Suchergebnisse

In Christian Weber's opinion in the preceding article in this journal, although Vilfredo Pareto never wrote his utility function in the Cobb-Douglas form U = rβbrγc, he did present an early, if incomplete, discussion of a Cobb-Douglas utility function. Weber's sections II and III try to document his opinion.Weber's section II examines Pareto's "Considerazioni" (1892) on the assumption that the marginal utility πi, of good i depends only on the level ri, of consumption of that good. Section III examines Pareto's Manual (1909) on the assumption of "additive separable" utility functions.

Scope. Macroeconomic theory determines either an unemployment equilibrium or an inflation equilibrium. Consider an economy producing a single good. Unemployment theory determines the physical output of that good; inflation theory determines its price. Twice in the history of economic thought an unemployment equilibrium reversed itself into an inflation equilibrium. First, in the eighteenth century the unemployment equilibrium of William Petty (1662) and A. Yarranton (1677) reversed itself into the inflation equilibrium of David Hume (1752) and A. R. J. Turgot (1769–1770). Second, in our own century the unemployment equilibrium of J. M. Keynes (1936) reversed itself into the inflation equilibrium of Milton Friedman (1968).

The first part of the paper, "The Freeze," restates the simplified Keynesian framework of fiscal activism pioneered by Jargen Pedersen (1937) and Alvin H. Hansen (1941). The framework is a macroeconomic model in which investment, the bond supply, price, the money wage rate, and the rate of interest are all frozen. Using government purchase and the tax rate as its policy instruments the paper solves the model and finds its fiscal multipliers.