budgetary policies and available actions a generalisation of decision rules for allocation and research decisions the allocation problem in health care can be characterised as a mathematical programming problem but attempts to incorporate uncertainty in costs and effect have suffered from important limitations a two stage stochastic mathematical programming formulation is developed and applied to a numerical example to explore and demonstrate the implications of this more general and comprehensive approach the solution to the allocation problem for different budgets budgetary policies and available actions are then demonstrated this analysis is used to evaluate different budgetary policies and examine the adequacy of standard decision rules in cost effectiveness analysis the research decision is then considered alongside the allocation problem this more general formulation demonstrates that the value of further research depends on i the budgetary policy in place ii the realisations revealed during the budget period iii remedial actions that may be available and iv variability in parameters values

specialization transactions technologies and money growth this paper develops a differentiated product model with endogenous specialization in which either money or a costly alternative transactions technology can be used for market purchases we discuss the real effects of monetary growth in this model which differ from those in standard cash in advance models and the implied interest sensitivity of money demand in general equilibrium

money as the mechanism of exchange abstract the existence and use of money remained an embarrassing puzzle for monetary analysis we observe over man s history that social groups without generally accepted media of exchange exhibit poor survival characteristics most social groups do not use assets or commodities at random in the execution of exchanges one observes that a small subset of assets is dominantly used in transactions these transaction dominating assets are usually referred to as money the literature contains many suggestive attempts to explain the emergence and role of money the classic writers made passing references in somewhat pictorial language to the extension markets and increasing labor productivity induced by the use of a general medium of exchange this idea has never been systematically developed however karl brunner 1971

endogenous transfer institutions in overlapping generations abstract we characterize the set of equilibrium transfers between overlapping generations when transfer institutions are endogenous in stationary economies pareto improving transfers require institutions cost as much to construct as they convey even if less costly institutions exist that make the same transfer if institutions can be built upon they may cost less and convey more but transfers may become excessive interpreting such institutions as social security we introduce private saving with time social security crowds out savings still the potential to save limits any excess transfer endogenous costly to create gold money institutions are examined and the role of compulsion in evolving to costless to create fiat currency detailed

the irrelevance of inference a decision making approach to the stochastic evaluation of health care technologies the literature which considers the statistical properties of cost effectiveness analysis has focused on estimating the sampling distribution of either an incremental cost effectiveness ratio or incremental net benefit for classical inference however it is argued here that rules of inference are arbitrary and entirely irrelevant to the decisions which clinical and economic evaluations claim to inform decisions should be based only on the mean net benefits irrespective of whether differences are statistically significant or fall outside a bayesian range of equivalence failure to make decisions in this way by accepting the arbitrary rules of inference will impose costs which can be measured in terms of resources or health benefits forgone the distribution of net benefit is only relevant to deciding whether more information is required a framework for decision making and establishing the value of additional information is presented which is consistent with the decision rules in cea this framework can distinguish the simultaneous but conceptually separate steps of deciding which alternatives should be chosen given existing information from the question of whether more information should be acquired it also ensures that the type of information acquired is driven by the objectives of the health care system is consistent with the budget constraint on service provision and that research is designed efficiently

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

resource allocation for control of infectious diseases in multiple independent populations beyond cost effectiveness analysis traditional cost effectiveness analysis cea assumes that program costs and benefits scale linearly with investment an unrealistic assumption for epidemic control programs this paper combines epidemic modeling with optimization techniques to determine the optimal allocation of a limited resource for epidemic control among multiple noninteracting populations we show that the optimal resource allocation depends on many factors including the size of each population the state of the epidemic in each population before resources are allocated e g infection prevalence and incidence the length of the time horizon and prevention program characteristics we establish conditions that characterize the optimal solution in certain cases

money barter and costly information acquisition abstract endogenous information structure is analyzed in a search model of production and exchange under qualitative uncertainty by allowing agents to invest in an inspection technology at a fixed cost where incurring a higher cost permits quality to be recognized with higher probability in any equilibria where agents acquire information some bad commodities are always produced the information acquisition promotes production and exchange of good commodities as the information problem becomes severe money can improve welfare by economizing on information costs in the optimal monetary equilibrium agents adopt trading strategies which contribute to the saving of information costs

