institutions and progress an insistent theme in richard nelson s work is that of capitalism as an engine of progress in this paper i explore this idea through a sequence of his writing distinguishing progress as outcome from progress as instituted process this leads to a deeper issue within this nelsonian theme namely the incompatibility between progress and equilibrium i argue that evolving systems are ordered and coordinated but they are never in equilibrium capitalism is restless it always generates change from within and the proximate source of this progressive tendency is the uneven accumulation of knowledge capitalism is restless because knowledge is restless copyright 2001 by oxford university press

a search theoretic model of legal and illegal currency abstract using a search theoretic model of money we explore the conditions under which two currencies domestic and foreign will co exist despite legal restrictions on the use of foreign currency for internal trade we study how changes in government policy i e its enforcement of currency laws through fines or the rate of enforcement affects the acceptability of illegal currency the equilibrium value of both currencies and the implicit exchange rate first we construct a model with indivisible goods to show conditions under which legal currency is fully acceptable but illegal currency circulates with varying acceptability we then introduce bargaining to determine prices in legal and illegal currency we show that some enforcement polices can create multiple equilibria while others will not also some methods of enforcement are capable of driving the illegal currency out of circulation while others are not

openness to international markets and the diffusion of standards compliance in latin america a multi level analysis abstract this study contributes to the debate on the role of openness to international markets for the diffusion of compliance with international standards in developing countries relying upon aggregated data for 1995 2005 as well as upon firm level and secondary data from the chilean salmon farming industry the determinants of iso 9000 and iso 14001 diffusion at country industry and firm level in latin american are analysed our evidence suggests that openness to international markets acts at different levels at both the country and industry level it creates awareness and access to new knowledge therefore providing economic incentives or penalisations for evaluating certification this effect competes and complements the deliberated efforts and policies in explaining diffusion of certification at firm level however openness to international markets alone does not provide sufficient opportunities to acquire the knowledge required to comply with these standards in this case standards compliance depends on firm s capability to use relational and search assets as well as on national and industrial efforts and policies to spread standards usage

implementing results oriented trade policies the case of the us japanese auto parts dispute abstract why would the us threaten punitive tariffs on luxury autos to implement a market share target in auto parts we show that by making threats to a linked market a market share target may be implemented with fairly weak informational and administrative requirements moreover such policies can be both pro competitive and advantageous to us firms

market share quotas abstract anecdotal evidence reveals that an import quota is not always filled when the quota is specified in terms of a market share limit instead of a quantity limit in a simple cournot duopoly we show that imposing a market share quota eliminates pure strategy equilibria instead a mixed strategy equilibrium occurs where the quota is not binding under one of the two equilibrium domestic strategies compared with a tariff that restrains the foreign market share to an equivalent level domestic output and social welfare may be higher under a market share quota

classifying technology policy from an evolutionary perspective abstract for the classification of technology policy in an evolutionary framework the taxonomy of mission and diffusion oriented policy design introduced by ergas ergas h 1987 the importance of technology policy in dasgupta p stoneman p eds economic policy and technological performance cambridge univ press cambridge is useful however ergas indirect method of identifying the respective policy style is only able to give a first and rough insight in the technology policy of a specific country to improve on that we developed a so called direct method aiming at a sound characterization of single policy measures and giving a more detailed picture about policy orientation to demonstrate the basic procedure of the suggested approach it is applied empirically on the german technology policy of the last 2 decades

a search theoretic approach to monetary economics the essential function of money is its role as a medium of exchange the authors formalize this idea using a search theoretic equilibrium model of the exchange process that captures the double coincidence of wants problem with pure barter one advantage of the framework described here is that it is very tractable the authors also show that the model can be used to addre ss some substantive issues in monetary economics including the potenti al welfare enhancing role of money the interaction between specializat ion and monetary exchange and the possibility of equilibria with multip le fiat currencies copyright 1993 by american economic association

