the expected inflation channel of government spending in the postwar u s abstract there exist sticky price models in which the output response to a government spending change can be large if the central bank is nonresponsive to inflation according to this expected inflation channel government spending drives up expected inflation which in turn reduces the real interest rate and leads to an increase in private consumption this paper examines whether the channel was important in the post wwii u s with particular attention to the 2009 recovery act period first we show that a model calibrated to have a large output multiplier requires a large response of expected inflation to a government spending shock next we show that this large response is inconsistent with structural vector autoregression evidence from the federal reserve s passive policy period 1959 1979 then we study expected inflation measures during the recovery act period in conjunction with a panel of professional forecaster surveys a cross country comparison of bond yields and fiscal policy news announcements we show that the expected inflation response was too small to engender a large output multiplier

common law statute law and the theory of legislative choice an inquiry into the goal of the sherman act although the sherman antitrust act is more than a century old debate continues over its goals in contrast to what many have argued i contend that the act s main goal is to maximize economic efficiency rather than the welfare of consumers the sherman act is a modest extension of the common law which the law and economics literature indicates moves towards economic efficiency further unlike the interstate commerce act of 1887 sherman act decisions are made by courts not a regulatory agency thus the theory of legislature choice also implies that the goal of the act is to maximize economic efficiency

multiple solution indeterminacies in monetary policy analysis abstract a sizeable fraction of recent research on monetary policy has been concerned with issues relating to analytical indeterminacies i e multiple solutions in rational expectations re models most of the literature features sophisticated re analysis conducted within dynamic models that reflect optimizing behavior by individual agents and incorporate taylor style policy rules a few papers have suggested that some of the particular indeterminacy arguments are misleading or irrelevant for the most part however there has been little dissent from the position that these indeterminacies present a genuine problem for monetary policy makers the purpose of the present paper by contrast is to argue that conclusions based on multiple solution indeterminacy findings are of dubious merit rather generally

control functions and simultaneous equations methods economic models of agent s optimization problems or of interactions among agents often exhibit simultaneity it is well known that any function in which an explanatory variable is partly determined by the dependent variable of the function cannot be identified without additional information typically this additional information is provided by observable exogenous variables or functional structures here we focus on nonlinear simultaneous equations models with nonadditive disturbances nonlinear nonadditive specifications are a fundamental feature of economic models with unobserved heterogeneity including multidimensional models of consumer and producer choice models of nash equilibrium in industrial organization and many models of labor market behavior in linear models with additive disturbances there are many alternative approaches to addressing endogeneity in estimation twostage least squares instrumental variable and control function approaches are three such commonly adopted approaches in simple specifications of the linear simultaneous model all three approaches generate consistent often analytically identical estimators hausman 1987 for example however linear models with additive

estimating theoretically consistent demand systems using cointegration techniques with application to greek food data abstract the use of time series techniques cointegration and error correction models has been offered as a potentially promising way in estimating demand systems that resolve the perennial issue of violating the theoretical postulates of homogeneity and symmetry the empirical results of this paper based on linearized aids and greek food data indicate that sample size aggregation schemes and model specification seem to be important factors in the estimation of a theoretically consistent demand system they also show that homogeneity is sensitive to sample size while symmetry is sensitive to the aggregation scheme adopted

sophisticated monetary policies in standard monetary policy approaches interest rate rules often produce indeterminacy a sophisticated policy approach does not sophisticated policies depend on the history of private actions government policies and exogenous events and can differ on and off the equilibrium path they can uniquely implement any desired competitive equilibrium when interest rates are used along the equilibrium path implementation requires regime switching these results are robust to imperfect information our results imply that the taylor principle is neither necessary nor sufficient for unique implementation they also provide a direction for empirical work on monetary policy rules and determinacy

