sraffa and his arguments against marginism the subtitle of sraffa s most celebrated work production of commodities by means of commodities is prelude to a critique of economic theory given that no later work was ever published by sraffa we are left to wonder what would have come after the prelude this paper suggests that the core of the critique might have been the marginal method itself by carefully distinguishing between published and unpublished work we shows that sraffa s opposition to the marginal method follows several threads some of which were developed over a period of nearly 35 years such as the belief that economic theory should use only measurable and observable magnitudes the critique of the fundamental symmetry between production and consumption and the disagreement with the marshallian concept of equilibrium although none of the arguments reached a stage that sraffa considered satisfactory enough to be worth publishing our reconstruction sheds light on his research programme and on otherwise rather obscure passages in his works

u s bilateral trade flows and exchange risk during the floating period abstract this paper tests for real exchange rate risk effects on u s bilateral trade flows during the floating period using several new as well as previously used risk measures significant negative effects occur in five of six u s import flows and in two of six u s export flows with one export flow showing a significant positive effect these results are consistent with several previous findings for aggregate u s trade two risk measures using the forward exchange rate and assuming a time varying risk premium provide marginally more significant results than the others

deviations from purchasing power parity in the long run this paper demonstrates that deviations from purchasing power parity reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible rate periods for a wide variety of countries and in both monthly and annual data since this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage the paper proposes an alternative explanation which instead relies on financial arbitrage in bonds as the underlying mechanism this paper will demonstrate that deviations from purchasing power parity ppp reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible exchange rate periods for a wide variety of countries and in both monthly and annual data this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage the paper therefore proposes an alternative explanation which does not presuppose free trade in goods but which instead relies on financial arbitrage in bonds as the underlying mechanism the major implication of the theory and the results is that ppp is as likely to be violated in the long as in the short run as an empirical matter deviations from ppp can be observed for most currencies at any instant see kravis et al 21 stockman 37 and genberg 15 among others these deviations are typically both cumulative and persistent the real exchange rate can remain on either side of parity for lengthy but variable time intervals of a year or more as a consequence the current consensus shared

forecasting wheat exports do exchange rates matter a vector autoregression is fit to recent u s data on wheat prices wheat export sales wheat export shipments and exchange rates forecast error decompositions and out of sample forecasts indicate that exchange rates have little influence on wheat sales and shipments

the law and economics movement in the last thirty years the scope of economics has expanded dramatically beyond its traditional domain of explicit market transactions today there is an economic theory of property rights of corporate and other organizations of government and politics of education of the family of crime and punishment of anthropology of history of information of racial and sexual discrimination of privacy even of the behavior of animals and overlapping all these but the last of law 2 some economists oppose this expansion in whole or more commonly in part 3 there are a number of bad reasons all i think closely related for such opposition and one slightly better one 1 one bad reason is the idea that economics means the study of markets so that nonmarket behavior is simply outside its scope this type of argument owes nothing really to economics but instead reflects a common misconception about language more specifically a failure to distinguish among three different types of word or concept the first type illustrated by the term marginal cost is purely conceptual the term is rigorously and unambiguously defined by reference to other concepts just as numbers are but again like numbers there is no observable object in the real world that it names try finding a firm s marginal costs on its books of account the second type of word illustrated by rabbit refers to a set of real world objects few such words are purely referential one can speak of a pink rabbit or a rabbit the size of a man without misusing the word even though one is no longer using it to describe anything that exists nevertheless the referential function dominates finally there are words like law religion literature and economics which are neither conceptual nor referential such words resist all efforts at definition they have in fact no fixed meaning and their dictionary definitions are circular they can be used but not defined 4 one cannot say that economics is what economists do because many noneconomists do economics one cannot call economics the science of rational choice either the word rational lacks a clear definition and passing that difficulty there can be noneconomic theories of rational choice in which few predictions of ordinary economics may hold for example because the theory assumes that people s preferences are unstable there can also be nonrational economic theories an example is the type of survival theory in industrial organization in which firms that randomly hit on methods of lowering their costs expand vis a vis their rivals another example is marxism one cannot call economics the study of markets either not only because that characterization resolves the question of the domain of eco judge u s court of appeals for the seventh circuit senior lecturer university of chicago law school 1111 e 60th st chicago il 60637 i thank gary becker frank easterbrook william landes geoffrey miller richard porter george stigler geoffrey stone and alan sykes for comments on a previous draft and nir yarden for research assistance see for example gary becker 1976 jack hirshleifer 1985 p 53 george stigler 1984 gerard radnitzky and peter bernholz 1986 2 for a recent conspectus of economic analysis of law see my book 1986 3see for example ronald coase 1978 coase is of course a leading figure in the economics of property rights so his opposition is far from total 4for an excellent discussion see john ellis 1974 ch 2

