Economic Inquiry

Articles from Vol. 31, No. 3, July

A Clarification of the Excess Demand for or Excess Supply of Money
I. INTRODUCTION This article focuses on many economists' neglect (and even denial) of monetary disequilibrium. I am convinced that one of the most misunderstood and neglected concepts in all of economics is the notion that money may indeed be in excess...
Corporate Control and Performance in the 1930s
I. INTRODUCTION A fundamental assumption of mainstream microeconomics holds that firms strive to maximize economic profits. Beginning with the work of Berle and Means |1932~, however, researchers have seriously questioned if profit maximization is the...
Employment and Output Effects of Government Spending: Is Government Size Important?
I. INTRODUCTION In 1981 Barro proposed that temporary changes in government spending affect output more than permanent changes of the same size. He argued, this is because temporary changes have no wealth effects, and so have a larger impact on aggregate...
Frank Knight on Risk, Uncertainty, and the Firm: A New Interpretation
I. INTRODUCTION For decades now, economists have struggled to interpret Frank Knight's Risk, Uncertainty, and Profit. Like a handful of other classic texts--Das Kapital and The General Theory come to mind--it has produced nearly as much confusion as...
How Trading Institutions Affect Financial Market Performance: Some Laboratory Evidence
I. INTRODUCTION Trading institutions vary considerably across contemporary financial markets,(1) but most can be classified into one of two basic types. The continuous double auction (DA) allows traders to submit public offers to buy or to sell and...
Imperfect Competition and Basing-Point Pricing
I. INTRODUCTION Basing-point pricing occurs when firms that are geographically differentiated use a common location to formulate the transportation costs, and thus delivered prices, charged to consumers. Consumers are not generally permitted to purchase...
Post-Reform Industrial Productivity Performance of China: New Evidence from the 1985 Industrial Census Data
I. INTRODUCTION During the last decade China implemented a series of economic reforms that followed what many observers agreed was a period of stagnation in industrial productivity.(1) The first wave of Chinese economic reforms (1978-79)--following the...
Pot-Bellies, Cattle Breeds and Revealing Signals
I. INTRODUCTION It is well known that when the desired attributes of a commodity are costly to measure, and when buyers and sellers have asymmetric abilities in measuring, signals may arise to minimize the cost of measurement.(1) As well known is the...
Promotions as Work Incentives
I. INTRODUCTION Why do professional partnerships like law firms, accounting practices, and management consulting groups to name a few, rely almost exclusively on promotions for incentives and do not typically use incentive pay to motivate their associates?...
Redundant Tariffs as Rational Endogenous Protection
I. INTRODUCTION In a competitive market, tariff protection is redundant whenever the tariff exceeds the difference between the domestic autarky price and the world price. With redundant protection, domestic price rises by less than the full nominal...
Some Evidence on the Alchian and Allen Theorem: The Third Law of Demand?
I. INTRODUCTION The Alchian and Allen theorem first appeared in writing more than twenty-five years ago in University Economics. Since then the theorem has grown to be standard pedagogy in many microtheory courses and the topic of several clarifying...
Variable Price Adjustment Costs
I. INTRODUCTION Costly price adjustment models (often called menu cost models--see Mankiw |1985~), are based on the assumption that nominal price changes in product markets are costly. With aggregate inflation the optimal pricing policies are state-contingent:...