making coasean property more coasean abstractin his pioneering work on transaction costs ronald coase presupposed a picture of property as a bundle of government prescribed use rights not only is this picture not essential to coase s purpose but its limitations emerge when we apply coase s central insights to analyze the structure of property itself this leads to the coase corollary in a world of zero transaction costs the nature of property does not matter to allocative efficiency however as with the coase theorem the real implication is for our world of positive transaction costs we need to subject the notion of property to a comparative institutional analysis because transaction costs are positive property is initially defined in terms of things uses are grouped under exclusion rights and in rem rights are widely employed a more thoroughly coasean approach points back to a picture of property more like the traditional one furnished by the law

by force of demand explaining international comovements abstract this paper explores the possibility that economic fluctuations may be largely demand driven it is shown that the stylized open economy business cycle regularities documented by feldstein and horioka 1980 the economic journal 90 june 314 329 and backus et al 1992 journal of political economy 100 4 745 775 can be explained by demand shocks alone even in a standard general equilibrium model frictions such as market incompleteness increasing returns to scale and sticky prices do not appear to be the preconditions for resolving these long standing puzzles

radio spectrum and the disruptive clarity of ronald coase abstractin the federal communications commission ronald coase exposed deep theoretical foundations via normative argument the government controlled scarce frequencies spillovers were said to be otherwise endemic coase saw that regulators limited conflicts by restricting uses and that property owners routinely perform such functions via the price system the fundamental insight was that analytical symmetry was demanded accounting for the net benefits of both regulation and markets coase augured that the price system would outperform administrative allocation a conclusion mocked by communications policy experts yet one specific slice of the coasean program competitive bidding for licenses commenced at the federal communications commission in 1994 today over 70 u s auctions have been held 31 305 licenses sold and 52 6 billion paid to the treasury the reform is a textbook example of economic policy success even as it raises the question why have market mechanisms not been further implemen

the transaction costs paradigm 1998 presidential address western economic association 1998 presidential address western economic association though the idea can be traced to david hume and adam smith the path breaking first economic analysis of transaction costs did not occur until 1937 when ronald coase published the nature of the firm 1 stigler and boulding perspicaciously reprinted coase s paper in the famous aea readings in price theory 1952 but for a quarter of a century it had no real impact on the profession in the 1940s two significant works were published which touched on transaction costs but these sparks did not ignite a fire 2 the transaction costs paradigm began to blossom in the early 1960s again it was coase who supplied the primum mobile his great paper on social cost was published in early 1961 though aaron director dated that issue of journal of law and economics as 1960 ronald had company this time george stigler s article on information cost came out later the same year and kenneth arrow s work on the appropriability of returns to inventions appeared in 1962 3 the combined wisdom of three brilliant men would perhaps not have been enough except that by the early 1960s science was on their side jargonistic articles on economic development flooded the journals throughout the 1950s but by 1960 economists were beginning to question the explanatory power of this kind of economics after the clarion call of friedman s work on the consumption function a few years earlier in 1957 the great methodological debate began 4 the demand for testable implications was becoming more vociferous by the day and the tendency for economists to be policy oriented was losing hold as the keynesian revolution waned 5 the tide of economic explanation was beginning to swell and the transaction costs paradigm was the beautiful goddess who emerged from the foam i began graduate work at ucla in 1961 and after my ma a year later i turned to audit the price theory lectures of jack hirshleifer and armen alchian the straight as student who knew by heart everything about market imperfections was told that this kind of knowledge did not count by 1963 graduate students at ucla s department of economics were all talking property rights and transaction costs now i knew coase and stigler by heart and could even handle the questions on pricing behavior and mergers at the end of friedman s price theory 1962 moreover i was the luckiest of the lot because in late 1963 armen gave me a copy of a manuscript by harold demsetz 6 one of the great expositors of our time harold wrote about property rights and transaction costs with such clarity and force that i decided then and there to work on these topics for my doctorate since that time my research has all been on the same track in this address i shall confine discussion of the transaction costs paradigm to my own involvement this limitation is imposed by necessity i like to sail the strange seas of thought alone and have seldom read other people s publications with the seriousness they deserve after i left chicago in 1969 from 1976 to 1982 i spent my time on contracts in the petroleum industry and from 1982 to now my research has concentrated on economic reforms in china although these works are all transaction costs oriented the former is not in print because it is proprietary while the latter has mostly been published in chinese after more than half a lifetime on the seashore however i feel it is time to share my small collection of pebbles with colleagues in the wea still you would not be wrong if you feel that i am addressing the subject as if i were a stranger returning from another planet i the nature of transaction costs transaction costs must be defined to be all the costs which do not exist in a robinson crusoe economy this broad definition is necessary because it is often impossible to separate one type of transaction cost from another the toll collector of a bridge serves not only transacting customers but also police against trespassers

