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When involved in politics, the economist ought to make his value judgments explicit. Besides efficiency, personal freedom is often at issue in policy prescriptions. Except for some strong advocates of individual freedom, like Bastiat, Hayek and Friedman, economists have too often had an indifferent attitude towards it. This benign neglect may be dangerous when a minority of ideologically committed citizens is attempting to impose its will on the majority by persuasion. This is consonant with J.J. Rousseau's conception of liberty, which is at odds with the one unconsciously held by the majority of citizens who assume personal self-determination.
The paper is divided into two parts. In the first one, three complete systems of demand equations are derived, namely, the standard neo-classical model, a model under quantity rationing and the general reduced form of walrasian models. The standard neo-classical model has no spillover eflects while the other models allow for them. But the spillover effects of the general reduced form are walrasian while the spillover effects of the model with quantity rationing can be specified as keynesian.
In the second part of the paper, the authors try to discriminate among these forms on empirical grounds. As a matter of fact, each model is found consistent with the Canadian data and the authors conclude that to discriminate between the models, one must insert them into more general models.
After a short review of the neo-classical theory of protection, the author presents the numerous models which were historically developed for the estimation of the national and regional impact of the Canadian tariffs. The author further compares a number of studies on the Canadian commercial policy, explains the divergences among them and, hopefully, identifies unsettled questions on the subject.
Lancaster's case of innovation in consumption technology is formalized and extended to include beside of the criterion of efficient consumption also the criterion of efficient production. The two criteria has to be met before an invention can be commercialized economically. Trade provoked by an innovation in consumption technology—a new product—is analyzed on a simple numerical example. Necessary conditions and some welfare implications of the neo-technology trade are presented. The approach is sufficiently general to encompass trade based on cost reducing innovation as well as existing trade models as special cases.
This note discusses some aspects of the relationship between the hypothesis that long-term bond rates follow a martingale process and the hypothesis that the bond market is efficient. It begins with some mathematics of bond prices and interest rates. It then shows that, except in one special case, the hypothesis that bond rates follow a martingale and that bond markets are efficient are theoretically inconsistent. Some empirical work is then adduced that shows that neither hypothesis is supported by the data. It concludes with some brief comments on the literature relating to this subject and some suggestions for further research.
Criticizing the fact the Phillips curve wage and price equations are usually reduced form or quasi-reduced form equations without an explicit structural model behind, this article is an attempt to provide a supply side based structural model of the Phillips curve. Of special importance are the theoretical specifications of the resulting wage and price equations that include several new explanatory variables and especially policy variables. After having demonstrated under what structural conditions the price-Phillips curve of this model will be a vertical in the long run, the model is solved for the theoretical specification of the natural rate of unemployment.
This paper presents simulations results using a "Modified St. Louis Model" for Canada. These simulations identify opportunities of trade-off between inflation and unemployment rate. They reveal very slim opportunities of trade-off and demonstrate that any short-term gain in real output caused by monetary stimulus will have to be paid in term of compensating slower output growth to reduce inflationary expectations. This situation of no real trade-off shows up even if the model does not fully endogenize the exchange rate and international trade feedback of changes in money supply growth rate.
This paper presents a critical evaluation of a St-Louis type monetarist reduced-form model for Canada. The model centres on two equations estimated over the 1957-1977 sample period. An expenditure equation relates the growth of nominal GNE to the rate of monetary expansion and to changes in autonomous expenditure. The split between real growth and inflation is modelled through a simple Phillips curve with adaptive expectations.
The dynamic properties of the model are discussed, and illustrated with simulations of alternative monetary growth paths. The analysis reveals some disturbing characteristics of this type of model. For instance, the responses of GNE to money supply changes or to price shocks are not symmetrical though both represent the same shock to real money supply. The price response to a monetary shock, while more plausible than in most large macroeconomic models, remains inadequate since increased monetary expansion results in higher real money supply accompanying higher inflation. The author nevertheless leaves the impression that reduced form models are a useful starting point for econometric research; their limitations are only an invitation to further refinements.
This paper examines the role that language skills play in the determination of the labour earnings of Quebec males in 1971 both for all males and for age and education specific subgroups. The first part of the paper presents the conceptual framework and the gross earnings differences between anglophones and francophones in Quebec. The second part describes the data and the variables used and the third and fourth parts contain the regression results and a discussion of the economic meaning of these results. In a nutshell these results indicate that knowing English is a more highly rewarded skill than knowing French in Quebec in 1970 and that the returns vary with the age but not with the education of Quebec males.