Claes-Henric Siven

The Becker Paradox And Type I Versus Type Ii Errors In The Economics Of Crime

Two real-world observations are not easily replicated in models of crime. First, although capital punishment is optimal in the standard Becker model, it is rarely observed in the real world. Second, criminal procedure and the evaluation of evidence vary across societies and historical periods, the standard of proof being sometimes very high and sometimes quite low. In this article, we develop a general equilibrium model of judicial procedure allowing for innocent persons being convicted. We show that the median voter theorem applies to this model, making judicial procedure endogenous. So formulated, the model can replicate both empirical observations.

The End of the Stockholm School

In 1937, Ohlin argued that the theory of employment had been developed independently in Sweden. Why then were the Stockholm School and, specifically, its original contribution-the dynamic method-unable to achieve an international breakthrough? On the basis of an analysis of Erik Lundbergs dissertation Studies in the Theory of Economic Expansion (1937), it is suggested that the lack of acceptance was due to the following characteristics of the Stockholm School: disinterest in equilibrium analysis, a preference for casuistic analysis, and lack of instruments for analyzing the questions posed by the School itself.

Heertje, Heemeijer, and Samuelson on the Origin of Samuelson's Multiplier-Accelerator Model

Who were the “fathers” of Paul Samuelson’s (1939) famous businesscycle model built on the interaction between the multiplier and the accelerator? Arnold Heertje and Peter Heemeijer (2002, 207–8) draw the conclusion that “there is little factual support for Samuelson’s suggestion ascribing the model mainly to Alvin Hansen, his mentor in the days of the creation of the model. Instead, the evidence indicates that Roy Harrod played the major role in the development of research leading to the multiplier-accelerator model.” In a reply, Samuelson (2002, 221) stressed Harrod’s importance but underlined that “I reaffirm now, from clear memory, that my 1939 difference equation(s) came directly from the numerical sequence on which Hansen based his thesis.” Below I will argue that the roots of the accelerator-multiplier model are more likely to be found in the work of Bertil Ohlin (1934) and Erik Lundberg (1937) but that Alvin Hansen might have transmitted Lundberg’s ideas to Samuelson. However, my argument does not necessarily contradict the thesis of Heertje and Heemeijer concerning the importance of Harrod. The same idea may come from different sources.

Two early Swedish debates about Wicksell's cumulative process

The paper contains a survey and analysis of two debates between Wicksell and a number of Swedish economists concerning the cumulative process. The debates illustrate various problems with the analytical formulation of the cumulative process and how these problems were dealt with by the participants. Inter alia the institutional framework (inside versus outside money), excess demand or interest gap as an engine of inflation, the natural and the normal rate of interest, the relationship between the real and the monetary parts of the economy and price expectations are discussed in the paper.

The General Supply-Demand Multiplier

The Barro-Grossman multiplier theory is extended to take variations in market conditions into account in different parts of the goods and labor markets, respectively. The generalization produces a multiplier theory where demand and supply elements simultaneously determine the total effects of various disturbances on production and employment. Implications for the relationship between employment and the real wage rate are presented. The analysis also suggests a new reason for the Leijonhufvud corridor effect.

The Interaction between Multiplier and Inflation Processes

The Barro-Grossman theory of the demand and the supply multiplier is generalized in the following ways: Household behavior under disequilibrium is derived from the knowledge of the behavior under equilibrium using the Tobin-Houthakker theory of rationing. The setting of prices and wages under equilibrium and disequilibrium conditions is analyzed. It is shown that the value of the demand multiplier depends on whether employment is instantaneously adjusted during a depression. The results of the microeconomic analysis are used for constructing a macroeconomic model where the interactions between inflation and quantitative adjustments are studied.

Labor Market Adjustment, Microeconomic Foundations of Short-Run Neoclassical and Keynesian Dynamics

The main purpose of this book is to develop a general theoretical framework within which it is possible to analyse the interaction of markets in disequilibrium. It considers optimal firm and household behaviour in a dynamic sequence of the labour and commodity markets when there is imperfect information about wage offers and the supply price of labour. The study is mainly theoretical but several empirical phenomena are shown to have an important interpretation within the framework of the model. Models of individual behaviour dealt with in the book increase our understanding of the working of an economic system out of equilibrium by providing the foundation for such dynamic processes as the Keynesian multiplier and the Phillips curve. The analysis points to a short-run dynamic process which exhibits Keynesian features when involuntary unemployment coexists with frictional unemployment and Neoclassical features when involuntary unemployment falls to a very low level.