mathematical programming for the efficient allocation of health care resources previous discussions of methods for the efficient allocation of health care resources subject to a budget constraint have relied on unnecessarily restrictive assumptions this paper makes use of established optimization techniques to demonstrate that a general mathematical programming framework can accommodate much more complex information regarding returns to scale partial and complete indivisibility and program interdependence methods are also presented for incorporating ethical constraints into the resource allocation process including explicit identification of the cost of equity

a simple approximation for semivariance abstract semivariance can differentiate among skewed return distributions but variance is unable to do so thus semivariance has been used as a risk surrogate in portfolio analysis and capital budgeting problems unfortunately semivariance analysis is relatively unknown and poses difficult analytic and computational problems in this paper an expression is derived which very closely approximates semivariance this expression is simple in form and uses only familiar statistics namely mean variance critical value and cumulative probability below the critical value

monetary economics a review essay in this essay i define money to be whatever objects serve as generally acceptable media of exchange and i define monetary economics to be the study of the causes and economic consequences of the monetization of exchange that is of the use of media of exchange these definitions lead me to specify the distinctive objectives of monetary economics to be to understand 1 the monetization of exchange and its relation to the technologies of production and of exchange 2 the form that money takes and especially the viability of fiat money 3 the determination and significance of the real value of units of money and 4 the relation between the nominal quantity of money and aggregate economic activity the essay tries to acquaint the reader with the contents of the recently published handbook of monetary economic as they relate to these objectives of monetary economics and offer some critical thoughts on selected unsettled issues in monetary economics that my reading of the handbook suggested this abstract was borrowed from another version of this item

economic organization with limited communication this paper presents formal stylized representations of communication accounting systems oral assignment portable object written message and telecommunication systems are considered the environments that allow this formalization are characterized by spatial separation private information and a need to keep track of past actions transfers and shocks in environments that have spatial separation and private information beneficial multilateral arrangements can depend critically on agents ability to communicate to one another values of contemporary shocks and to keep track of histories of past transfers or past announced shocks this paper formalizes this idea and focuses on com

liquidity quality production cost and welfare in a search model of money this paper examines a search model of money with divisible commodities of high and low quality while keeping the assumptions of indivisible money and unit inventory constraint with no direct barter and a higher fixed cost of producing high relative to low quality an increase in the money stock encourages the production of high quality output by trading off the larger trading opportunities against the significance of higher fixed cost as long as the fixed cost differential between high and low quality is sufficiently small relative to the utility gain from high quality consumption the quality improvement outweighs the negative effect of higher money stocks on aggregate production and hence implies higher welfare the most important function of money is its role as a medium of exchange wicksell 1906 1967 p 17 defined a general medium of exchange to be an object which is habitually and without hesitation taken by anybody in exchange for any commodity the main challenge facing monetary theory is to construct a model which permits the object s role in exchange to be endogenous 1 kiyotaki and wright 1991 1993 seems to be the first fully coherent model which specifies the environment and equilibrium concept in a way that does not force at the outset the assumption on which objects will play a special role in trade the kiyotaki wright model departs from the physical environment of the standard general equilibrium model through the assumption that trading histories are private information the medium of exchange role of money is obtained as an outcome of nash equilibrium together with some bargaining rule in pairwise random meetings however the standard kiyotaki wright model yields an undesirable welfare implication that an increase in the money stock eventually leads to a decrease in welfare because of a decrease in the number of agents who get to consume in a given period the same welfare property is obtained in the models with divisible commodities such as trejos and wright 1995 and shi 1995 2 this property has been regarded as the outcome of the original kiyotaki wright assumptions of indivisible money and the inventory constraint agents can only carry one object either commodity or money at a time despite simplifying the distribution of money holdings these assumptions impose the restriction that agents are not allowed to produce while they hold money

cost effectiveness utility analyses do current decision rules lead us to where we want to be despite the growing literature on economic evaluation of health care programmes little attention has been paid to the theoretical foundations of cost effectiveness and cost utility analyses and the validity of the decision rules adopted as methods of achieving the stated goals we show that although applications of the techniques can be used to pursue some managerial objectives in the context of highly constrained environments such applications are inconsistent with both welfare economic objectives and the interpretations of the findings of these applications alternative strategies are identified as potential and practical methods for pursuing welfare economic objectives

