Pieter J. F. G. Meulendijks

On economics and technical change

SummaryThe article is divided into four sections. The first consists of a review of a few main lines of Heertjes thoughts on the relation between economics and technical change. It appears that Dr. Heertje has chosen to write a basically non-mathematical book dealing with the history of technology, production theories and the significance of technical development for economic growth, monopoly power and economic policy. The general comments in the second section make it clear that his study is an excellent survey of the literature on the subject. It covers an overwhelmingly large number of topics and includes copious notes at the end. However, the authors assigned task of filling a gap in the literature for a varied audience of undergraduates, post-graduate students and working economists as well as those doing research in the field of technical development inevitably proved to be too difficult. It means that many conclusions have to be accepted at their face value. On the contrary, at the end of the second section of thepresent article a ‘CS’ model is constructed that allows for a more exact analysis of the important question about the absorptive power of an economic system with regard to the consequences of labour-saving technological pushes. The third section deals more fully with the authors treatment of Von Böhm-Bawerks roundabout production theory. Improvements are suggested in this section as well as in the concluding fourth section.

Exchange rates and the European business cycle : An application of a quasi-empirical two-country model

Abstract A quasi-empirical symmetric two-country model is used to analyse the case in which country A, as an anchor country, pursues price stability as its main priority, whereas country B stresses exchange rate stability. Problems will arise, in particular for the latter country, when in country A contractionary tax and monetary policy measures are taken after expansionary wage impulses have occurred. In addition, the analysis should shed light upon the recent problems of a European stagnation within an unstable European Monetary System. The model, presented as an exempli gratia in order to promote quasi-empirical modelling, integrates the q theory of investment with the approach of a portfolio choice in which both domestic and foreign agents spread their non-human wealth over imperfectly substitutable domestic and foreign share capital, domestic and foreign government bonds, domestic and foreign treasury bills, domestic and foreign time deposits and domestic and foreign money. Within the framework of fixed or floating exchange rates, rigid labour markets, sticky price and/or flexible price regimes in the goods markets, due account is taken of capital accumulation, government debt and current account dynamics. The analysis shows why politicians have fundamental reasons to question the usefulness of a European Monetary Union within a framework of fixed exchange rates. The pros of the latter system are probably outweighed by the cons.