regulation and the theory of legislative choice the interstate commerce act of 1887 this article concerns the economic incidence of the interstate commerce act of 1887 ica our focus is the short haul pricing constraint a provision of the ica that prohibited railroads from charging higher rates to isolated primarily agrarian shippers than it charged to intercity shippers of similar commodities utilizing the event study methodology we find that the impending passage of the ica generated a distribution of abnormal returns to railroads and shipping firms that is consistent with the theoretical implications of our analysis of the short haul pricing constraint shpc however early interpretations of the shpc by the interstate commerce commission reduced some of the abnormal returns to railroads in a manner that is inconsistent with the hypothesis that the short haul pricing constraint was an important mechanism of early railroad regulation the analysis does support a multiple interest interpretation of the interstate commerce act and has implications for the positive theory of regulation

determinacy and identification with taylor rules the new keynesian taylor rule theory of inflation determination relies on explosive dynamics by raising interest rates in response to inflation the fed induces ever larger inflation unless inflation jumps to one particular value on each date however economics does not rule out explosive inflation so inflation remains indeterminate attempts to fix this problem assume that the government will choose to blow up the economy if alternative equilibria emerge by following policies we usually consider impossible the taylor rule is not identified without unrealistic assumptions thus taylor rule regressions do not show that the fed moved from passive to active policy in 1980

stable near rational sunspot equilibria abstract we introduce a new class of solutions to nonlinear forward looking models called near rational sunspot equilibria nrse nrse are natural nonlinear extensions of the usual sunspot equilibria associated with the linearized version of the economy and are near rational in that agents use the optimal linear forecasting model when forming expectations generic results for existence and stability under learning are established nrse in indeterminate nonlinear models are found to be stable under learning provided that the corresponding linearized model s minimal state variable solution is e stable nrse are readily computable and our results make it possible to use the standard linear tools to search for stable nrse we illustrate our results using a canonical nonlinear new keynesian model

monetary policy with interest on reserves abstract i analyze monetary policy with interest on reserves and a large balance sheet i show that conventional theories do not determine inflation in this regime so i base the analysis on the fiscal theory of the price level i find that monetary policy can peg the nominal rate and determine expected inflation with sticky prices monetary policy can also affect real interest rates and output though higher interest rates raise output and then inflation the conventional sign requires a coordinated fiscal monetary policy contraction i show how conventional new keynesian models also imply strong monetary fiscal policy coordination to obtain the usual signs i address theoretical controversies a concluding section places our current regime in a broader historical context and opines on how optimal fiscal and monetary policy will evolve in the new regime

equilibrium selection observability and backward stable solutions abstract the robustness of stability under learning to observability of exogenous shocks is examined regardless of observability assumptions the minimal state variable solution is robustly stable under learning provided the expectational feedback is not both positive and large while the nonfundamental solution is never robustly stable overlapping generations and new keynesian models are considered and concerns raised in cochrane 2011 2017 are addressed

predicting the effects of sugar sweetened beverage taxes on food and beverage demand in a large demand system a censored exact affine stone index incomplete demand system is estimated for 23 packaged foods and beverages and a numeraire good instrumental variables are used to control for endogenous prices a half cent per ounce increase in sugar sweetened beverage prices is predicted to reduce total calories from the 23 foods and beverages but increase sodium and fat intakes as a result of product substitution the predicted decline in calories is larger for low income households than for high income households although welfare loss is also higher for low income households neglecting price endogeneity or estimating a conditional demand model significantly overestimates the calorie reduction

animal spirits risk premia and monetary policy at the zero lower bound abstract in this paper we investigate the risk related effects of monetary policy in normal times as well as in periods where the zero lower bound zlb binds in a stylized macroeconomic model with boundedly rational beliefs in our model financial market participants use heuristics to assess the risk premium over the policy rate in accordance to an implicit taylor rule that measures the stance of conventional monetary policy and which serves as an informative instrument during times when the funds rate is constrained by the zlb in such a case conventional monetary policy is exhausted so that the central bank is forced to use unconventional types of policy we propose alternative monetary policy measures to help the economy out of the liquidity trap which take into account this assumed form of bounded rationality

aggregation without separability tests of the united states and mexican agricultural production data the generalized composite commodity theorem gcct and testing procedure is extended to test for consistent aggregation of the united states and mexican agricultural production data in each category for which earlier tests rejected homothetic separability nonrejected gcct and separability hypotheses provide empirical support for aggregating all the united states agricultural outputs into as few as two categories crops and livestock mexican agricultural outputs also can be aggregated into as few as two categories support for aggregating all outputs into a single category is ambiguous in both countries and is only provided by the gcct