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

a further exploration in the theory of exchange rate regimes in an interesting paper in this journal elhanan helpman 1981 develops a simple two country model to compare the welfare levels that are achieved under different exchange rate regimes in a world characterized by perfect foresight his basic finding is that equilibrium consumption allocations and hence welfare levels are identical under a floating exchange rate system and a one sided peg fixed exchange rate regime this result is due to helpman s assumption that output is determined exogenously which allows a separation of the real and monetary sides of the economy the purpose of this paper is to extend helpman s model by making two alterations in his setup 1 to allow production to be endogenously determined as a function of labor force participation and 2 to allow welfare levels to be dependent on labor service as well as on consumption the main conclusion then obtained is that a country may achieve a higher welfare level under a flexible exchange rate regime than under a fixed exchange rate regime since it is able to choose an optimal rate of inflation or currency depreciation

the welfare cost of inflation in a cash in advance economy with costly credit the paper presents a modification of the lucas stokey 1983 cash in advance economy in which the representative consumer decides based on relative prices which goods to buy with cash and which with costly credit an explicit baumol 1952 condition emerges that guides this consumer choice deriving and estimating a closed form welfare cost function in an example economy the paper shows that the welfare cost of inflation depends on the margins of substitution the consumer avoids inflation through costly credit and faces higher welfare costs of inflation than in standard cash in advance economies

armen alchian s contribution to macroeconomics i introduction this essay examines alchian s contribution to the theory and practice of macroeconomics we have the task of reviewing alchian s contributions in an area that represents only a tiny fraction of his body of work citations to his work on the theory of the firm greatly outnumber those on money and inflation nevertheless we find that many of the major developments in macroeconomics in the last two decades follow paths that were pointed out in the late 1950s and early 1960s by armen alchian much of it in collaboration with reuben kessel alchian s ideas about macroeconomics were developed in a fertile environment at ucla in conversations with colleagues such as karl brunner and jack hirshleifer as well as with graduate students such as allan meltzer and rachael and ted balbach a signature of alchian s work was his great ability to clarify the issues he was careful to distinguish the effects of money versus real shocks of anticipated versus unanticipated inflation and to work through the impact of an event to the general equilibrium consequences he understood that real world problems such as incomplete information might explain apparently noneconomic behavior but unlike many macroeconomists of that time he did not abandon microeconomic principles when explaining nominal real interactions alchian s views were a clear contrast to those of prominent macroeconomists of the day who argued that aggregate monetary policies could not be used to stabilize the price level at full employment because of asymmetric rigidities in markets that prevented the downward adjustment of any nominal price as part of the process of adjusting relative prices 1 the conventional wisdom of the day led to policies that ultimately caused two decades of accelerating and costly inflation both the rational expectations revolution and developments in modeling the microfoundations of business cycles were a reaction to this experience and to the apparent failure of standard macroeconomic analysis alchian s 1970 work on the effect of private information was one of the original articles in this microfoundation literature although he used a narrative approach rather than the highly structured mathematical models available to researchers today alchian was more than two decades ahead of the real business cycle economists in asking researchers to explore economic explanations fully before adopting explanations based on market failure money illusion and irrational behavior this paper is organized in four parts the first part describes alchian s work involving the fundamental role of money in society king and plosser 1986 93 wrote but in the explosion of formal modeling of monetary economies in the postwar period brunner and meltzer 1971 and alchian 1977 stand nearly alone in stressing the idea that monetary arrangements economize on the information production that would otherwise be necessary to mitigate problems of moral hazard in the exchange of commodities the second part discusses alchian and klein s work on the measurement of inflation this measurement problem appears to be more obvious when inflation is low and the variance of price indexes is dominated by real factors this work was generally neglected at the time it was written perhaps because inflation accelerated so rapidly that the real factors became less important now that inflation has declined to moderate levels the measurement problems are resurfacing the third part of the paper documents alchian s insight into the problems and intellectual developments that followed the erratic inflation policies of the u s government in the 1960s and 1970s in a 1962 journal of political economy article he and reuben kessel set forth a description of the events that occur as an economy shifts from one steady state inflation regime to another this work revealed an understanding of the importance of credibility for the policymaker that was missing from much of the writing about macro policymaking in the subsequent three decades

