Evaluation of Demand under Rationing when Only Indirect Utility Functions are Known: A Note

This note outlines a simple routine for evaluation of consumer demand under disequilibrium (shortage of some commodities) when the representative consumer's preferences are characterized by a cost function, or an indirect utility function consistent with the conventional theory of consumer behavior. The routine may be applied whenever the explicit form of the direct utility cannot be easily derived from the indirect utility function

A Linear Expenditure System Allowing for Direct Substitutability of Various Foodstuffs

It is widely acknowledged that the Linear Expenditure System -- or any system derived on the assumption of additive utility function -- rules out direct substitution effects among the commodities. When applied to the study of the structure of demand for particular foodstuffs, any such demand study violates some of the legitimate intuition about actual substitutability of various food-stuffs: the similarity of nutritional content of any two (or more) otherwise "different" commodities does -- to a great extent -- seem to prejudge their actual substitutability. The paper presents a modified linear expenditure system, which, having all the advantages of the simple LES at the same time allows for direct substitutability of particular foodstuffs. The theory, related to K. Lancaster's idea of the "new approach to the demand study" appears rather fruitful. The estimates of the parameters of the system for Italy, the Netherlands, West Germany and Great Britain obtained on its basis exhibit a rather unusually high statistical significance. At the same time these estimates seem very much the same for all the four countries studied

A Generalized Theory of Household Behavior under Rationing

The results of Neary and Roberts (1980) relating rationed demand functions to the unrationed demand functions via the concept of "virtual" prices are shown to hold only in certain restricted circumstances. An alternative and generalized approach is suggested for the evaluation of effective demand under any arbitrarily-chosen rationing scheme

A General Outline of the Structure of a Simulation Model for Polish Agriculture

One of the main purposes of the Food and Agriculture Program at IIASA is to build a series of interconnected national agricultural models covering sufficiently large parts of the globe's food consumption, production and exchange. Poland, being a big agricultural producer and having a noticeable share of the international food and feed market, deserves some attention in this context. Another important factor favoring the choice of Poland as a subject of modeling effort is the fact that the current specific problems of the Polish economy may resemble the ones that sooner or later are likely to face many medium-size countries that have not yet attained the highest level of industrialization. Among these problems are the heterogeneity of agricultural technologies, observed economic phenomena and organizational patterns, mixed structure of land ownership (large-scale public ventures are typical as small private farms) impending intensification of rural-urban migration and a high level of foreign indebtedness

Globalization, secular stagnation, and soft national balances: A pro-equilibrium manifesto

It is argued that increased freedom to run economic activities combined with the growing impotence of national governments (i.e., globalization) have contributed to the secular growth slowdown at the global level. Fast globalisation-driven growth of international trade has unleashed the global race for economic surpluses. The process involves the suppression of wages and widening income inequalities – restricting aggregate demand globally. A “beggar-thy-neighbor” tactics of keeping large trade surpluses by countries successfully suppressing wages and domestic demand is likely to be unproductive. Overcoming the secular stagnation may not be possible without safeguarding equilibrium (or balance) in international transactions between major industrial countries – even if this may necessitate that in most (or all) of them the public sectors run large fiscal deficits permanently

Efficient Use of Prices and Quantity Constraints for Control and Coordination of Linear Sectoral Production Models

A number of complex national agricultural models with linear programming description of the sectors of farms have been developed. Intended as tools for policy analysis, these models do not clearly endognize the government's behavior. However, it is interesting to explore the consequences and possibilities of an efficient utilization of the sectoral programming models for a fully conscious governmental decision making. The topic is especially important for those centrally planned economies where the failure of the administrative (command) methods of management of agriculture has been unequivocally acknowledged and yet no consistent alternative mechanism has so far emerged. The paper presents a scheme for the control and coordination of production plans generated by the linear aggregative (sectoral) programs. Thereby prices and, if need be, quotas and constraints on input availabilities may be set in such a way as to guarantee the satisfaction of the governmental goals while fully respecting sovereignty of the profit-motivated producers. It has been demonstrated that prices alone, even if fully controlled by the government, need not lead to the satisfaction of the achievable government's goals. It is only with the introduction of quotas on outputs and limits on available inputs that the possibility of a reconciliation of the government's goals with the behavior of profit-motivated sectors is recovered. However, the introduction of quantity restrictions imposes additional conditions that cannot be violated for fear that this would unleash uncontrollable speculation with respect to licenses for production and inputs. The analytical framework for the consistent simultaneous determination of prices and quantity restrictions has been given. This implies solving linear programming models with some nonconcave quadratic constraints

Economic disintegration of the European Union: Not unavoidable, but probable

Abstract It is argued that European integration has not fulfilled its chief economic promises. Output growth has been increasingly weak and unstable. Productivity growth has been following a decreasing trend. Income inequalities, both within and between the EU member states, have been rising. This sorry state of affairs is likely to continue – and likely to precipitate further exits, or eventually, the dissolution of the Union. However, this outcome is not unavoidable. A better integration in the EU is possible, at least in theory. Also, the negative consequences implicit in the existence of the common currency could be neutralised. However, the basic paradigms of the economic policies to be followed in the EU would have to be radically changed. First, the unconditional fiscal consolidation provisions still in force would have to be repelled. Second, “beggar-thy-neighbour” (or mercantilist) wage policies would have to be “outlawed”

Labour productivity growth slowdown: An effect of economic stagnation rather than its cause?

This paper reports the results of an econometric examination on the links between labour productivity and output growth for 22 countries (for which long-term data are available). It turns out that, generally, labour productivity does not “cause” output. In more cases, the causation seems to be running in the opposite direction: from output to productivity. This finding, though inconsistent with the “mainstream” ideas on the sources of long-term economic growth, is reminiscent of the classical Kaldor-Verdoorn Law. The progressing slowdown in output growth on the global level, initiated around the mid-1970s (when the process of discarding the earlier economic policy paradigms set in), may have been mirrored by the progressing slowdown in productivity growth (and that despite the hardly disputable acceleration of technological progress)

Estimates of the Disequilibria in Poland's Consumer Markets, 1965-1978

In the course of work on the development of the Polish agricultural policy model, the author has investigated the disequilibria in Poland's consumer markets. Since an understanding of consumer behavior is critically important in formulating plans and designing policies that facilitate the realization of plans, this is an important element in the Polish agricultural policy model

Central and Eastern Europe: Trapped in integration?

The Central and Eastern European new Member States of the European Union (CEECs) went through the transition process following the commandments of the Washington Consensus, which gradually evolved into the “integrative growth model”. External liberalisation exposed the CEECs to recurring problems over external imbalances, bubbles driven by capital inflows, and resulting growth instabilities. Large foreign direct investment inflows attracted by repressed wages and low taxes do not accelerate growth. Arguably, real convergence would be much faster under a system with built-in limitations to free trade, free capital movements – and with more scope for traditional industrial, trade, incomes, and fiscal policies