the new keynesian liquidity trap abstract many new keynesian models produce a deep recession with deflation at the zero bound these models also make unusual policy predictions useless government spending technical regress capital destruction and forward guidance can raise output moreover these predictions are larger as prices become less sticky and as changes are expected further in the future i show that these predictions are strongly affected by equilibrium selection for the same interest rate path equilibria that bound initial jumps predict mild inflation small output variation negative multipliers small effects of far off expectations and a smooth frictionless limit fiscal policy considerations suggest the latter equilibria

pegging the interest rate on bank reserves a resolution of new keynesian puzzles and paradoxes abstract introducing bank reserves or money into the basic new keynesian nk model offers a resolution of nk puzzles and paradoxes the resulting models deliver local equilibrium determinacy under an exogenous interest rate on reserves and an exogenous nominal stock of reserves even for an arbitrarily small monetary friction this leads to a resolution of the forward guidance puzzle the fiscal multiplier puzzle and the paradox of flexibility as the monetary friction becomes vanishingly small the models converge to the basic nk model and serve to select a particular equilibrium of that model which also offers a resolution of the paradox of toil

inflation and output in new keynesian models with a transient interest rate peg a familiar result in the canonical dynamic new keynesian dnk model is that policymakers constrained by the zero bound can improve outcomes by promising to keep rates low after the zero bound is not binding we examine a general class of interest rate pegs in a variety of dnk models standard versions of the model produce counterintuitive reversals where the effect of the interest rate peg can switch from highly expansionary to highly contractionary for modest changes in the length of the interest rate peg this unusual behavior does not arise in sticky information models of the phillips curve

antitrust and competition historically considered although antitrust laws enjoy wide support among economists there was almost no such support during the early years of the sherman act one reason for this transformation is a change in the theory of competition until the 1920s most economists viewed competition as a dynamic rivalrous process that would be stifled by antitrust laws once the perfect competition model which largely ignores rivalry was accepted economists opinions of antitrust grew more favorable to the extent that antitrust interferes with rivalry and enterprise the competitive model has very likely misdirected the profession at least as far as antitrust policy is concerned

global effective lower bound and unconventional monetary policy abstract in a standard open economy new keynesian model the effective lower bound causes anomalies output and terms of trade respond to a supply shock in the opposite direction compared to normal times we introduce a tractable framework to accommodate for unconventional monetary policy in our model these anomalies disappear we allow unconventional policy to be partially active and asymmetric between countries empirically we find the us euro area and uk have implemented a considerable amount of unconventional monetary policy the us follows the historical taylor rule whereas the others have done less compared to normal times

quality variation and quantity aggregation in consumer demand for food viewing the problem of quality variation in consumer demand for food as a problem of valid aggregation over goods leads to new insights the simple sum of physical quantities used as the measure of demand in the quality literature is found to be a theoretically arbitrary and potentially misleading measure of demand when goods are heterogenous alternative measures of demand derived from restrictions on quality variation consumer preferences or relative prices are investigated a hypothetical example illustrates the use of a hicksian composite commodity assumption the empirical as well as conceptual merits of the various measures are discussed the usual assumption made about prices in a cross section analysis of household food expenditures is that all households are facing the same prices estimation of price elasticities of demand is commonly left to time series researchers who get price information from intertemporal indices recently however there has been renewed interest in the otential of cross section analysis for estimation of price elasticities of demand for food especially when surveys collect data on both household expenditures for food items and on the physical quantities purchased

stepping on a rake the fiscal theory of monetary policy abstract the fiscal theory of the price level can describe monetary policy governments can set interest rate targets and thereby affect inflation with no change in fiscal surpluses the same basic mechanism describes interest rate targets forward guidance open market operations and quantitative easing it does not require any monetary pricing or other frictions in the presence of long term debt higher interest rates lead to temporarily lower inflation a challenging sign i derive and replicate the results of the sims 2011 stepping on a rake model which first produced this negative sign and produces realistic impulse response functions i show that sims result is robust to many model features but essentially requires long term debt

