An ARIMA analysis of the deconcentration of public investment in Peru, Reg. Studies 27, 41–52. Regional policies are ubiquitous in less developed countries, yet theoretical explanations for these policies are often ignored. This essay presents theoretical explanations–inspired by world systems analysis and more traditional Marxist analysis, dependency theory and neoclassical economic theory—for regional policy and examines their appropriateness for the Peruvian case. Subsequently, the strength of the link between political rhetoric favouring deconcentration policies and the reality of such policies is examined. Have successive governments kept their promises to distribute public investment more equitably over Peruvian regions? This question is addressed with the aid of ARIMA models which allow the effect of policy interventions to be gauged in straightforward fashion. The ARIMA analysis reveals that few governments have matched their regionalist rhe...

Modèles classiques et projet keynésien : Réponse à Ch. Tutin

In my answer to Christian Tutin's comment I make the following points : (i) Keynes was concerned with establishing what he called "the other point of view", according to which effective demand has an impact on the performance of the economic system both in the short and in the long run. This presupposed the refutation of the neoclassical, especially Pigovian, doctrine which maintains that with flexible wages there will be a long-run tendency to full employment. Hence Keynes was not, and could not have been, content with a purely short-run analysis, as some commentators argues. (ii) The refutation of the neoclassical theory necessitated a critique of its notion of the rate of interest as the factor that equilibrates decisions to invest and decisions to save. Keynes's alternative theory of the rate of interest was, however, not fully convincing and cannot bear the burden placed upon it. (iii) Sraffa deserves the credit for having demonstrated that the traditional neoclassical theory of the rate of interest cannot be sustained. Therefore, Keynesians are well advised to take Sraffa's contribution seriously, also because the latter provides the theory of effective demand solid production theoretic foundations. In addition some questions relating to the little macromodel presented in my paper are discussed.

ORGANIZATIONAL EQUILIBRIA AND PRODUCTION EFFICIENCY(*)

New Institutional Theory has pointed out mechanisms by which technology can influence property rights and forms. We argue that the argument can be integrated and enriched by using also the opposite argument: property rights and technology can also influence technology. We develop an organizational equilibria framework and we show that when New Institutional Theory is integrated in this direction, a multiplicity of organizational equilibria can arise and production efficiency may no longer be achieved. The paper introduces the argument by pointing out some similarities between Marx's theory of history and modern transaction cost theories, which imply a common departure form the standard methodology of traditional neoclassical theory.

The Neoclassical Model Enriched by the Structure of Control:

Abstract Traditional neoclassical theory treats the economic sphere as if it can be detached from its surrounding social and political environment. It assumes connections between the social/political spheres and the economic sphere are weak, and no change of significance occurs in the social and political environment during the period considered Social and political conditions are treated as “given” and, more often than not, the conditions of this given environment are neither specified nor studied A broader economics is neededThe Virginia School has represented a connection between political control and distributive outcomes with its rent‐seeking analysis The flaw in their argument, that exposes their ideological bent, is their failure to extend the analysis to the distributive impact of control in the social sphere. This piece is an attempt to make that extension, and to demonstrate that a specific historical case, women s experience in World War II, cannot be fully understood without bringing that social dimension into the analysis

An axiomatic approach to compensated demand

Starting with hypotheses on functions which can be interpreted as income compensation functions, a theory of consumer behaviour is developed. If people act rationally they will behave according to these hypotheses. From these axioms many propositions, well-known from traditional neoclassical consumer theory, can be deduced. In particular, Shephard's lemma can be proved within this theory.