international financial volatility and agricultural commodity trade a primer recent international financial crises east asia in 1997 russia in 1998 brazil in 1999 and the speed with which they have spread across countries and regions have called into question the very desirability of financial globalization that is the opening of balance of payments capital accounts in both developed and emerging economies since the mid 1980s 1 calls for a new global financial architecture have multiplied and new and old theoretical arguments for and against controlling capital flows as well as domestic financial markets especially banks have been put forward imf rodrik stiglitz there is little empirical evidence to support the debate over the potential effects of enhanced financial volatility at the sectoral level and especially on the agricultural economy has international financial volatility actually affected real sectoral performance and if so how after briefly reviewing literature in this area this paper introduces the methodology and preliminary results of an on going research project that addresses that question with reference to agricultural commodity trade the purpose of the paper is both to generate productive discussion and to motivate similar research in this

exchange rate uncertainty and agricultural trade using a sample of bilateral trade flows across ten developed countries between 1974 and 1995 this article explores the effect of exchange rate uncertainty on the growth of agricultural trade as compared to other sectors based on a gravity model that controls for other factors likely to determine bilateral trade the results show that real exchange rate uncertainty has had a significant negative effect on agricultural trade over this period moreover the negative impact of uncertainty on agricultural trade has been more significant compared to other sectors

the impacts of exchange rate volatility on vegetable trade flows trade flows of commodities are generally affected by the principles of comparative advantage in a free trade however trade flows might be enhanced or distorted not only by various government interventions but also by exchange rate fluctuations among others this study applies a commodity specific gravity model to selected vegetable trade flows among organization for economic co operation and development oecd countries to determine the effects of exchange rate uncertainty on the trade flows using the data from 1996 to 2002 the results show that while the exchange rate uncertainty significantly reduces trade in the majority of commodity flows there is evidence that both short and long term volatility have positive effect on trade flows of specific commodities this study also tests the regional preferential trade agreements such as the north american free trade agreement nafta the asia pacific economic cooperation apec and the eu and their different effects on commodities

exchange rate risk and u s agricultural trade flows this paper analyzes the effect of exchange rate risk on u s agricultural trade flows a model which incorporates exchange rate risk is applied to ten countries while exchange rate risk was not significant in the seven developed markets results indicate that the exchange rate variable adversely affected u s agricultural exports to the three developing countries used in the analysis these findings underscore the importance of exchange rate risk in developing countries trading behavior issues such as establishment of well developed financial and commodity markets in developing countries must be addressed in future research

real and nominal exchange rates in the long run an empirical investigation abstract this paper reports on econometric tests of the hypothesis that purchasing power parity holds as a long run relationship using data on eight industrialized countries during the flexible exchange rate period the empirical work proceeds by i testing whether nominal exchange rates and relative price levels are co integrated and ii conducting impulse response analysis of long run exchange rate and relative price level changes to explain the data keynesian models suggest that shocks during the estimation period were due principally to exogenous shifts in aggregate demand while equilibrium models suggest that monetary factors have been relatively more important