a further look at the propagation of monetary policy shocks in hank we provide quantitative guidance on whether and to what extent different elements of heterogeneous agent new keynesian hank models amplify or dampen the response of aggregate consumption to a monetary policy shock we emphasize four findings first the introduction of capital adjustment costs does not affect the aggregate response but does change the transmission mechanism so that a larger share of indirect effects originates from equity prices rather than from labor income second incorporating estimated unequal incidence functions for aggregate labor income fluctuations leads to either amplification or dampening depending on the data and estimation methods third distribution rules for monopoly profits that allocate a larger share to liquid assets lead to greater amplification fourth assumptions about the fiscal reaction to a monetary policy shock have a stronger effect on the aggregate consumption response than any of the other three elements

demand for beef and chicken products separability and structural change several studies have indicated that the recent shift from beef to poultry in consumption is not entirely caused by changes in rela tive prices or income braschler chavas dahlgran hudson and vertin moschini and meilke frank thurman most studies of structural change have focused on red meat consumption only thurman has looked closely at the poultry market and no one has considered poultry products yet the mix of chicken products marketed changed dramat ically during the last twenty years and should have influenced aggregate meat demand the share of broiler slaughter marketed as whole birds declined from 74 in 1965 to 28 in 1985 while cut up parts and processed chick en products increased from 26 to 72 whole birds are inferior goods and cut up parts and processed chicken are normal goods haidacher et al the shift in chicken prod uct mix away from whole birds should have increased the preference for total chicken in this article two related questions are ad dressed first do consumers allocate expendi tures among meats by animal origin or by product type second does disaggregation of meat into products in a meat demand model give insight into the causes of structural

money as stock abstract the fiscal theory determines the price level from the value of nominal government debt as a claim to government primary surpluses just as private stock is valued as a claim to corporate profits valuation equations are not constraints so this theory does not mistreat the government s intertemporal budget constraint i anchor the analysis in a simple cash in advance model when money demand falls to zero i show that the price level can still be determined by the government debt valuation equation

ruling out divergent speculative bubbles abstract the growth in the empirical literature on testing for divergent in mean speculative bubbles indicates that existing theoretical arguments for ruling out such price paths are not sufficiently compelling here we strengthen the case for ruling out explosive or implosive bubbles a priori by filling in two gaps first we demonstrate why divergent stochastic bubbles arising from purely extrinsic uncertainty as in blanchard 1979 cannot be equilibria in a monetary optimizing model second we show why existing arguments for ruling out implosive price bubbles are insufficient in some cases and we provide stronger arguments

fiscal multipliers under an interest rate peg of deterministic versus stochastic duration this paper revisits the size of the fiscal multiplier the experiment is a fiscal expansion under the assumption of a pegged nominal rate of interest we demonstrate that a quantitatively important issue is the articulation of the exit from the policy experiment if the monetary fiscal expansion is stochastic with a mean duration of t periods the fiscal multiplier can be unboundedly large however if the monetary fiscal expansion is for a fixed t periods the multiplier is much smaller our explanation rests on a jensen s inequality type argument the deterministic multiplier is convex in duration and the stochastic multiplier is a weighted average of the deterministic multipliers the quantitative difference in the two multipliers also arises in a model with capital and in the baseline nonlinear model however the differences between the two is less pronounced in the nonlinear models

monetary and fiscal policy in a liquidity trap with inflation persistence abstract this paper relies on the new keynesian model with structural inflation persistence to characterize the optimal monetary and fiscal policy in a liquidity trap it shows that with a phillips curve that is both forward and backward looking the monetary policy that is implemented during a liquidity trap episode can be sufficient to avoid a depression the central bank does not need to commit beyond the end of the crisis to get some traction on economic activity regarding fiscal policy inflation persistence justifies some front loading of government expenditures to get inflation started such as to reduce the real interest rate the magnitude of the optimal fiscal stimulus is decreasing in the degree of inflation persistence finally if inflation persistence is due to adaptive expectations rather than to price indexation then monetary policy is ineffective while the optimal fiscal stimulus is large and heavily front loaded

