Skip to main content
main-content

Über dieses Buch

The large aggregates in the economy - consumption, investment, production of the domestic and the international sectors, international capital flows, financial accumulation and indebtedness - are analysed in this book as problems in time-optimisation for enterprises and households. The effects of fiscal and monetary policies along with exchange-rate variation are examined, and their simultaneous use for stabilizing demand are found to be necessary. All household decisions on consumptions, savings, and financial disposition are conditioned by uncertainty, and similarly for firms, who make more complex simultaneous decisions on production, real investment, financing, and market strategy. The marginal efficiency-of-investment function derived from these decisions is fundamentally different from the marginal productivity of capital in the neoclassical sense. An economy which grows through the accumulation of capital, increase in labor supply, and technological progress is the framework in which all of these variables move. This codetermines the allocation of factors between domestic and international production, and the development of foreign trade. The growth both of the public debt and of international investment are treated in depth.

Inhaltsverzeichnis

Frontmatter

Introduction

Abstract
These essays are about macroeconomics and about the similarities and differences between an open and a closed economy, with respect to growth, allocation, stability, capital accumulation, business and household behavior, adjustment of financial markets, and the implications of these for stabilization policy. In comparison with another book bearing a related title, Dombusch (1980), the emphasis is not on balance-of-payments adjustment, although this receives its due, but on the behavior of the large aggregates in an economy which happens also to be open rather than closed.
Franz Gehrels

I. The Growth Path

Abstract
The purpose of this chapter is to provide the growth framework and other features which will be used in later parts of the study. The economy may or may not be operating near its potential. In the years since World War II the period until about 1973 was one of approximate full employment in most industrial countries, while the time since then was marked by lower employment and a flatter growth path.1
Franz Gehrels

II. On Aggregate Stability Of Closed and Open Economies

Abstract
We take up here an old question which may never be answered fully: To what extent is a market economy able to maintain stability in the aggregate without intervention. We put the question first for a closed economy — this is more familiar — and then for an economy engaged in international trading, investing and borrowing. It turns out that in neither case is the economy immune to shocks but that under specified circumstances the open economy responds better to real disturbances than does the closed economy. On the other hand the open economy may be troubled by international capital transfers.
Franz Gehrels

III. Underutilized Resources

Abstract
The main task of the first chapter was to describe the ceiling growth path of the economy, with particular attention to the allocation of resources and outputs. Supply forces pushed in the direction of the international sector, while demand forces pulled toward the domestic sector. The tendency was for domestic goods to rise in relative price and for supply spillovers of iritemational goods to be absorbed by an increasing trade balance. Allocation with underemployed resources was given more cursory treatment, with innovation playing a dominant role in new investment, output growth, and allocation of labor. Scarcities of factors played little role in this case because both labor and the capital stock were underemployed.
Franz Gehrels

IV. Risk Averse, Time Optimizing Behavior Of Households: Comparison With German Microcensus Data

Abstract
This chapter and its successor have in common the emphasis on time as a fundamental component of decisions, in this chapter those of households, and in the next those of enterprises. * In the case of microeconomics, be it of the partial-equilibrium or of the general-equilibrium sort, much of what is interesting can be said without explicit reference to time (an exception being the time path from disequilibrium back to equilibrium). But in dealing with behavior of the large aggregates, it is obvious that plans made affect the time-path of income, consumption, investment, the price-level, and the balance of payments. These in turn may confirm expectations at the base of decisions made, or they may call for revisions. But there is no agreed-on mechanism which brings the economy back to full employment, stable prices, and external balance.
Franz Gehrels

V. Investment Behavior in an Open Economy

Abstract
The purpose of this chapter is to expand on the concept of the marginal efficiency of investment, making it an explicit function of several variables besides the rate of interest. At least as important, we consider real investment behavior in three distinct sectors: the domestic, making non-tradables; the international, making exportables and importables; and the foreign sector, where investment in production facilities responds to policy measures taken at home.
Franz Gehrels

VI. The Labor Market and Wage Determination

Abstract
This chapter shifts the discussion from markets for goods to those for one factor of production, labor. The examination is consciously incomplete in that the supply of labor is taken as exogenous, not determined in the aggregate by wages or taxes or transfers or other economic forces in the system. Institutions are such that there can be, and often is, involuntary unemployment; and when labor is employed there is no close relation of the worker’s wage to his rate of substitution between leisure and income (or consumption). Minimum wage laws, custom, union pay scales, immobility due to costs of search and moving, are the dominant reasons for this. This is not to say that removing these would eliminate involuntary unemployment; indeed the removal of the first three of these might have undesirable consequences. Given that many employers are local monopsonists and that workers are unequal to one another in their bargaining strengths, inefficiencies in labor allocation and undesirable distributional effects might well be the consequence.
Franz Gehrels

VII. The Market For Financial Assets And Monetary Policy

Abstract
The treatment of financial relationships in this chapter is best characterized as “Keynesian” in that money, by any definition, is a substitute for fixed-interest securities of all maturities, as well as for equities, and for material assets. There are differences in the consequences of a given change in the stock of money, according as it is generated by a public deficit or surplus, an active or passive balance of payments, by open-market operations, or by credit expansions or contractions on the part of this banking system.
Franz Gehrels

VIII. Growth Once More: Income And Claims To Wealth

Abstract
The present chapter returns to secular growth but deals with different titles to wealth: those generated by the domestic sector in the form of securities, equities, bank deposits, pension claims, and the like, as well as direct titles to real property; those created by the government in its role as spender, taxer and borrower; and those coming out of foreign investment. It will be shown that all of these can grow forever but that there is a fundamental difference between public debt creation (deficits) and domestic or foreign investment. This lies in the fact that the latter contribute (if successful) to the national product, while the former has no direct connection. Moreover, domestic and/or foreign investment have a self-adjusting character which is lacking in the case of the public debt, because they respond to rates of return.
Franz Gehrels

Backmatter

Weitere Informationen