one money one market the effect of common currencies on trade currency unions their dramatic effect on international trade a gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade the panel data bilateral observations for five years during 1970 90 covering 186 countries includes 300 observations in which both countries use the same currency i find a large positive effect of a currency union on international trade and a small negative effect of exchange rate volatility even after controlling for a host of features including the endogenous nature of the exchange rate regime these effects statistically significant imply that two countries sharing the same currency trade three times as much as they would with different currencies currency unions like the european emu may thus lead to a large increase in international trade with all that that entails andrew rose

exchange rate behaviour are fundamentals important one of the most controversial issues in the international economics literature concerns the role of economic fundamentals in explaining exchange rate behaviour we interpret this controversy as having three different aspects the first concerns the relationship between exchange rates and fundamentals in the long run the second the usefulness of fundamentals in producing out of sample forecasts which dominate a random walk and the third controversy concerns the relative importance of shocks to real and nominal fundamentals in explaining real exchange rate variability this as we shall see is related to the first controversies one and two therefore may be thought of as relating to the first moment of exchange rate behaviour while the third is associated with the second moment the first controversy may be motivated by referring to fig 1 which portrays the logarithm of the real and nominal exchange rates of the mark dollar

international trade and exchange rate volatility for currencies with well developed forward markets several papers have investigated the conjectured negative relationship between trade and short term exchange rate volatility without being very successful a theoretical explanation for the empirical anomalies is provided by solving explicitly for the forward rate because importers and exporters are on opposite sides of the forward market so is their exposure towards exchange rate volatility moreover which trade flow benefits and which one loses from increased volatility is determined by the signs of the aggregate net foreign currency exposure and the aggregate measure of risk aversion

exchange rate uncertainty and foreign trade abstract this paper starts with reviewing the existing literature on exchange rate uncertainty and trade flows it then argues that potential costs of medium term uncertainty in exchange rates and competitiveness are likely to be much larger than that of exchange risk which has been the focus of the existing literature two measures of medium term exchange rate uncertainty are constructed one is a weighted function of the magnitude of past movements in nominal exchange rates and the current deviation of the exchange rate from equilibrium while the second depends on both the duration and the amplitude of misalignment from equilibrium exchange rates the empirical evidence reported in the paper suggests that when exchange rate uncertainty is defined over a medium term period it does affect adversely trade flows of the industrial countries under review with the notable exception of the united states

trade blocs currency blocs and the reorientation of world trade in the 1930s we analyze the impact of commercial and financial policies on the reorientation of trade in the 1930s we report evidence that commercial policies attenuated prior connections between income growth and trade and that exchange rate instability marginally discouraged international trade in contrast the tendency toward regionalization commonly ascribed to the formation of trade and currency blocs was already evident to a considerable extent prior to the regional policy initiatives of the 1930s this reorientation is more properly attributed to ongoing historical forces such as commercial and financial links between countries forged over many years

real exchange rate behavior the recent float from the perspective of the past two centuries using annual data spanning two centuries for dollar sterling and franc sterling real exchange rates we find strong evidence of mean reverting real exchange rate behavior using simple stationary autoregressive models estimated on prefloat data we easily outperform nonstationary real exchange rate models in dynamic forecasting exercises over the recent float such stationary univariate equations explain 60 80 percent of the in sample variation in real exchange rates although the degree of short run persistence may be high the econometric estimates imply a half life of shocks to the real exchange rate of about 6 years for dollar sterling and a little under 3 years for franc sterling

monetary and exchange rate policies for international financial stability a proposal w v ithout a common monetary standard the remarkable integration of western european north american and the industrialized asian economies in both commodity trade and financial flows is less efficient and becoming untenable dissatisfaction with wildly fluctuating relative currency values euphemistically called floating or flexible exchange rates is a prime cause of the resurgence in protectionism in 1986 87 the overvalued yen forced japanese industrialists to close factories retire workers and write off once valuable investments in plant and equipment this parallels what their american counterparts were forced to do between 1981 and 1985 when the dollar suddenly became overvalued similarly the paring down of the british manufacturing base was precipitated when the pound unexpectedly became a strong petrocurrency in 1979 81 in agriculture japan and european countries are determined to insulate their domestic prices of farm products from unsettling international influences including volatile fluctuations in the yen dollar or mark dollar exchange rates thus unless exchange stability is first achieved the american government s attempt to broaden the general agreement on tariffs and trade to encompass agriculture and services is likely to fail but what keeps the three major industrial blocs from developing a common monetary standard to prevent exchange rate fluctuations although many people