aggregation without separability a generalized composite commodity theorem this paper provides general conditions for aggregating commodities without separable utility these conditions impose weaker and more empirically plausible restrictions on price movements than the currently existing alternative to separability the hicks leontief composite commodity theorem the idea is to allow departures from hicks leontief that take the form of well behaved error terms utility functions that permit generalized composite commodity aggregation include the aids model the translog all homothetic utility functions and any utility function when demands are aggregated to two groups of goods implications of empirical nonstationarity of relative prices for aggregation and demand estimation are considered copyright 1996 by american economic association

fiscal policy in an expectations driven liquidity trap we study the effects of fiscal policy interventions in a liquidity trap in a model with nominal rigidities and an interest rate rule in a liquidity trap caused by a self fulfilling state of low confidence higher government spending has deflationary effects that reduce the spending multiplier when the zero lower bound is binding instead cuts in marginal labor tax rates are inflationary and become more expansionary when the zero lower bound is binding these findings contradict popular views about the effects of fiscal policy in a liquidity trap

demand elasticities for fresh fruit at the retail level the obesity epidemic in the us and elsewhere has re doubled efforts to understand determinants of the quality of consumers diets part of the discussion has centered on the potential of fat taxes and or the subsidization of the purchase of fresh fruits and vegetables to coax consumers to better diets whether this discussion has merit or not fundamental to the debate are the demand elasticities of the commodities involved this study employs weekly data from several retail stores on fruit prices and sales to estimate elasticities of individual fruits estimates show consumers are more responsive to price than has been found previously

can government purchases stimulate the economy this essay briefly reviews the state of knowledge about the government spending multiplier drawing on theoretical work aggregate empirical estimates from the united states as well as cross locality estimates i assess the likely range of multiplier values for the experiment most relevant to the stimulus package debate a temporary deficit financed increase in government purchases i conclude that the multiplier for this type of spending is probably between 0 8 and 1 5 jel e23 e62 h50

unconventional fiscal policy at the zero bound when the zero lower bound on nominal interest rates binds monetary policy cannot provide appropriate stimulus we show that in the standard new keynesian model tax policy can deliver such stimulus at no cost and in a time consistent manner there is no need to use inecient policies such as

the perils of taylor rules abstract since john taylor s 1993 carnegie rochester conf ser publ policy39 195 214 seminal paper a large literature has argued that active interest rate feedback rules that is rules that respond to increases in inflation with a more than one for one increase in the nominal interest rate are stabilizing in this paper we argue that once the zero bound on nominal interest rates is taken into account active interest rate feedback rules can easily lead to unexpected consequences specifically we show that even if the steady state at which monetary policy is active is locally the unique equilibrium typically there exist an infinite number of equilibrium trajectories originating arbitrarily close to that steady state that converge to a liquidity trap that is a steady state in which the nominal interest rate is near zero and inflation is possibly negative journal of economic literature classification numbers e52 e31 e63

discussion of can structural reforms help europe by gauti eggertsson andrea ferrero and andrea raffo w s gilbert abundantly proves he is still the legitimate monarch of the realm of topsy turvydom in such marvelous terms the times of london in 1884 reviewed the premiere of princess ida by w s gilbert and arthur sullivan the critic had captured concisely the basic plot of many of the wonderful creations of gilbert and sullivan the premise of those works was to turn around the conventional rules of society and to push the unusual arrangements to their logical consequences with this trick the artists created amusing pieces that the audiences of the era and not a few of our contemporaries adored thinking about the zero lower bound zlb of the nominal interest rate is similar to listening to gilbert and sullivan all our intuitions about economic policy can switch and in the process we are entertained eggertsson ferrero and raffo hereafter efr have presented an original and carefully crafted argument that structural reforms may be counterproductive at the zlb exactly opposite to their effect under normal conditions thus their thought provoking and immensely interesting article is an outstanding member of what i would like to call the economics of gilbert and sullivan why does the zlb cause this rumpus for a market economy to work properly a central piece of the machinery the savings investment market must operate satisfactorily this market through its price the real interest rate ensures that the desire of households and firms to postpone consumption savings is equal to their desire to accumulate capital investment unfortunately the presence of cash complicates the response of the interest rate to changes in the desire to save and invest all modern economies have found that a convenient trading arrangement is the use of noninterest bearing nominal notes issued by a sovereign which we refer to as cash or call deposits easily redeemed for cash this is not the place to review why this is the case suffice it to say that these notes are the root of all evil here since i started by talking about 19th century art i fast forward to the early 21st century and to reflect geopolitical realities i travel from old england to contemporary new jersey where i write these lines to introduce the tony soprano technology in a famous episode tony unforgettably interpreted by the recently departed james gandolfini hides his

