John Z. Drabicki

An antinomy in the theory of comparative advantage

Abstract This paper shows that the usual bilateral rule of comparing relative prices under autarky to determine the pattern of trade is not valid for the multicommodity world. In addition, equilibrium world price ratios need not fall between the corresponding price ranges under autarky. Such a paradox disappears under gross substitutability when the third commodity is a nontradeable. For the case of tradeables, an alternative bilateral rule to determine the pattern of trade is proposed. Since the classical constant cost case has been heavily discussed in the literature, we confine ourselves to the neoclassical case.

Money, national debt, and economic growth

Abstract This paper develops a dynamic model which allows for government spending, taxation, and the endogeneity of the money supply. As an example of an application of our framework, we consider the well known stability problem of the two asset (money and physical assets) neoclassical “money-and-growth” literature. We conclude, among other things, that the usual saddle-point instability result under myopic perfect foresight with proportional savings behavior can be reversed by introducing a third asset (securities). It is further argued that this result is “robust” as it holds under various policy rules (including the traditional case of national debt growing at a constant rate).

The symmetry of real purchasing power and the neoclassical monetary growth model

Abstract It has been argued that the usual instability property of the neoclassical monetary growth model can be removed if an asymmetric treatment of real purchasing power between the real and monetary sectors is eliminated, i.e., if the demand for money is made to depend on disposable income and not income. Basically, the argument is that this symmetry can offset the destabilizing forces of the Wicksell effect of the rate of inflation on the demand for money. We show that, under the usual stipulations of the model, the instability (saddle-point) nature of the model cannot be altered by such an argument.

An optimal monetary policy in an aggregate neoclassical model of economic growth

Abstract This paper shows that the usual Ramsey-Cass-Koopmans optimal-growth theory is applicable to decentralized monetary economies and illustrates, with a simple model, how optimal growth can be achieved via a simple monetary policy. Securities and the endogeneity aspect of the money supply are explicitly introduced. This paper shows that the steady state under optimal growth is a saddle point, that the dynamic behavior of the capital-labor ratio and real per capita consumption is identical to that found in the usual literature in which money is not introduced, and that the optimal monetary policy is “counter-cyclical.”

The long-run consequences of minimum wage regulation in a monetary economy☆

Abstract This paper investigates the long-run implications of minimum wage regulation on the growth process with monetary repercussions. The paper shows, among other results, that if the minimum wage floor (MWF) is sufficiently low, then the qualitative behavior of the dynamic path is similar to the case of full employment in which the steady state is a saddle point, and that if the MWF is sufficiently high, the economy decays all the way toward the origin.

Money, inflation, and optimal economic growth

Abstract Using a two-asset model of a growing competitive economy, it is shown that the optimal growth path can be achieved via a policy operating exclusively on the rate of growth of the money stock.