De Viti de Marco vs. Ricardo on public debt: self-extinction or default?

The most prominent Italian theorist of the late 19th and early 20th centuries, Antonio de Viti de Marco, accepted David Ricardo’s proposition that an extraordinary tax and a public loan are equivalent. Despite this common point of analytical departure, their theories of public debt diverged sharply. In this divergence, moreover, lies a fundamental gulf between two distinct analytical schemes for connecting the micro and macro levels of analysis. Ricardo treated macro aggregates as analytical primitives, with individual action being induced from those aggregates. In sharp contrast, de Viti took individual variables as primitive, with aggregate conditions being induced from interaction among those individual variables. Within de Viti’s framework of a fully cooperative state, public debt would be self-extinguishing. De Viti also recognized that democracies were never exclusively cooperative, as continuing competition among elites striving for power would enable politically dominant groups to pass cost onto the remainder of society, thereby operating as a de facto form of default

Did the Great Inflation occur despite policymaker commitment to a Taylor rule?

The authors study the hypothesis that misperceptions of trend productivity growth during the onset of the productivity slowdown in the United States caused much of the great inflation of the 1970s. They use the general equilibrium, sticky price framework of Woodford (2002), augmented with learning using the techniques of Evans and Honkapohja (2001). The authors allow for endogenous investment as well as explicit, exogenous growth in productivity and the labor input. They assume the monetary policymaker is committed to using a Taylor-type policy rule. The authors study how this economy reacts to an unexpected change in the trend productivity growth rate under learning. They find that a substantial portion of the observed increase in inflation during the 1970s can be attributed to this source.Equilibrium (Economics) ; Monetary policy ; Macroeconomics ; Inflation (Finance) ; Productivity

Central Bank Communication and Expectations Stabilization

This paper analyzes the value of communication in the implementation of monetary policy. The central bank is uncertain about the current state of the economy. Households and firms are uncertain about the statistical properties of aggregate variables, including nominal interest rates, and must learn about their dynamics using historical data. Given these uncertainties, when the central bank implements optimal policy, the Taylor principle is not sufficient for macroeconomic stability: for reasonable parameterizations self-fulfilling expectations are possible. To mitigate this instability, three communication strategies are contemplated: i) communicating the precise details of the monetary policy -- that is, the variables and coefficients; ii) communicating only the variables on which monetary policy decisions are conditioned; and iii) communicating the inflation target. The first two strategies restore the Taylor principle as a sufficient condition for stabilizing expectations. In contrast, in economies with persistent shocks, communicating the inflation target fails to protect against expectations driven fluctuations. These results underscore the importance of communicating the systematic component of monetary policy strategy: announcing an inflation target is not enough to stabilize expectations -- one must also announce how this target will be achieved.

Did the Great Inflation occur despite policymaker commitment to a Taylor rule?

We study the hypothesis that misperceptions of trend productivity growth during the onset of the productivity slowdown in the U.S. caused much of the great inflation of the 1970s. We use the general equilibrium, sticky price framework of Woodford (2003), augmented with learning using the techniques of Evans and Honkapohja (2001). We allow for endogenous investment as well as explicit, exogenous growth in productivity and the labor input. We assume the monetary policymaker is committed to using a Taylortype policy rule. We study how this economy reacts to an unexpected change in the trend productivity growth rate under learning. We find that a substantial portion of the observed increase in inflation during the 1970s can be attributed to this source.Monetary policy ; Productivity

When does determinacy imply expectational stability?