product aggregation market integration and relationships between prices an application to world salmon markets relationships between prices of goods offer motives of interest in at least two areas market integration and product aggregation there is a close relationship between market integration and aggregation which may increase the usefulness of market integration studies in this article these relationships are developed and illustrated by an application to the world salmon market it is shown that the law of one price holds for an international market with five salmon species this result has significant implications for the world salmon market regarding both product aggregation in demand analyses and international trade policy

the semiflexible almost ideal demand system abstract the concept of a semiflexible functional form is applied to the almost ideal ai demand system this yields a demand model that is more parsimonious than standard ones while preserving a degree of flexibility that satisfies the curvature property of concavity of the underlying expenditure function at least locally and that preserves the desirable properties of the ai model aggregation across consumers and nonlinearity of the engel curves the model is illustrated with an application to a relatively large demand system emphasizing food consumption

the robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the european central bank abstract this paper examines the implications of recent research on monetary policy rules for practical monetary policy making with special emphasis on strategies for setting interest rates by the european central bank ecb the paper draws on recent research and new simulations of a large open economy model to assess the efficiency of a simple benchmark rule in comparison with other proposed rules further it stresses new results on the robustness of monetary policy rules in which each rule that is optimal or good according to one model or researcher is tested for robustness by other researchers using different models because of the large increase in the number of economists focussing on econometric evaluation of monetary policy rules for the interest rate instrument and because of the parallel increase in the variety of models being developed for this purpose much more evidence is becoming available on the robustness of simple monetary policy rules for the interest rate than ever before

can learnability save new keynesian models abstract mccallum 2009 argues that learnability can save new keynesian models from indeterminacies he claims the unique bounded equilibrium is learnable and the explosive equilibria are not however he assumes that agents can directly observe the monetary policy shock reversing this assumption i find the opposite the bounded equilibrium is not learnable and the unbounded equilibria are learnable more generally i argue that a threat by the fed to move to an unlearnable equilibrium for all but one value of inflation is a poor foundation for choosing the bounded equilibrium of a new keynesian model

on market equilibrium analysis in this paper we develop the implications of competitive market equilibrium for production and household behavior when some prices are endogenously determined the properties of market equilibrium functions are explored including the effects of pricing policy a slutsky type equation relating compensated and uncompensated market equilibrium functions is derived implications for multimarket welfare analysis are presented focusing on the effects of pricing policy and technical change

world food demand long term projections of global food demand are heavily dependent on which functional form of the food demand equation is used given that real incomes can change substantially over the long term key elements are the dependence of the income elasticity on income which ensures that the food budget share always lies within the 0 1 range and the role of income inequality this article analyzes these issues proposes a new functional form that deals with them and presents estimates of income and price elasticities for food in 138 countries copyright 2012 oxford university press

savings asset scarcity and monetary policy abstract this paper analyzes optimal monetary policy regarding asset markets in a model where money and savings are essential and asset markets matter the model is able to explain why different regimes for the correlation of real interest rates and stock price dividend ratios exist and offers two explanations why the correlation vanished after 2007 a decrease in inflation or changes in the supply of risky and safe assets the results on optimal policy show that away from the friedman rule fiscal policy can improve welfare by increasing the amount of outstanding government debt if the fiscal authority is not willing or able to increase debt the monetary authority can improve welfare of current generations by reacting procyclically to asset return shocks