sectoral effects of exchange rate volatility on united states exports abstract we analyze the effects of real exchange rate volatility on the proportions of bilateral exports of nine categories of goods from the united states to seven major industrial countries using a fixed effect framework in six of the nine categories the volatility of the real exchange rate significantly affects the value of exports and in five of these categories the effect is positive these results are consistent with a model in which risk neutral firms increase supply of elastically demanded exports in response to an increase in the volatility of the real exchange rate

the effects of exchange rate volatility on agricultural trade i extend cho sheldon and mccorriston s 2002 analysis of the effect of exchange rate volatility on agricultural trade among the g 10 countries to a broad sample of developed and developing nations i replicate their original finding that exchange rate volatility has a large negative impact on agricultural trade between g 10 members after controlling for agricultural export subsidies which are correlated with exchange rate volatility i show that the original impact declines by half using the extended sample i find that the effect of exchange rate volatility is much larger for developing country exporters than for developed exporters copyright 2008 oxford university press

piero sraffa and the true object of economics the role of the unpublished manuscripts this special issue is concerned with the work of piero sraffa and with recent developments in its interpretation occasioned by the opening of the sraffa archives in late 1993 1 it brings together some of the contributions to a workshop on this theme that was sponsored by the cambridge journal of economics and held in july 2010 on the occasion of the 50th anniversary of the publication of piero sraffa s major work production of commodities by means of commodities pcmc the original workshop on new perspectives on the work of piero sraffa was aimed at sraffa scholars who had taken the opportunity to engage with materials in the sraffa archives and who were interested in exploring their potential for revisiting and placing pcmc in the wider context of ongoing debates on economic philosophy economic theory and economic policy as is usually the case not all presentations made at the workshop were advanced for consideration in this special issue nor could all invitees attend heinz kurz as chief editor of the sraffa archives agreed to present his view on the relevance of the sraffa archives to research on sraffa and to comment on contributions at the workshop as well as on their final versions submitted for publication in this special issue kurz s contribution to this special issue was thus written in the short time available between the receipt of final versions and publication deadlines we are indebted to him for his cooperation in the preparation of this special issue we are especially grateful for his patience in the time taken to bring this project to publication this abstract was borrowed from another version of this item

monetary policy real exchange rates and u s agricultural exports interest rates will attract capital to dollar money market instruments which in turn will cause the value of the dollar to rise in foreign exchange markets a stronger dollar makes our exports more expensive to other countries thereby reducing the quantity demanded and it also causes the price of imports into the united states to decline in dollar terms creating competitive pressures for domestic imports sic that compete with imports such as the automobile steel and textile industries the monetary authorities accomplish what they want to accomplish but the burden of adjustment is borne by the export sectors and the sectors that have strong import competition in this way one can see that the problems of agriculture and the automobile industry in the early 1980 s have been cut in part from the same cloth a period of very tight monetary policy

monopolistic competition and international trade reconsidering the evidence we test some propositions about international trade flows that are derived from models of monopolistic competition developed by elhanan helpman and paul krugman we investigate whether the volume of trade between oecd countries is consistent with the predictions of a model in which all trade is intraindustry trade in differentiated products we then repeat the test with non oecd countries we also investigate whether the share of intraindustry trade is consistent with a more general theoretical model in which some but not all trade is intraindustry trade our results lead us to question the apparent empirical success of these models