an equilibrium model of the business cycle with household production and fiscal policy the authors estimate a dynamic general equilibrium model of the u s economy that includes an explicit household production sector and stochastic fiscal variables they use their estimates to investigate two issues first the authors analyze how well the model accounts for aggregate fluctuations they find that household production has a significant impact and reject a nested specification in which changes in the home production technology do not matter for market variables second the authors study the effects of some simple fiscal policy experiments and show that the model generates different predictions for the effects of tax changes than similar models without home production copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

on the curvature of the reporting function from objective reality to subjective feelings i suggest the idea of a reporting function r from reality to feelings the happiness literature claims we have demonstrated diminishing marginal utility of income i show not and that knowing r s curvature is crucial a quasi experiment on heights is studied

government spending and private consumption this paper investigates the macroeconomic effects of anticipations about future fiscal expenditures within a simple perfect foresight general equilibrium model this paper extends s djajic 1987 by investigating an anticipated permanent increase in government spending an anticipated permanent increase may temporarily stimulate capital accumulation the questions of whether anticipated or unanticipated changes in government spending have a larger effect on capital accumulation and output is related to the questions of whether government spending is initially above or below the optimal level

by force of demand explaining cyclical fluctuations of international trade and government spending abstract this paper explores the role of demand shocks as an alternative to productivity shocks in driving both domestic and international business cycles within the international real business cycle irbc framework in addition to those well documented domestic business cycle fluctuations e g the volatility and cyclicality of output consumption investment labor hours and labor productivity and international business cycle properties e g the countercyclical net export and the comovement puzzle this paper focuses on two additional stylized facts in the industrialized countries the procyclical trade openness the gdp fraction of trade volume and the countercyclical government size the gdp fraction of government spending using a parsimonious dynamic stochastic general equilibrium model we show that the model s predictions under productivity shocks are not consistent with these facts instead a demand shock driven model replicates the above facts while matching other domestic and international business cycle properties an estimated version of the model confirms the quantitatively important impacts of demand shocks

international business cycles in theory and in practice this paper investigates whether multi country international business models can account for international comovements in the oecd there are substantial positive comovements between many output components between levels of employment and between total factor productivities the standard international business cycle model is not consistent with these comovements except for consumption levels the model implies either negative or very low comovements this is a robust feature of the theoretical models independently of specific parameter values one interesting finding is that a more general specification of the technology shock processes lead to substantial comovements but at the cost of another deficiency

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

the coasean analysis of lighthouse financing myths and realities in the lighthouse in economics coase r h journal of law and economics vol 17 no 2 357 76 1974 coase reached the conclusion that in england there existed a relatively efficient privately financed lighthouse system which would refute economists traditional statements concerning the production of public goods the purpose of this paper is to challenge his conclusion we first show that from a methodological and theoretical perspective the lighthouse is consistent with the problem of social cost coase r h journal of law and economics vol 3 1 44 1960 then applying coase s own method historical case studies we attempt to re examine the respective roles and efficiencies of private initiative and government

the determinants of uk business cycles this paper considers the causes of post war uk business cycles using an extended stochastic growth model we construct estimates of productivity and preference shocks both of which are highly persistent volatile and potentially capable of explaining uk business cycles we find the productivity term is the dominant explanation of uk output fluctuations but our estimated preference shift is crucial in understanding employment movements a variety of granger causality tests establish whether these productivity and preference terms are unpredictable and so can be potentially considered as the cause of uk business cycles or whether they are themselves granger caused by other variables the aim of business cycle theory is to identify the causes of business cycles and outline the various propagation mechanisms through which these produce cyclical fluctuations the purpose of this paper is to study the former using uk data we investigate the main sources of uk post war business cycles our aim in doing so is to discriminate between competing theories of the business cycle as well as to increase our understanding of particular episodes of uk post war economic history to achieve this aim we focus on two fundamental sources of business cycle fluctuations productivity shocks and a preference shift or more generally a supply and demand shock we choose these because i they can be easily calculated using only published data avoiding the need for any econometric identification assumptions ii they represent the simplest extension to the neoclassical stochastic growth model which can explain observed uk business cycle patterns they therefore form a natural benchmark with which to assess prescott s 1986 claim that this model can account for both growth and business cycles however while our main focus is on these two shocks our methodology is broad enough to allow for a wide range of potential causes of uk business cycles in section 1 of the paper we outline some stylised facts of the uk business cycle and motivate more rigorously our focus on productivity and preference shocks in section 2 we provide estimates of these shocks discuss their univariate properties and examine their correlation with key business cycle variables we find both shocks to be very volatile and persistent with the productivity variable accounting for a large proportion of output fluctuations and preference shifts more important in explaining employment movements simulations show that in combination with a neoclassical growth model these shocks are capable of matching uk business cycles however if