Old and New Patterns of International Specialization: The shares of inter- and intra-industry transactions in ASEAN-EC trade, 1974–82

According to recent analyses of international trade (Aquino 1978; Balassa 1979; Grubel 1967; Grubel-Lloyd 1971, 1975; Under 1961; and Hirsch 1977), an increasing share of world trade has become the exchange of commod ities, of means of production and consumption, which are close substitutes, of each other. This intra-industry trade contradicts the traditional neoclassical trade theory focusing on the ex change of commodities, of means of produc tion and consumption, which serve different purposes. Traditional neoclassical trade theory deals solely with inter-industry trade, that is, with the exchange of primary for secondary commodities and of relatively (physical and human) capital-intensive goods for relatively labour-intensive secondary goods. Contrary to this inter-industry trade, intra-industry transac tions cannot be explained by differences in natural resources, relative factor endowment, or in demand conditions, but rather by product differentiation and price differences based on specialization in know-how, production, and distribution. While inter-industry trade relies on the old international division of labour, on the exchange of raw materials for manufactured products (Ricardo-trade) and of labourfor capital-intensive manufactured products (Heckscher^Ohlin-trade), intra-industry trade offers the opportunity of a new international specialization, the exchange of differentiated products, which are designed to meet equally differentiated requirements of producers and consumers. The share of intra-irdustry trade in total trade seems to be positively, that of inter-industry trade negatively related to the respective countries' per capita income dif ferentials and to differences in production and consumption patterns. The larger the differ ences in per capita income, production and consumption profiles, the larger will be the share of inter-industry as opposed to intra industry specialization. This paper determines, compares, and asses ses commodityand country-specific shares of interand intra-industry trade in total ECand ASEAN-EC trade from 1974 to 1982. The analysis is based on the trade nomenclature and trade statistics of the European Commun ity. National trade statistics were excluded in order to provide a consistent data base. The global, commodityand country-specific shares of interand intra-industry trade in total between EC and ASEAN trade are deter mined according to the definition of Balassa (1966) and Grubel-Lloyd (1971, 1975): Inter industry trade in commodity i of country j is \Xij Afy|, where Xq is countryy's export, Mif country y's import of commodity /, and intra industry trade in commodity i of country y is gross trade (X^ + A//;) minus inter-industry

A conceptual framework for analysis of primary commodity markets

The paper begins with a critique of the traditional neoclassical theory as a tool for analysing commodity markets, and suggests that a viable theory needs to be developed from the concept of ‘market power’, as expressed in the relative bargaining strengths of transnational corporations active in the commodity production and trade of developing countries, and of the governments and business interests of host countries. A discussion of the principal elements comprising relative bargaining strength, divided into commodity-specific, country-specific and international, is followed by a brief consideration of alternative policy options for developing countries aimed at improving their share of the benefits from their commodity exports to developed countries.

AN ECONOMIC ANALYSIS OF VALUE TO THE OWNER

This short paper applies the economists' concept of consumer surplus to the accountants' concept of value to the owner. It is shown that the two relevant concepts of consumer surplus ‐ the equivalent consumer surplus and the compensating consumer ‐ result in valuations that differ from the traditional Solomons, et al., analysis. This proposition is established by use of traditional neoclassical demand theory. It is also shown that whilst the analysis is essentially of a short run nature this is also true of the accountants' concept of value to the owner.

Indexation, Expectations, and Stability

THE RECENT SURGE OF PRICE MOVEMENT, coupled a fairly substantial recession, has interested economists in alternative adjustments to chronic price inflation. By traditional neoclassical theory, increases in excess capacity would prove sufficient to dampen excess demand and reduce the rate of change in observed prices (perhaps about its expected path). This remedy, however, has proved to be both costly, as measured by the lost output during transition, and time consuming, as evidenced by the rather slow decrease in price movement over the recent slowdown. Consequently, there has been increased interest in alternative ways of living with inflation rather than ridding the system of it. One of these ways, proposed by Milton Friedman [10, 11], is a general system of indexation of nominal contracts to actual inflation rates, which, it is believed, would diminish the pains of inflation associated imprecise estimates incorporated in contract negotiations. Bargaining could, thus, center around real changes such as productivity or relative price movements . Therefore, the burden of inflation would be reduced and the economy would more rapidly attain its new equilibrium after a disturbance. However, Friedman's reintroduction of indexation into the economic arena has not met unequivocal support. Some have contended that the proposed remedy need not be universally optimal, and others question whether it may even be undesirable. Representing the first group, Gray [ 15] questions the general optimality