enterprise restructuring and embeddedness a policy and systems perspective this paper presents a dynamic analysis of technological and industrial policies directed to business sector restructuring in increasingly knowledge based economies it simultaneously considers policies which are aimed at promoting restructuring directly and policies aimed at influencing the facilitating structure of largely non business institutions and organizations this paper also offers an explicit analysis of the changing portfolio of policies recognizing the complementarity of both incentives and institutional development and the likelihood of having to adopt under a broad set of circumstances a changing portfolio of horizontal and target incentives policies programs copyright 2000 by oxford university press

welfare and market access effects of piecemeal tariff reform abstract we study the link between import volume and welfare due to liberalization we confine our attention to the small country case and to unilateral tariff reductions our results indicate that increased import volume associated with tariff reductions is neither necessary nor sufficient for welfare improvement to occur we show that in general both import value and welfare cannot fall moreover if the excess demand for exported goods does not respond to changes in the prices of imported goods the value of imports and welfare must move in opposite directions

the evolution of exchange abstract stochastic stability is applied to the problem of exchange we analyze the stochastic stability of two dynamic trading processes in a simple housing market in both models traders meet in pairs at random and exchange their houses when trade is mutually beneficial but occasionally they make mistakes the models differ in the probability of mistakes when all mistakes are equally likely the set of stochastically stable allocations contains the set of efficient allocations when more serious mistakes are less likely the stochastically stable states are those allocations always efficient with the lowest envy level

market stimulating technology policies in developing countries a framework with examples from east asia abstract this paper proposes an analytical framework for technology development based upon evolutionary approaches and drawing upon asian development strategies the analysis rests on the concept of market stimulating technology policies comprising a broad array of policies to promote industrial and technological development some market and others government determined these policies may be functional horizontal or vertical and can be analyzed at three levels national strategic and specific the paper suggests that strategic choices are involved at all stages that cannot be resolved entirely by recourse to free markets

results oriented versus rules oriented trade policies a theoretical survey this paper surveys the recent literature on results oriented versus rules oriented trade policies after presenting a simple setting capturing the basics of results oriented markets access schemes we discuss extensions which have been or might be developed in this line of research in particular we investigate how the use of simple costly verification of information models might be fruitfully applied to analyze the incentives for countries to choose between results oriented and rules oriented trade policies

complementary credit networks and macroeconomic stability switzerland s wirtschaftsring abstract the swiss wirtschaftsring economic circle credit network founded in 1934 provides residual spending power that is highly counter cyclical individuals are cash short in a recession and economize by greater use of wir credits a money in the production function mipf specification implies that transactions in wir form a stabilizing balance that makes up for the lack of ordinary currency thus unlike the ordinary money wir money is negatively correlated with gdp in the short run this implication is confirmed by empirical estimates such credit networks play a stabilizing role that should be considered in monetary policy

on the stability of non walrasian equilibria abstract we present a dynamic disequilibrium macro model which permits non walrasian or keynesian equilibria as stationary states unlike the stability results obtained by varian 1977 and eckalbar 1979 1980 1981 in a series of papers in the same model we show that such equilibria have the saddle point property when the real wage rate the real money balances and expected output demand all change in disequilibrium

trade liberalization and strategic outsourcing this paper develops a model of strategic outsourcing with trade liberalization in the intermediate product market a domestic firm may choose to purchase a key intermediate good from a more efficient foreign producer who also competes with the domestic firm for a final good this has a strategic effect on competition unlike the outsourcing motivated by cost saving the strategic outsourcing has a collusive effect that could raise the prices of both intermediate and final goods trade liberalization in the intermediate good market has a very different effect compared with trade liberalization in the final good market d 2003 elsevier b v all rights reserved

