Leif Johansen

The theory of public goods: Misplaced emphasis?

Abstract The note takes up for critical examination the tendency in the modern theory of public goods to emphasize the problem of correct revelation or concealment of preferences. It is argued that a strategy which consists in playing down ones preferences for a public good in order to get a lower share in the costs of providing the good is not likely to succed in an open political decision-making process involving elected representatives. This conclusion is supported by the fact that there seems to be little empirical evidence which shows the importance of the preference revelation issue.

Некоторые заметки по поводу предложенной Линдалем теории определения государственных расходов (Some Notes on the Lindahl Teory of Determination of Public Expenditers)

В 1919 году шведский экономист Эрик Линдаль предложил решение проблемы одновременного определения расширения расходов для удовлетворения общественных потребностей и распределения соответствующего налогового бремени. Данная работа представляет собой попытку представления решения Линдаля в виде более современных понятий теории благосостояния и, тем самым, выявления некоторых новых аспектов этого решения. Эта работа также указывает на то, что решение Линдаля было не вполне удовлетворительно представлено в книге Р.Э.Масгрейва «Теория государственных финансов».

On the Status of the Nash Type of Noncooperative Equilibrium in Economic Theory

In economic theory the Nash type of noncooperative equilibrium is a widely used equilibrium concept. Nevertheless, the concept is frequently misunderstood, and misleading explanations and interpretations are often given. This paper presents a sample of such frequently appearing misleading explanations, and goes on to explain why they are misleading. The case for using the Nash noncooperative equilibrium concept is stronger than what is implied by the many misleading statements found in the literature. A basic issue is whether it can be argued that decisions in accordance with the noncooperative equilibrium theory are individually rational decisions. This issue is not covered by the classical rationality postulate in economic theory. This problem is tackled by stating certain postulates which may be taken as defining individual rationality in situations of noncooperative interaction; it is shown that Nash behavior satisfies these postulates.

Establishing preference functions for macroeconomic decision models: Some observations on Ragnar Frisch's contributions

Abstract The article reviews Ragnar Frischs contributions to solving the problem of establishing preference functions for macroeconomic decision models, and compares Frischs approach with other possible approaches to the problem. The article mainly considers linear and quadratic preference functions. In discussing the methodology attention is drawn to the analogy with problems in the analysis of consumer demand.

Econometric Models and Economic Planning and Policy: Some Trends and Problems

If we use the term econometric models in a somewhat broad sense, then I think we can say that such models now play some part in connection with economic planning and policy-making “almost everywhere”. The roles they play, however, are different in different countries. On the one hand we have countries where the use of the models is integrated in the decision-making process itself in the relevant ministries or divisions of government. Sometimes in the past I have got the feeling that Norway has, in this respect, been a singleton, but this is probably not true. France may also be a case in point, and other countries have been developing in the same direction. On the other hand we have countries where the models are used mainly by independent agencies, private or public, but outside the decision-making process concerning national planning and policy. The United States may belong to this class. In such cases the use of econometric models will mainly be in the direction of forecasting, simulations of the historical development in order to find out about the influences of various factors such as elements of economic policy, exogenous influences of various sorts etc., and calculations of alternative conditional forecasts in order to elucidate possibilities in economic policy.

A note on the possibility of an international equilibrium with low levels of activity

Abstract This note studies the interaction through international trade of decision-making in two countries, where the decision-makers have preferences regarding the level of economic activity and the balance of trade. Non-cooperative and cooperative equilibria in the sense of game theory are studied. It is demonstrated that non-cooperative equilibria can easily be sub-optimal. For a complete characterization it is necessary to take into account the capacity constraints in both countries. This leads to the possibility of many different types of equilibrium situations, as well as to the possibility that no non-cooperative equilibrium (in pure strategies) will exist. This fact may point to an inherent difficulty in decision-making concerning demand management in an international system.

Cores, aggressiveness and the breakdown of cooperation in economic games

Abstract The paper develops the use of the core as a solution concept in game theory in two interrelated directions. In the first place, an indicator of aggressiveness of claims is introduced in a modified definition of the core. The modified core may be smaller than the usual core, and may fail to exist if aggressiveness increases beyond some critical level. In the second place the article gives a formulation of a mixed cooperative/non-cooperative game, in which the game will be played cooperatively within coalitions, but non-cooperatively as between coalitions. A mixed cooperative/non-cooperative solution obtains if the grand coalition of all players fail to materialize because the various claims are incompatible. The two directions referred to are interrelated because the level of aggressiveness may be decisive for whether or not the grand coalition, and possibly other coalitions, will break down. The final section of the paper draws some general conclusions and relates the approach to other ideas in the literature.

Optimal use of forecasts in economic policy decisions: An empirical test

Abstract A criterion for optimal use of forecasts of exogenous variables in a linear policy model with quadratic preferences is given, based on Johansen (1972). By calculating regressions of observed values with respect to raw forecast values used in the observation period, equations are established which can be used to transform raw forecasts into ‘certainty equivalents’. The method is applied to data from national budgeting and corresponding national accounts in Norway 1948–-1971. Especially the forecasts for the volume of exports, but also for import prices, could be considerably improved, for policy purposes in the context of the model of the type mentioned, by the transformation described. Some of the forecasts, when optimally transformed, should be permitted to fluctuate more strongly and thereby influence policy more strongly. Some tentative results for Sweden and the Netherlands are briefly mentioned and compared with the evidence for Norway.

L. V. Kantorovich's Contribution to Economics

The 1920s constitute a very interesting period in Soviet economics. Constructive and original scientific work was carried out in many fields of economics, perhaps particularly in the field now called development economics. Some parts of this literature have gained new actuality in recent decades and have experienced a revival of interest. In this early period in Soviet economics there were also some attempts to use mathematical methods in connection with both research and economic planning, methods which were relatively advanced as compared with the general state of economics at that time. Feldmans work on a model for perspective planning has become famous, and there are works by Slutsky, Konlis and perhaps a few others which are known to specialists. However, there are probably many other works from this period which deserve to be brought to light again. The period from around 1930 through most of the 1950s was, apart from some scattered cases, a less interesting period from the point of view of economic science. Beginning in the late 1950s, however, there was a revival of economics as a science in the USSR, particularly related to the fact that mathematical and statistical methods and modern computational techniques came into use on a much larger scale than before. In this new wave, some of the activities were of course absorbed by attempts to recover what had been neglected or lost in the preceding decades, and it can hardly be denied that some rather uncritical and immature works appeared during this period. This is unavoidable in such a surge. There is no doubt, however, that a great advance took place from a scientific point of view, and that works appeared which are valuable and scientifically original as compared with the development of economics in other countries.

Death rates, age distribution and average income in stationary populations

Abstract This paper investigates the influences of death rates on average income in stationary populations, through changes in the age distribution and changes in the upper age limit of the population taking part in production. It is assumed that decreases in death rates are followed by a decrease in the number of births to make the total population remain constant. This may reduce the loss in labour input due to the births. The formal analysis introduces a productive ages a function of expectation of life at birth. We further introduce a consumption unit scale to be used in defining average income. The formulae derived are in principle applicable to any given pattern of change in death rates. The method is illustrated numerically on the basis of changes in Norwegian death rates between 1901–11 and 1921–31. Some tentative consclusions are drawn. The main result seems to be that it is a necessary condition for achieving any appreciable increase in average income through a decline in death rates, that the up...