A note on the separability principle in economies with single-peaked

We consider the problem of allocating an infinitely divisible commodity among a group of agents with single-peaked preferences. A rule that has played a central role in the analysis of the problem is the so-called uniform rule. Chun (2001) proves that the uniform rule is the only rule satisfying Pareto optimality, no-envy, separability, and continuity (with respect to the social endowment). We obtain an alternative characterization by using a weak replication-invariance condition, called duplication-invariance, instead of continuity. Furthermore, we prove that Pareto optimality, equal division lower bound, and separability imply no-envy. Using this result, we strengthen one of Chun's (2001) characterizations of the uniform rule by showing that the uniform rule is the only rule satisfying Pareto optimality, equal división lower bound, separability, and either continuity or duplication-invariance.

The behavior of money velocity in low and high inflation countries

This paper presents a general equilibrium model of money demand where the velocity of money changes in response to endogenous fluctuations in the interest rate. The parameter space can be divided into two subsets: one where velocity is constant as in standard cash-in-advance models, and another one where velocity fluctuates as in Baumol (1952). The model provides an explanation of why, for a sample of 79 countries, the correlation between the velocity of money and the inflation rate appears to be low, unlike common wisdom would suggest. The reason is the diverse transaction technologies available in different economies.

Credit markets and the propagation of monetary policy shocks

This paper analyzes the propagation of monetary policy shocks through the creation of credit in an economy. Models of the monetary transmission mechanism typically feature responses which last for a few quarters contrary to what the empirical evidence suggests. To propagate the impact of monetary shocks over time, these models introduce adjustment costs by which agents find it optimal to change their decisions slowly. This paper presents another explanation that does not rely on any sort of adjustment costs or stickiness. In our economy, agents own assets and make occupational choices. Banks intermediate between agents demanding and supplying assets. Our interpretation is based on the way banks create credit and how the monetary authority affects the process of financial intermediation through its monetary policy. As the central bank lowers the interest rate by buying government bonds in exchange for reserves, high productive entrepreneurs are able to borrow more resources from low productivity agents. We show that this movement of capital among agents sets in motion a response of the economy that resembles an expansionary phase of the cycle.

Manipulation via endowments in exchange markets with indivisible goods

We consider exchange markets with heterogeneous indivisible goods. We are interested in exchange rules that are efficient and immune to manipulations via endowments (either with respect to hiding or destroying part of the endowment or transferring part of the endowment to another trader). We consider three manipulability axioms: hiding-proofness, destruction-proofness, and transfer-proofness. We prove that no rule satisfying efficiency and hiding-proofness (which implies individual rationality) exists. For two-agent exchange markets with separable and responsive preferences, we show that efficient, individually rational, and destruction-proof rules exist. However, for separable preferences, no rule satisfies efficiency, individual rationality, and destruction-proofness. In the case of transfer-proofness the compatibility with efficiency and individual rationality for the two-agent case extends to the unrestricted domain. For exchange markets with separable preferences and more than two agents no rule satisfies efficiency, individual rationality, and transfer-proofness.

On the weights of nations: assigning voting weights in a heterogenous union

Consider a voting procedure where countries, states, or districts comprising a union each elect representatives who then participate in later votes at the union level on their behalf. The countries, provinces, and states may vary in their populations and composition. If we wish to maximize the total expected utility of all agents in the union, how to weight the votes of the representatives of the different countries, states or districts at the union level? We provide a simple characterization of the efficient voting rule in terms of the weights assigned to different districts and the voting threshold (how large a qualified majority is needed to induce change versus the status quo). Next, in the context of a model of the correlation structure of agents preferences, we analyze how voting weights relate to the population size of a country. We then analyze the voting weights in Council of the European Union under the Nice Treaty and the recently proposed constitution, and contrast them under different versions of our model.

Choosing how to choose: self-stable majority rules and constitutions

Constitutional arrangements affect the decisions made by a society. We study how this effect leads to preferences of citizens over constitutions; and ultimately how this has a feedback that determines which constitutions can survive in a given society. Constitutions are stylized here, to consist of a voting rule for ordinary business and possibly different voting rule for making changes to the constitution. We deffine an equilibrium notion for constitutions, called self-stability, whereby under the rules of a self-stable constitution, the society would not vote to change the constitution. We argue that only self-stable constitutions will endure. We prove that self-stable constitutions always exist, but that most constitutions (even very prominent ones) may not be self-stable for some societies. We show that constitutions where the voting rule used to amend the constitution is the same as the voting rule used for ordinary business are dangerously simplistic, and there are (many) societies for which no such constitution is self-stable rule. We conclude with a characterization of the set of self-stable constitutions that use majority rule for ordinary business.

An alternative way to model merit good arguments

Besley (1988) uses a scaling approach to model merit good arguments in commodity tax policy. In this paper, I question this approach on the grounds that it produces 'wrong' recommendations--taxation (subsidisation) of merit (demerit) goods--whenever the demand for the (de)merit good is inelastic. I propose an alternative approach that does not suffer from this deficiency, and derive the ensuing first and second best tax rules, as well as the marginal cost expressions to perform tax reform analysis.

Marx's analysis of the falling rate of profit on the first version of volume III of capital

The paper provides a description and analysis of the Hodgskin section of Theories of Surplus Value and the general law section of the first version of Volume III of Capital. It then considers Part III of Volume III, the evolution of Marx's thought and various interpretations of his theory in the light of this analysis. It is suggested that Marx thought that the rate of profit must fall and even in the 1870s hoped to be able to provide a demonstration of this. However the main conclusions are: 1. Marx's major attempt to show that the rate of profit must fall occurred in the general law section. 2. Part III does not contain a demonstration that the rate of profit must fall. 3. Marx was never able to demonstrate that the rate of profit must fall and he was aware of this.