Intertemporal competitive equilibrium: a reappraisal of a basic source of instability

Abstract This paper resumes a source of instability of intertemporal equilibrium which was anticipated by Garegnani (2003) and criticized by Schefold (2004). The author points out that a non orthodox tâtonnement pricing must be accepted if the theory has to be consistent with the Jevons’s law of unique price. Such tâtonnement prescribes that the rule for adjusting the relative prices of commodities available at different times is different from the rule applied to the relative prices of contemporary commodities. The working of such a mechanism can be a fundamental source of instability of the intertemporal equilibria. This result seems to be a challenge for the stability of general equilibrium also in the context of more realistic nontâtonnement disequilibrium processes. Final version of this working paper: S.Parrinello, “Intertemporal Competitive Equilibrium, Capital and the Stability of Tâtonnement Pricing Revisited”, Metroeconomica 56:4 (2005). Further development: S. Parrinello, Numeraire, Savings and the Instability of a Competitive Equilibrium”, Metroeconomica 62:2 (2011) 328–355.Intertemporal equilibrium; instability; savings; capital

National competitiveness and absolute advantage in a global economy

Distinguished trade theorists maintain that a national economy cannot be uncompetitive as a whole, contrary to the frequent statements of many politicians, because a country must possess a comparative advantage in some sector according to Ricardo’s principle. In this paper the author arguesthat such a criticism addressed to the notion of national competitiveness neglects a bottom line of a national economy engaged in a global market. In this context, characterized by free capital movements and possible unemployment, absolute productivity and absolute advantage may prevail over relative productivity and comparative advantage and can affect the competitiveness of all productive sectors of a single country. Such a reappraisal of international equilibrium offers a theoretical foundation to the intuitive idea that national competitiveness can be a source of possible economic conflict among the national members of a global economy. Final version of this working paper : S. Parrinello, “ The notion of national competitiveness in a global economy” chapter 4, pp. 49-68, in Economic Theory and Economic Thought, Essays in Honour of Ian Steedman, J. Vint, J. Metcalfe, H. Kurz, N. Salvadori and P.A. Samuelson (eds.). London and New Yor)k: Routledge, 2010.National competitiveness, Globalization, International Trade

The "institutional factor" in the theory of international trade: new vs. old trade theories

Abstract The New Trade Theory presents novel perspectives compared to the Old Theories of international trade. Increasing returns and different institutional arrangements can explain the international specialization and trade flows even between countries which are identical in terms of factor endowments, technology and preferences for private goods. In this context the pattern of trade cannot be determined by a price/cost comparison of isolated countries. Comparative advantages can be affected by historical accidents and become a solution to a general political-economic equilibrium system. As a consequence, the institutional factor appears as a crucial element in a non purely verbal distinction between theories of interregional trade and theories of international trade. This distinction is acknowledged in the non analytical discourse of the Old Trade Theories, but it is seldom revealed in the formal models by which such theories are formulated. The New Trade Theory has the merit of dealing with this hidden factor explicitly. This paper presents 1) a reappraisal of some ideas of Smith, Ricardo and Ohlin which anticipate the role assigned to the institutional factor in the New Theory; 2) a critical assessment of how this factor is modeled in the New Trade Theory 3) an evaluation of the progress brought about by the New Trade Theory; 4) an indication of how the same factor can be treated in the light of the Old Trade Theories.Trade theories; National competitiveness; Cambridge Economists;

The myth of the service economy

In this article the author, after a critical assessment of the main notions of services developed in economics, presents a revised definition of services based on process analysis. A corresponding distinction is made between material and non-material goods, on the one hand, and services, on the other hand. The proposed definition is applied to extend Sraffa’s theory of prices and to clarify that the expansion of the service activities, as such, is not related to knowledge creation and information diffusion. It is suggested that the dynamics of such non-material factors, instead of being reflected by the change in the relative weights of goods and services, should be assessed on the basis of the change in the tasks and qualities of the labour force. Final version of this working paper: S. Parrinello, “The service economy revisited”, Structural Change and Economic Dynamics, 15 (2004) 381–400Services; process analysis; Classical economics

Exhaustible natural resources, normal prices and intertemporal equilibrium

This paper proposes an extension of the classical theory of normal prices to an n-commodity economy with exhaustible natural resources. The central idea is developed by two analytical steps. Firstly, it is assumed that a given flow of an exhaustible resource in short supply is combined with the coexistence of two methods of production using that resource. Sraffa’s equations are reinterpreted by adopting the concept of effectual supply of natural resources and avoiding the assumption of perfect foresight. Secondly, in force of the Hotelling rule, some limitations are imposed to the dynamics of normal prices and, by implication, to technical and structural change. A comparison, between such approach and the notion of intertemporal equilibrium with natural resources, introduces the central argument. The final part of the paper presents a critical assessment of recent works in this area. The conclusions are focused on methodological issues. Final version of this working paper: S. Parrinello, “The Notion of Effectual Supply and the Theory of Normal Prices with Exhaustible Natural Resources”, Economic Systems Research, Vol. 16, No. 3, September 2004.Exhaustible resources; normal prices, Sraffian analysis, Hotelling rule