exchange rate uncertainty and us bilateral fresh fruit and fresh vegetable trade an application of the gravity model in order to analyse the effect of exchange rate uncertainty we apply an empirical gravity equation to two sets of us bilateral trade data fresh fruit over the period 1976 1999 for a panel of 26 countries and fresh vegetables over the period 1976 2006 for a panel of nine countries based on panel estimation methods and using both a moving sd measure and the peree and steinherr 1989 measure of exchange rate uncertainty the results show that us bilateral fresh fruit trade has been negatively affected by exchange rate uncertainty we also find some evidence that the exchange rate between the us dollar and the currencies of latin american trading partners accounts for most of the negative impact of exchange rate uncertainty on bilateral trade flows in fresh fruit in contrast when using panel estimation methods and both measures of exchange rate uncertainty we find no statistically significant evidence for any negative effect of exchange rate uncertainty on us bilateral fresh vegetable trade however

on alternative notions of change and choice krishna bharadwaj s legacy krishna bharadwaj following upon the work and insights of sraffa made substantial contributions to our understanding of what is implied in the neoclassical notion of change and its related notion of choice in this respect she appears closer to the spirit of sraffa s critique of neoclassical theory than many others she also supplemented important elements in building an alternative approach based on classical political economy which is free from the need to employ marginal magnitudes and does not require hypothetical or potential changes to determine the resting positions of economic variables moreover the notion of choice is rescued from the parable of preferences and given more meaningful contents allowing for consideration of habits customs and power relationships 1 premise the consumption and production of goods is the kind of human activity to which the term economic is applied in most societies these activities are mediated through exchange and in capitalist societies exchange is performed in organised markets in the history of economic thought a range of different conceptions have been put forward to explain how individuals interact in markets and various accounts have been advanced of ways to understand which are the incentives and the constraints affecting their behaviour and decision making in neoclassical theories choices in consumption and production are conceptualised through reasoning at the margin under the ceteris paribus assumption i e that everything else remains unchanged this method provides the means to measure the effects of a small technically infinitesimal variation in quantities of selected variables such as utility and cost which are compared with the relevant prices to determine the optimum choice by individuals the optimal choice framework is in fact the basis upon which price and quantities are simultaneously determined in the neoclassical world

does exchange rate stability increase trade and welfare we develop a simple general equilibrium framework to study the effect of the exchange rate system on trade and welfare an important feature of the model is deviations from purchasing power parity caused by rigid price setting in buyers currency we find the following first exchange rate stability is not necessarily associated with more trade in a simple benchmark model with separable preferences and only monetary shocks trade is unaffected by the exchange rate system consistent with most evidence second both trade and welfare can be higher under either exchange rate system depending on preferences and on the monetary policy rules followed under each system finally in general there is no one to one relationship between the levels of trade and welfare across exchange rate systems

exchange rate uncertainty and the demand for u s soybeans this study examines the effects of exchange rate uncertainty on bilateral soybean trade flows and finds that imports for japan france and spain are sensitive to short term variations in nominal bilateral exchange rates this research extends previous work by focusing on bilateral trade for a single commodity using a longer sample period and testing over a variety of model specifications the results suggest that the effects vary across countries depending on access to forward markets the availability of alternative soybean suppliers the degree of market concentration in the domestic soybean processing sector and the degree of currency risk importers are willing to assume the decline in u s agricultural exports during the 1980s has been explained by numerous factors including stagnant world income increased foreign competition the existence of trade barriers and the level of the exchange rate an additional factor exchange rate volatility has received less attention in agricultural trade models since the adoption of the flexible exchange rate system in the early 1970s variability in exchange rates has had a potentially destabilizing impact on trade disruptions in trade can occur because exchange rate variations change the actual price paid or received for traded goods causing adjustments in quantities traded domestic prices or in the timing of sales in order to avoid the effects of variability on profits other longer term effects may occur if exchange rate uncertainty persists to the extent that goods are substitutable such adjustments can be manifested as a sustained preference for domestic suppliers over foreign suppliers or alternative sources of foreign supply may be explored the magnitude of the effect of exchange rate uncertainty on quantity imported is dependent upon inter alia the respective exchange rate elasticities and the importer s response to variability for some goods this magnitude can be substantial the objective of this study is to determine