can subsidies for mars be procompetitive in contrast to recent literature we show that market access requirements mars can be implemented in a procompetitive manner even in the absence of threats in related markets by focusing on subsidies that are paid only when the requirement is met we show that a mar can increase aggregate output relative to free trade provided that the right set of firms is targeted in the context of a model with multiple japanese and u s firms we show that a mar on u s imports is procompetitive as long as the u s firms are the ones targeted to receive the subsidy jel classification f13 est ce que les subventions pour promouvoir la penetration du marcheetranger peuvent promouvoir la concurrence contrairement a ce qui ressort de la litterature specialisee recente les auteurs montrent que l on peut mettre en place des mesures pour promouvoir la penetration du marcheetranger de telle maniere que cela promeuve la concurrence et ce meme en l absence de menaces dans des marches relies en mettant l accent sur les subventions payees quand les objectifs de penetration sont remplis on montre que de telles pratiques peuvent accroire le niveau de production par rapport a ce qu il serait dans un monde de libre echange pourvu que le bon ensemble de firmes soit cible dans un modele ou coexistent plusieurs firmes americaines et japonaises on montre que de tels efforts quand ils portent sur les importations en provenance des etats unis promeuvent la concurrence tant que ce sont les firmes americaines qui recoivent la subvention

inventory fluctuations in a disequilibrium macro model as fig i shows this pattern continues to hold with remarkable fidelity over the postwar period as well notice that stock levels tend to peak during recessions shaded areas and to trough shortly after recessions while the stock sales ratio tends to peak during the latter part of recessions and to trough during expansions given the huge role played by stocks in business fluctuations 1 it is surprising that so little theoretical attention is directed toward improving our understanding of the timing of stock and stock sales ratio movements 2 the purpose of this paper is to offer a theoretical model which is consistent with the observed cyclical behaviour of stocks and the stock sales ratio the present model has firms forming sales expectations and then producing enough output if possible to cover the expected sales and to maintain a given stock expected sales ratio trade takes place out of equilibrium and inaccurate sales expectations or capacity constraints give rise to involuntary stock changes we find that stock holding may or may not be destabilising if stocks are not destabilising the familiar keynesian multiplier will obtain though the path of output after a shock will differ from the keynesian path if stocks are destabilising the system is found to enter a cycle with stocks and output ultimately rising and falling in a pattern much like that observed in actual cycles

money barter and convergence to the competitive allocation menger s problem abstract this paper explores the propensity of a bilateral exchange economy to get stuck away from the competitive allocation even when the competitive prices have been established this is menger s problem necessary and sufficient conditions for a menger problem are found to relate to the presence of corner solutions when money is introduced convergence can be established

a catalytic and evolutionary approach to horizontal technology policies htps abstract this paper presents an evolutionary framework for horizontal technology policies htps especially market friendly ones involving project based incentives e g rd and they complement the more specific and well known selective and vertical policies aimed at individual sectors and technologies the analysis is conducted within a learning to innovate framework with emphasis on collective organizational learning search and market building the outcome is a technology policy cycle with distinct infant growth and mature phases proactive generation of a critical mass of projects for efficient learning and diffusion of innovation routines becomes the aim of the infant phase while the mature phase of the policy should focus on policy restructuring including drastic reductions in the support of routi projects and enhanced support of more complex types of innovation the paper also emphasizes the importance of a neutrality component in incentives in the infant phase of increasing selectivity and of building policy capabilities for efficient policy design and implementation

