General Economic Equilibrium: Purpose, Analytic Techniques, Collective Choice

Lecture to the memory of Alfred Nobel, December 12, 1972general equilibrium;

Transition from socialism

This paper discusses the changes that socialist countries, specially in Eastern Europe, are currently undergoing. It also comments on the decline all over the world of the institution of the nation-state, and, particularly, a decline in its importance in the economy.

Innovation in Large and Small Firms

This essay is intended to begin the elaboration of a theme: the interaction between the observed sizes of firms and their internal decision making procedures. This theme is a major one in the symphony of entrepreneurial activity. The entrepreneur, as the maker and changer of economic and productive life, is usually envisaged as an individual. In the neoclassical tradition, he (or, rarely, she) is the lightning calculator, the individual who rapidly scans the field of alternative productive processes and chooses the optimum any given set of prices

Reclaiming Virtue Ethics for Economics

Virtue ethics is an important strand of moral philosophy which normative economists have largely neglected. It underpins influential critiques of the market (as a domain in which instrumental motivation corrodes virtue) and of economics (as justifying such motivation). We explain and respond to this critique. Using the methods of virtue ethics and with reference to the writings of major economists, we propose an understanding of the ‘telos’ (purpose) of markets as cooperation for mutual benefit, and identify traits that thereby count as virtues for market participants. We conclude that the market need not be seen as a virtue-free zone

The Genuine Savings Criterion and the Value of Population

Arrow, Dasgupta and Maler demonstrate thatin any dynamic model of the economy with changing population, population should properly be one of the state variables of the system. It enters both in the maxim and, at least under total utilitarianism, and into the production function in one way or another. If population growth is exponential and there are constant returns to scale, then a simple transformation to per capita variables can be used to eliminate one state variable. However, this simple transformation cannot be made if growth is not exponential, as it obviously is not and cannot be. If the growth of population is exogenous, then introducing it into the system does not affect the optimal policy. However, if one asks whether the system is sustainable, in the sense of at least maintaining total welfare (integral of discounted utilities), then the criterion is that the value of the rates of change of the state variables is non-negative, so that the shadow price of population becomes relevant. In this paper, we derive explicit formulas in a simple model, showing that the rate of growth of per capita capital is not the correct formula but must have other terms added to it. We also study the question under an alternative criterion of long-run average utilitarianism.

Sustainability and the Measurement of Wealth

We develop a consistent and comprehensive theoretical framework for assessing whether economic growth is compatible with sustaining well-being over time. The framework focuses on whether a comprehensive measure of wealth – one that accounts for natural capital and human capital as well as reproducible capital – is maintained through time. Our framework also integrates population growth, technological change, and changes in health. We apply the framework to five countries that differ significantly in stages of development and resource bases: the United States, China, Brazil, India, and Venezuela. With the exception of Venezuela, significant increases in human capital enable comprehensive wealth to be maintained (and sustainability to be achieved) despite significant reductions in the natural resource base. We find that the value of “health capital” is very large relative to other forms of capital. As a result, its growth rate critically influences the growth rate of per-capita comprehensive wealth.

A Statement on the Appropriate Role for Research and Development in Climate Policy

This statement is issued by a group of economists and scientists which met at Stanford University on October 18, 2008 to discuss the role of research and development (R&D) in developing effective policies for addressing the adverse potential consequences of climate change. We believe that climate change is a serious issue that governments need to address. We also believe that research and development needs to be a central part of governments’ strategies for responding to this challenge. Solutions to manage long-term risks will require the development and global deployment of a range of technologies for energy supply and end-use, land-use, agriculture and adaptation that are not currently commercial. A key potential benefit of focused scientific and technological research and development investment is that it could dramatically reduce the cost of restricting greenhouse gas emissions by encouraging the development of more affordable, better performing technologies.