net exports consumption volatility and international business cycle models abstract conventional two country rbc models interpret countercyclical net exports as reflecting primarily the dynamics of capital i show that quantitatively theoretical economies rely on counterfactual terms of trade effects trade fluctuations on the contrary are driven by consumption smoothing thus generating procyclical net trade in goods i then consider a class of preferences that embeds home production in a reduced form consumption volatility increases so that countercyclical net exports reflect primarily a strong relation between consumption and imports as in the data the major discrepancy between theory and data concerns the variability of international prices

government spending and the international business cycle in this paper the author develops a stochastic general equilibrium model of the world economy it differs from previous multicountry models in the introduction of the government sector the author assumes that countries produce a nonspecialized traded good and that households derive utility from the consumption of private and public goods and services this simple modification has a potential explanation for the low cross country correlations in private consumption and output and the countercyclical trade balances that are observed empirically

consumption and real exchange rates in dynamic economies with non traded goods abstract we examine the possibility that non traded goods may account for several striking features of international macroeconomic data large persistent deviations from purchasing power parity small correlations of aggregate consumption fluctuations across countries and substantial international real interest rate differentials a dynamic exchange economy is used to show that non traded goods in principle can account for each of these phenomena in the theory there is a close relation between fluctuations in consumption ratios and those in bilateral real exchange rates but we find little evidence for this relation in time series data for eight oecd countries

government spending and private consumption some international evidence this paper investigates the relationship between private consumption and publicly provided goods and services for a number of countries the empirical results show that in the aggregate private and government consumption are best described as complementary in the sense that an increase in one raises the marginal utility of the other the strength of this relationship is shown to be negatively affected by the government size these findings are robust across all specifications tried copyright 1994 by ohio state university press

can world real interest rates explain business cycles in a small open economy abstract while the world real interest rate is potentially an important mechanism for transmitting international shocks to small open economies much of the recent quantitative research that studies this mechanism concludes that it has little effect on output investment and net exports we re examine the importance of world real interest rate shocks using an approach that reverses the standard real business cycle methodology we begin with a small open economy business cycle model but rather than specifying the stochastic processes for the shocks and then solving and simulating the model to evaluate how well these shocks explain business cycles we use the model to back out the shocks that are consistent with the model s observable endogenous variables then we use variance decompositions to examine the importance of each shock we apply this methodology to canada and find that world real interest rate shocks can play an important role in explaining the cyclical variation in a small open economy in particular they can explain up to one third of the fluctuations in output and more than half of the fluctuations in net exports and net foreign assets

openness government size and the terms of trade this paper investigates the relationship between trade openness and the size ofngovernments both theoretically and empirically we argue that openness can increase the size of governments through two channels 1 a terms of trade externality whereby trade lowers the domestic cost of taxation and 2 the demand for insurance whereby trade raises risk and public transfers we provide a unified framework for studying and testing these two mechanisms our main theoretical prediction is that the relative strength of the two explanations depends on a key parameter namely the elasticity of substitution between domestic and foreign goods moreover while the first mechanism is inefficient from the standpoint of world welfare the second is instead optimal in the empirical part of the paper we provide new evidence on the positive association between openness and government size and we explore its determinants consistently with the terms of trade externality channel we show that the correlation is contingent on a low elasticity of substitution between domestic and foreign goods our findings raise warnings that globalization may have led to inefficiently large governments

the international diversification puzzle is not as bad as you think the international diversification puzzle is the fact that country portfolios are on average biased toward domestic assets while one good international macro models with nondiversifiable labor income risk predict the opposite pattern of diversification this paper embeds a portfolio choice decision in a two good international business cycle model and provides a closed form solution for equilibrium country portfolios equilibrium portfolios are biased toward domestic assets because endogenous international relative price fluctuations make domestic assets a good hedge against labor income risk evidence from developed economies in recent years is qualitatively and quantitatively consistent with the mechanisms highlighted by the theory

optimal taxation of capital income with imperfectly competitive product markets abstract we show that the steady state optimal tax on capital income can be negative positive or zero in a neoclassical growth model that allows for imperfectly competitive product markets the sign of the optimal tax rate depends crucially on 1 the degree of monopoly power 2 the extent to which monopoly profits can be taxed 3 the size of the depreciation allowance and 4 the magnitude of government expenditures for an empirically plausible set of parameters we find that the steady state optimal capital tax can range between 10 and 22