stable quantities in fixed price disequilibrium recent work in the area of non walrasian process analysis has focused on three primary deficiencies in the walrasian tatonnement assumptions these are the walrasian neglect of endowment and spillover effects together with the failure to assign a special role for money in detail first it has long been known that if trade takes place during the process of price adjustment the resulting capital gains and losses coupled with the change in the distribution of commodities will tend to shift the position of the equilibrium for an early source see 18 book v chap ii this leaves the system with the problem of trying so to speak to close in on a moving target this is the endowment effect surprisingly hahn negishi and others see 17 1 chap 131 h ave found that stability follows in this class of models more readily than in walrasian models second clower 3 and patikin 9 chap xiii have argued that if trade takes place away from equilibrium we should expect that non zero excess demands in some markets will influence trading plans in other markets this is the spillover effect the classic case is that if a worker on the long side of the labor market cutting his planned consumption below its walrasian level because of spillovers the demands which actually get expressed in the marketplace can differ significantly even in sign from the demands which the walrasian auctioneer responds to initially there was speculation that spillovers would generate instability and or unemployment equilibria but thus far the theoretical results are mixed compare for example 11 io finally clower 4j has argued that the patikinesque macromoney general equilibrium models have not succeeded in formally distinguishing between money and other durables as a means of payment noting that the walrasian budget constraint implicitly allows trading in any pair of commodities he urges that a tighter restriction be introduced in the interest of enforcing the rule money buys goods and goods buy money 302 0022 0531 81 050302 12502 00 o

vertical foreclosure and international trade policy international differences in the cost of production of a key intermediate product can mean that a domestic firm is dependent on supplies from a foreign vertically integrated firm this paper considers the incentives for the foreign firm and foreign country to supply the domestic firm when the firms compete in a cournot or bertrand market for the final product the vertical supply decision is significantly affected by domestic supply conditions for the input and a domestic tariff on final product imports optimal policy by the exporting country may require a tax on both exports or a subsidy on both exports countries that are dependent on imports of a key intermediate product or raw material from a dominant world supplier are often concerned about the price and the availability of imports a notable current example involves the computer industry japanese suppliers with the help of the japanese government recently restricted the exports of dram semiconductors substantially raising their price these suppliers control about 80 of the market for semiconductors and the higher prices and shortage in supply have forced u s producers of computers to curtail production and increase prices vertically integrated japanese firms such as toshiba and n e c have benefitted both from increased profits in the export market for semiconductors and from the improvement in their competitive position in the market for final computers as this example indicates the price and availability of imported supplies can depend on both public and private incentives in the exporting country in this paper we first examine the private incentives for a vertically integrated firm to export an intermediate product to a higher cost rival lowering its rival s costs the exporting firm may choose vertical foreclosure thus fully cutting off supplies we then consider the public interest of the exporting country does the exporting country gain by encouraging the export of the intermediate product or alternatively might government foreclosure occur the government is in a position to affect the quantity of exports of both the input and the final product by an appropriate choice of export tax and subsidy policies

keiretsu and relationship specific investment implications for market opening trade policy abstract this paper considers the implications of relationship specific investment within keiretsu for policies aimed at opening the japanese market for intermediate goods such as auto parts both vies applied to parts and vers restricting japanese exports of autos cause the keiretsu to import a wider range of parts but of a relatively unimportant type such as seat covers since keiretsu investment and output fall the total value of us parts exports may actually fall for a given value of these exports a vie is less costly for us consumers and japanese producers but a ver is preferred by us automakers

the control of export credit subsidies and its welfare consequences a two stage bertrand duopoly model demonstrates how the sequence of firm and government actions can explain the origins of export credit subsidies and can affect the welfare consequences of international agreements to adopt subsidy rate ceilings firms act first by stating prices in applications for export credit and can induce positive subsidies by inflating the prices the subsidies transfer rents from governments to firms without changing welfare defined as profits less subsidy expenditures governments become the first to act by adopting subsidy rate ceilings that bind ceilings cause firms to lower prices such that if a positive ceiling binds welfare falls

the complexity of exchange the computational complexity of two classes of market mechanisms is compared first the walrasian interpretation in which prices are centrally computed by an auctioneer recent results on the computational complexity are reviewed the non polynomial complexity of these algorithms makes walrasian general equilibrium an implausible conception second a decentralised picture of market processes is described involving concurrent exchange within transient coalitions of agents these processes feature price dispersion yield allocations that are not in the core modify the distribution of wealth are always stable but path dependent replacing the walrasian framing of markets requires substantial revision of conventional wisdom concerning markets