the generalized composite commodity theorem and food demand estimation this article reports tests of aggregation over consumer food products and estimates of aggregate food demand elasticities evidence that food demand variables follow unit root processes leads us to build on and simplify existing tests of the generalized composite commodity theorem we compute food demand elasticities using a method of cointegration that is shown to apply to a convenient but nonlinear functional form estimates are based on consumer reported expenditure data rather than commercial disappearance data appropriately specified models of consumer demand are central to market analysis it has been established that a valid equilibrium for markets characterized by diverse firms or diverse consumer products depends on downward sloping composite demand curves heiner braulke wohlgenant or on valid indirect utility functions chavas and cox given the large number of consumer food products food demand and price analysis must be implemented at some level of product aggregation improper aggregation can lead to biased estimates of welfare loss associated with public policies biased estimates of consumer and derived demand elasticities and misleading tests of market power testing for consistent aggregation over food products and estimating aggregate consumer food demand elasticities are the subjects of this article by far the most common justification for aggregation has been separable preferences one reason for its popularity has been the lack of a viable alternative tests of the composite commodity theorem hicks leontief lewbel are always rejected because it restricts relative prices within a group to remain fixed over time on the other hand aggregation based on weak separability is often rejected diewert and wales eales and unnevehr

the legislative history of the sherman act re examined according to robert bork s influential analysis the sherman act was expressly instituted by the 51st congress to advance consumer welfare but has often been misinterpreted by federal courts handing down anticonsumer decisions this paper suggests that the political coalition backing the 1890 antitrust statute sought multiple social ends and did not faithfully seek to impose economic efficiency the key evidence includes historical economic trends congressional debate the legislative agenda of senator john sherman and the political conflict generated by the most contentious and most electorally important issue of the 51st congress the highly protectionist mckinley tariff act i the consumer welfare hypothesis economists have singled out the sherman antitrust act as a uniquely proconsumer piece of legislation while the general economic analysis of political processes has proceeded from george stigler s presumption that a s a rule regulation is acquired by the industry and is designed and operated primarily in its benefit stigler 1971 114 no similar cynicism has enveloped the nation s preeminent antitrust statute strong evidence that the federal trade commission act of 1914 was shaped by the protectionist vision of louis brandeis mccraw 1981 or even a solid economic consensus as to the anticompetitive sentiment behind the 1936 antitrust law the robinson patman act see sowell 1980 210 ross 1984 243 schwartz 1986 has failed to cloud the sherman act s good name as stigler himself has concluded i like the sherman act so far as i can tell it s a public interest law in the same sense in which i think having private property enforcement of contracts and suppression of crime are public interest phenomena stigler 1984 46 see also stigler 1985 1 this proconsumer view of antitrust is all the more ironic in light of recent dissatisfaction with anticonsumer consequences of antitrust policy generally see goldschmid et al 1974 demsetz 1978 baxter 1980 brozen 1982 armentano 1982 johnson 1983 baumol and ordover 1985 hazlett 1986 bittlingmayer 1992 there is widespread concern that antitrust law has been employed against competitive market rivalry moreover the central paradox of an 1890 antimonopoly law remains why should an economy rapidly expanding outputs in virtually all major industrial sectors move to quash restrictions of output baxter 1980 dilorenzo 1985 particularly when such output increases were intrinsically tied to the emergence of large corporate forms chandler 1977 it is also troubling that the interstate commerce act of 1887 generally rejected as a proefficiency measure occurred under such close and similar political auspices hilton 1966 indeed a recent re examination of the commerce act has nicely revealed a multiple interest group demand for legislation gilligan et al 1989 perhaps the consumer welfare model differs sharply from the popular notions of monopoly that the sherman act sought to discourage in law yet this would tend to jeopardize the notion that the act was wholly proconsumer and american economists of the sherman act era in typically viewing competition as a dynamic market phenomenon largely rejected the antitrust approach as failing to advance the consumer s long run interests dilorenzo and high 1988 the proconsumer view of the sherman act has been most thoroughly elaborated by robert bork who writes the legislative history of the sherman act displays the clear and exclusive policy intention of promoting consumer welfare 1978 61 while competing motivations for antitrust legislation were admittedly advanced with only trivial exceptions it is impossible to find even colorable language suggesting most of the other broad social or political purposes that have occasionally been suggested as relevant to the application of the sherman act bork 1966 42