In the recent literature on monetary and fiscal policy design, adoption of policies that induce both determinacy and learnability of equilibrium has been considered fundamental to economic stabilization. We study the connections between determinacy of rational expectations equilibrium, and expectational stability or learnability of that equilibrium, in a general class of purely forward-looking models. We ask what types of economic assumptions drive differences in the necessary and sufficient conditions for the two criteria. We apply our result to a relatively general New Keynesian model. Our framework is sufficiently flexible to encompass lags in information, a cost channel for monetary policy, and either Euler equation or infinite horizon approaches to learning. We are able to isolate conditions under which determinacy does and does not imply learnability, and also conditions under which long horizon forecasts make a clear difference to conclusions about expectational stability. The sharpest result is that informational delays break equivalence connections between determinacy and learnability.Rational expectations (Economic theory)

Evaluation of a series hybrid thrust bearing at DN values to three million. 2: Fabrication and testing

Results of tests made to determine the experimental performance of a series hybrid bearing are reported. The bearing consists of a 150 mm ball bearing and a centrifugally actuated, conical, fluid film bearing fitting an envelope with an outer radius of 86.4 mm (3.4 in.) and inner radius of 71 mm (2.8 in.). Tests were conducted up to 16,500 rpm, at which speed an axial load of 15,568 N (3500 lb) was safely supported by the hybrid bearing system. Through the employment of the series hybrid bearing principle, it was possible to reduce the effective ball bearing speed to approximately one-half of the shaft speed. A reduction of this magnitude should result in a tenfold increase in the ball bearing fatigue life. A successful simulation of fluid film bearing lubricant supply failure, performed repeatedly at an operating speed of 10,000 rpm, resulted in complete and smooth change over to full scale ball bearing operation when the oil supply to the fluid film bearing was discontinued. Reactivation of the fluid film supply system produced a flawless return to the original mode of hybrid operation

CONDI: a cost-of-nominal-distortions index

We construct a price index with weights on the prices of different PCE goods chosen to minimize the welfare costs of nominal distortions: a cost-of-nominal-distortions index (CONDI). We compute these weights in a multisector New Keynesian model with time-dependent price setting, calibrated using U.S. data on the dispersion of price stickiness and labor shares across sectors. We find that the CONDI weights mostly depend on price stickiness and are less affected by the dispersion in labor shares. Moreover, CONDI stabilization leads to negligible welfare losses compared to the optimal policy and is better approximated by core rather than headline inflation targeting. An even better approximation of the CONDI can be obtained with an adjusted core index that covers total expenditures excluding autos, clothing, energy, and food at home, but that includes food away from home.Inflation (Finance) ; Price indexes ; Monetary policy

EHD analysis of and experiments on pumping Leningrader seals

Analysis and design charts have been generated to provide design data for Pumping Leningrader Reciprocating Rod Seals. The analytical treatment divides the seal into three regions: an inlet zone, induced with the use of an expansion ring, a contact zone, and an exit zone. Complete solutions have been obtained by matching elasticity equations with hydrodynamic theory. Experiments, although of a limited nature, did demonstrate the ability of the seal design analysis to provide viable seals

Evaluation of a series hybird thrust bearing at DN values to three million. 1: Analysis and design

The analysis and design are presented of a hybrid bearing consisting of a 150-mm ball bearing and a centrifugally actuated, conical, fluid film bearing fitting an envelope with an outer radius of 86.4 mm (3.4 in.) and an inner radius of 71 mm (2.8 in.). The bearing analysis, combined with available torque data on ball bearings, indicates that an effective speed split between the ball and fluid-film bearings of 50 percent may be expected during operation at 20,000 rpm and under an axial load of 17,800 newtons (4000 lbs.). This speed split can result in a ten-fold increase in the life of the ball bearing when compared to a simple ball bearing system operating under similar conditions

Public finance and welfare: From the ignorance of the veil to the veil of ignorance

Present-day welfare states may survive as long as bureaucracies and governments can create "optimistic" illusions among taxpayers-voters. This setting is destined to fail and indirectly to open up the pathway for a constitutional welfare state. Mazzola and Wicksell first offered a constitutional view on both public choice and public goods, but the intellectual godfathers of the genuine alternative to the present welfare state are Buchanan and Tullock in the early sixties and Rawls a decade later. The virtuous circuit obligations-entitlements-rights, which the institutions of present welfare states helped to make crumble, may be restored behind the veil of ignorance. (c) 2005 Elsevier B.V. All rights reserved