finitely optimal allocation in countably large square exchange economies abstract a countably large square exchange economy is said to be of overlapping generations type if an allocation can be pareto improved upon through a trade involving only a finite number of agents if it can be improved upon through a trade involving only finite numbers of agents and commodities a necessary and sufficient condition is given for economies to be of overlapping generation type

export subsidies for differentiated products abstract export subsidies in differentiated product markets are examined in a framework where the decision to establish subsidy programs occurs first but firms set prices before governments set subsidy levels in contrast to earlier results that governments should tax the exports of bertrand firms when subsidy levels are set before prices positive subsidies can be optimal adoption of a subsidy program by one producer s government does not necessarily hurt the unsubsidized competitor the subsidy itself hurts but the program facilitates collusion the results highlight the importance of timing and the distinction between the effects of policy regimes and policy instruments

mapping public support for innovation a comparison of policy alignment in the uk and france this paper proposes and tests a three dimensional model of public support design as a framework to compare public incentives for innovation in firms through time and across countries and consequently to compare forms of policy alignment of innovation objectives in an economy using data on 149 french and british policy programmes from the early 1980s to 2002 this paper shows that policy makers implement programmes within a different three dimensional design space in order to align several distinctive objectives and consequently strengthen the impact of governmental measures moreover as the objectives of the national players and policy makers evolved the portfolio of innovation policies also evolved in their separate ways nevertheless some similar trends are also observed

investment and competitive matching we study markets in which agents first make investments and are then matched into potentially productive partnerships equilibrium investments and the equilibrium matching will be efficient if agents can simultaneously negotiate investments and matches but we focus on markets in which agents must first sink their investments before matching additional equilibria may arise in this sunk investment setting even though our matching market is competitive these equilibria exhibit inefficiencies that we can interpret as coordination failures all allocations satisfying a constrained efficiency property are equilibria and the converse holds if preferences satisfy a separability condition we identify sufficient conditions most notably quasiconcave utilities for the investments of matched agents to satisfy an exchange efficiency property as well as sufficient conditions most notably a single crossing property for agents to be matched positive assortatively with these conditions then forming the core of sufficient conditions for the efficiency of equilibrium allocations

innovative opportunity pursuit human capital and business ownership experience in an emerging region evidence from ghana this study explores whether an entrepreneur s ability to assemble and leverage human capital particularly specific human capital relating to prior business ownership experience is associated with seven types of product and work practices innovation in an emerging region namely ghana logistic regression estimation revealed that portfolio entrepreneurs were more likely than novice entrepreneurs to report innovation tried multinomial logistic regression analysis revealed that portfolio entrepreneurs were more likely than other entrepreneurs to report innovation tried and introduced if the goals of policy are to increase the quality of new business start ups and maximize investment returns there is a case to target assistance to portfolio entrepreneurs

it takes t to tango trading coalitions with fixed prices in the edgeworth non tatonnement process trade occurs if there exists some coalition of agents able to make a pareto improving trade among themselves at current prices it is known that the coalition size required is bounded by the number of commodities and that provided all agents always have strictly positive endowments bilateral trade suffices these results are generalized but it is shown that when some agents do not hold all commodities the information requirements for coalition formation can be very severe coalition size is not the only problem very detailed information on preferences may be needed

no envy and consistency in economies with indivisible goods we consider the problem of fair allocation in economies with indivisible goods our main objective is to identify appealing subsolutions of the no envy solution we formulate desirable properties of solutions and look for solutions satisfying them given an allocation chosen by a solution for some economy and given a subgroup of the agents consider the problem of fairly distributing among its members the resources that this group has collectively received the solution is consistent if it recommends that the same bundle be attributed to each of these agents as initially we show that there is no proper subsolution of the no envy solution that satisfies consistency however many subsolutions satisfy bilateral consistency or the converse of consistency but again there is no proper subsolution satisfying these two properties together