anticipated inflation and the capital stock in a cash in advance economy abstract an economy is constructed in which the steady state capital stock is inversely related to the rate of inflation as a result that is directly opposite the usual conclusion

monetary policy and bank regulations in an economy with financial innovations this is a study of financial innovations and moves towards the cashless society in a general equilibrium cash in advance model it is assumed that a subset of goods cash goods and check goods

forecasting the volatility of crude oil futures using intraday data abstract we use the information in intraday data to forecast the volatility of crude oil at a horizon of 1 66 days using a variety of models relying on the decomposition of realized variance in its positive or negative semivariances part and its continuous or discontinuous part jumps we show the importance of these decompositions in predictive in sample regressions using a number of specifications nevertheless an important empirical finding comes from an out of sample analysis which unambiguously shows the limited interest of considering these components overall our results indicates that a simple autoregressive specification mimicking long memory and using past realized variances as predictors does not perform significantly worse than more sophisticated models which include the various components of realized variance

a model to optimize investments in health technologies quality of care and research funds for health technologies compete with funds for implementing health technologies as well as funds for conducting research to reduce uncertainty around treatment and implementation cost effectiveness no study has yet shown how to allocate a combined budget for health technologies implementation and research the purpose of this work was to present an allocation model with the goal to maximize health based on a constrained optimization formulation we show that considering opportunities to invest in implementation and research may justify considerable disinvestment in health technologies this may reduce the willingness to pay for new health technologies significantly

commodity money under private information abstract private information is introduced into the kiyotaki wright model of commodity money in terms of qualitative uncertainty concerning the good which would be the unique medium of exchange under complete information producers are allowed to produce high or low quality versions of that good and people may not always recognize its quality it is shown that commodities that suffer from qualitative uncertainty may still be used as the medium of exchange when the private information problem is not too severe this is so despite the fact that in some equilibria there is necessarily some low quality commodity money in circulation when the information problem is so severe that the good of uncertain quality cannot be the unique money there can exist an equilibrium with dual commodity monies of which one is the good subject to qualitative uncertainty

money and information this paper investigates the role of money in markets in which producers have private information about the quality of the goods they supply when the fraction of high quality producers in the economy is given money promotes the production of high quality goods which improves the quality mix and welfare unambiguously when this fraction is endogenous however we find that money can decrease welfare relative to the barter equilibrium the origin of this inefficiency is that money provides consumption insurance to low quality producers which can result in a higher fraction of low quality producers in the monetary equilibrium finally we find that most often agents acquire more costly information in the monetary equilibrium than in the barter equilibrium consequently money is welfare enhancing because it promotes useful production and exchange but not because it saves information costs

variance vs downside risk is there really that much difference abstract the popularity of downside risk among investors is growing and mean return downside risk portfolio selection models seem to oppress the familiar mean variance approach the reason for the success of the former models is that they separate return fluctuations into downside risk and upside potential this is especially relevant for asymmetrical return distributions for which mean variance models punish the upside potential in the same fashion as the downside risk the paper focuses on the differences and similarities between using variance or a downside risk measure both from a theoretical and an empirical point of view we first discuss the theoretical properties of different downside risk measures and the corresponding mean downside risk models against common beliefs we show that from the large family of downside risk measures only a few possess better theoretical properties within a return risk framework than the variance on the empirical side we analyze the differences between some us asset allocation portfolios based on variances and downside risk measures among other things we find that the downside risk approach tends to produce on average slightly higher bond allocations than the mean variance approach furthermore we take a closer look at estimation risk viz the effect of sampling error in expected returns and risk measures on portfolio composition on the basis of simulation analyses we find that there are marked differences in the degree of estimation accuracy which calls for further research

uncertainty and value of information when allocating resources within and between healthcare programmes a two stage stochastic mathematical programming formulation has been developed to optimally allocate resources within and between healthcare programmes when there is an exogenous budget and the parameters of the healthcare models are variable and uncertain this formulation solves the optimal resource allocation problem and calculates the expected value of acquiring additional information to resolve the uncertainties within the allocation it is shown that the proposed formulation has several advantages over the chance constrained and robust mathematical programming methods