optimal monetary policy and determinacy under active passive regimes abstract should one expect inflation to be stable when monetary policy is passive according to the workhorse model for monetary policy analysis the answer should be no if the passive spell is too long in this paper i develop a new keynesian model in which monetary policy is optimal subject to a loose commitment constraint i show that there is a threshold degree of commitment such that the equilibrium is locally unique when monetary policy switches between active and passive stances regardless of the length of the passive spell this result also holds for a version of the model where the passive spell is endogenous and due to a demand shock driving the economy to the zero lower bound

determining the impact of food price and income changes on body weight we develop a theoretical model to identify conditions under which price and income changes are most likely to change weight although it is intuitive that raising the price of high calorie food will decrease consumption of such goods it is not clear that such an outcome will actually reduce weight our empirical analysis demonstrates a case where a tax on food away from home a food intake category blamed for much of the rise in obesity could lead to an increase in body weight a finding which emphasizes the need to employ economic modeling when developing public policy to reduce obesity

demand for farm output in a complete system of demand functions demand interrelationships for farm outputs that are theoretically consistent with consumer demand and marketing group behavior provide important linkages between retail and farm prices a conceptual model based on reduced form specifications for retail and farm prices is formulated and applied empirically to a set of eight disaggregated food commodities this approach circumvents the need for retail quantities which are frequently unavailable for disaggregated food commodities the results are consistent with theory and generally indicate significant substitution between farm and marketing inputs except for poultry derived demand elasticities are at least 40 larger compared to those derived assuming fixed proportions

winners and losers under the robinson patman act the 1936 robinson patman amendments to the clayton antitrust act prohibit differences in price that might be injurious to competition they also restrict certain practices for example brokerage payments unequal advertising allowances etc that could be used to give hidden discounts to favored buyers the robinson patman r p act has the distinction of being almost universally unpopular among antitrust scholars this is probably because it looks less like an antitrust measure than like legislated relief for small business 2 that the law wears an antitrust cloak is probably a measure of the cunning of its original proponents the statute s poor reputation owes more to theory than to evidence however there has been very little empirical work on the effects of the act and what there is has been largely concerned with the effects of individual prosecutions the purpose of this essay is to begin a broader empirical study i start by reviewing the act s history the impetus for the legislation came from the distributive wholesale and retail trades where a struggle had developed between the old wholesale retail order and the

theory of the firm in short run industry equilibrium a number of economists have studied the long run input behavior eugene silberberg 1974a lowell bassett and thomas borcherding 1 970a b c c e ferguson and thomas saving and paul meyer 1967 of a competitive industry in which entry or exit continues until industry output price moves to the minimum average cost of the marginal firm in the industry however this analysis requires very strong assumptions which severely restrict diversity between firms silberberg 1974a for example assumes all firms production functions are identical except for a scale factor complementary to these long run investigations i will present a compact but thorough analysis of the short run case in which technology and the number of firms are fixed but industry output price responds to aggregate supply changes of existing firms resulting from changes in factor prices in contrast to the long run analysis no assumptions limiting interfirm diversity nor any other restrictions beyond definition of the usual neoclassical firm are needed furthermore results are obtained for industry factor demand which do not necessarily hold for individual firms when they respond to factor prices jointly with other firms in the industry this contradicts the older methodology associated with paul samuelson 1947 in which factor demand responses are derived for firms acting in isolation from each other and their isolated responses are aggregated to obtain the industry factor response for example traditional theory shows input response obeys the law of demand for isolated firms but this standard result no longer holds when a firm adjusts within a larger industry of firms whose collective output response can affect output price thus the law of demand for industry factor behavior cannot be established by aggregation of isolated firm responses however its validity does nevertheless hold in the short run in which the number of firms in the industry is constant therefore the purpose of this paper is to characterize the short run industry level factor demand implications and to show how these implications relate to the traditional theory of isolated firm behavior in addition it is briefly shown how these short run results also imply that the law of demand is likely to hold even in the long run where entry and exit from the industry can occur even for an industry of quite dissimilar firms given the well established literature of the standard neoclassical firm the main body of the paper will confine presentation to required definitions and the statement plus interpretation of the main results all proofs and derivations are reserved for the appendix