tying trade flows a theory of countertrade with evidence a countertrade contract ties an export to an import usually countertrade is criticized as a form of bilateralism and reciprocity and thus as an inefficient form of international exchange in this paper the authors argue that there are circumstances in which the tying of two technologically unrelated trade flows may be efficiency enhancing they show that countertrade can be an efficient institution in international trade that solves moral hazard problems and restores creditworthiness of highly indebted countries the authors test the implications of their model using a sample of 230 countertrade contracts copyright 1995 by american economic association

increasing returns and the foundations of unemployment theory current approaches to macroeconomic theory divide roughly into two basic schools of thought one approach typically associated with rational expectations views the economy as basically at or near walrasian market clearing equilibrium in which case it becomes very difficult to explain away convincingly the undeniable persistence at times of involuntary unemployment another approach views the underemployed economy as being in a state of temporary fixed price disequilibrium in which case aside from having to repress suspicions that the essence of effective demand failure might not have to do with prices fixed at wrong values there is a lot of rationalising to be done about why profitable adjustments are so slow this paper argues that something like an internally consistent theory of steady state involuntary unemployment is possible and even plausible the cornerstone of this third approach is increasing returns to scale which blocks unemployed agents from breaking out of a low level equilibrium trap unless there is overall coordination or stimulation a simple model is presented which contains the basic ideas

symposium on keynesian economics today no book in economics has been more praised more vilified or more discussed than the general theory of employment interest and money by john maynard keynes keynes wrote the book in the midst of a depression so great that it was clear to all observers that the economy was not working well in the united states the unemployment rate reached a peak of 25 percent in 1933 and it remained above 14 percent for the rest of the decade indeed the severity and persistence of the depression threatened the very existence of free market economies in the general theory keynes offered a diagnosis and treatment of this malady the book sparked a revolution in economics what is left of the keynesian revolution today the 1970s were a hard time for keynesians as the phillips curve seemed to disappear so did the burgeoning consensus in macroeconomics keynes had emphasized how shifts in aggregate demand cause economic fluctuations but in the 1970s shifts in aggregate supply seemed at least as important critics questioned whether keynesian macroeconomics could be built on solid microeconomic foundations and new classical macroeconomics took a turn on center stage but intellectual ideas ebb and flow most economists were not willing to embrace theories of the business cycle based on continuous market clearing it is therefore not surprising that keynesian ideas surged again to prominence in the 1980s the first two papers in this symposium discuss two strands of new keynesian economics like keynes new keynesians begin with the premise that persistent unemployment and economic fluctuations are central and continuing problems recessions and depressions represent market failure on a grand scale coming in the wake of the new classical revolution new

how to haggle and to stay firm barter as hidden price discrimination barter transactions conducted openly by established corporations play an increasingly significant role in the u s economy the model developed here helps explain why firms use barter and yields predictions concerning the circumstances under which barter is likely to occur it is shown that when two firms barter goods used as inputs price discrimination occurs this price discrimination is hidden from the firms other customers because the real values of the transacted goods to the barterers are different from the accounting prices used in the transaction since price discrimination that is observed by potential customers might have an adverse effect on the selling firm s future bargaining power barter will have value as a means of hiding price discrimination

wage inequality and the new economy many economists have argued that the observed increase in wage inequality in developed economies over the past 30 years is due to skill biased technical progress in this paper we put forward a somewhat different technology based argument namely that the increased inequality was caused by technical change linked to the pervasive innovation wave associated with the new economy this technical change was not skill biased in the usual sense but rather raised the reward to adaptability this alternative approach based on the notion of general purpose technology can shed light on a number of outstanding puzzles on the evolution of wage inequality both between and within educational groups

inventories in a dynamic macro model with flexible prices this paper presents a disequilibrium macro model with inventories rational expectations and flexible prices it is found that less than full employment equilibria are possible even highly likely in the intermediate term and that wage reductions will cause employment to drop increasing aggregate demand will raise employment only if it is done gradually on a technical level we have multiple switching lines disconnected regimes and a connected equilibrium set which borders on a switching iline and otherwise lies in a single region