circuitous processes jigsaw puzzles and indisputable results making best use of the manuscripts of sraffa s production of commodities by means of commodities the opening of the sraffa archive has allowed the production of credible narratives of the development of sraffa s thought based on documentary evidence the archive is complex especially in the case of the papers relating to production of commodities by means of commodities pcmc but the author s paperwork helps guide us through the development of his ideas affirming the causal relationship between thought and archive the complex interrelationships between materials in the archive make a painstaking scholarly approach necessary but rewarding allowing authors to use material of high evidential value to corroborate the cases they are making the archive has primarily been used by historians of economic thought however as the material contextualises pcmc it may also be useful to those working on economic theory from a sraffian perspective copyright oxford university press

testing purchasing power parity under the null hypothesis of co integration this paper analyzes monthly data on the exchange rates and price indices of the eleven major industrial countries over the modern period of floating exchange rates it presents tests that are based upon the null hypothesis of cointegration the paper finds evidence that most country pairs not involving north american currencies have exchange rates and price indices that are cointegrated it estimates the error correction representation for the series that are cointegrated and it shows that the dynamic adjustment of the relationship between exchange rates and prices is accomplished almost entirely in the market for foreign exchange copyright 1991 by royal economic society

understanding business improvement district formation an analysis of neighborhoods and boundaries abstract business improvement districts bids provide supplemental services to urban commercial corridors using funds from member assessments they have become a very popular urban revitalization tool but their formation is still largely unexplained theory implies that bids will form if they add to aggregate welfare and if the marginal net benefit of membership is positive i test this for the neighborhood overall and at the bid boundary using unique micro level and longitudinal data from new york city i employ survival analysis methods to estimate the likelihood of a neighborhood forming a bid i then estimate the likelihood of the marginal property s bid membership by comparing the characteristics of properties located immediately inside and outside of the bid boundaries i find that bids are more likely to form when there is more commercial space over which the bid benefits can be capitalized and when there is homogeneity in service and spending preferences across properties bids also tend to form in neighborhoods that possess signs of appreciation and growth generally bids are more likely to form in neighborhoods with higher valued properties with the exception of very wealthy areas the bid boundary however is comprised of relatively less valuable properties

recent exchange rate experience and proposals for reform university of california at berkeley department of economics berkeley california 94720 3880 center for international and development economics research working paper no c96 060 recent exchange rate experience and proposals for reform jeffrey a frankel department of economics university of california berkeley january 1996 key words exchange rate foreign exchange market volatility speculation bubble mckinnon tobin tax iel classification f31 f33

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association

real exchange rate misalignment and agricultural export performance in developing countries the influence of fluctuating currency values on agricultural trade has been acknowledged especially since the demise of the bretton woods system of fixed exchange rates following g e schuh s pioneering articles linking exchange rates to country performance in the global agricultural market several attempts were made to quantify the effects of nominal and real exchange rate movements on agricultural trade recently another body of literature emerged aimed at quantifying the effects of exchange rate risk on trade 2 despite these studies inadequate attention has been directed toward analyses of underlying policies that directly influence real exchange rates and that indirectly affect trade performance specifically the issue of incorrect real exchange rate alignment has been ignored real exchange rate misalignment occurs in markets in which actual exchange rates are not allowed to adjust to changes in economic fundamentals unsustainable monetary fiscal and various trade and exchange control policies are its principal cause calculation of misaligned exchange rates is dependent on the ability to disentangle equilibrium from disequilibrium disturbances affecting movements in actual real exchange rates quantification represents a major challenge purchasing power parity ppp provides the simplest way to estimate misalignment however real exchange rate deviations from ppp often do not indicate incorrect alignment of the real exchange rate because the actual rate ought to vary in response to external or internal shocks that modify the equilibrium rate ideally misalignments are measured using real exchange rates that are permitted to vary in response to changed economic conditions the changing path of real equilibrium exchange rates is somewhat elusive and can be identified using a structural model