Robert L. Basmann

Cross Country Comparisons

In a recent paper, Hayes, Molina and Slottje (1988) examined the question of preference variation across North America. As the economy of the United States becomes a more open economy and less immune to fluctuations in international markets, the impact of relative price changes of foreign commodities on domestic economic well-being will be of increasing interest. Earlier studies have focused on the welfare impact of foreign price changes (cf Thursby (1981)). In this chapter, potential secondary utility effects of foreign prices are examined, the chapter follows Hayes, Molina and Slottje (1988).

A general functional form for approximating the Lorenz curve

Abstract The purpose of this paper is to present several descriptive approximations of empirical Lorenz curves. Each of these hypothetical forms is less restrictive than those considered before. We compare these alternative forms by goodness of fit, F -tests of nested forms, and measurement of the Gini coefficient.

Agricultural Production Technologies with Systematic and Stochastic Technical Change

A production system modeling tool is developed that implements recent work on autoregressive and endogenous stochastic production technologies associated with generalized Fechner-Thurstone (GFT) optimizing functions. A GFT-class production system is used to evaluate the empirical support for technology specifications inherent in the neoclassical theoretic structure of an agricultural production region. Little likelihood support is found for zero serial correlation, elimination of systematic technology changers from the production system, strict neoclassical production technologies, Hicks-neutral technical change, or zero homogenous factor demand functions.

On the empirical relationship between several well-known inequality measures

Abstract This paper presents a new class of weighted geometric mean inequality measures. This class allows us to make explicit the latent weighting other well-known inequality measures are giving to various portions of the observed income graduations under scrutiny. Since policymakers rely on measures such as the Gini coefficient to convey information to them about the level of inequality, knowledge of such implicit weightings is important.

The Lorenz curve and the mobility function

Abstract The purpose of this paper is to specify a functional form of a Lorenz curve which allows us to examine an aspect of the observed income graduation which has not previously been analyzed. We demonstrate that the form of the Lorenz curve specified satisfied a Riccati differential equation and the logarithmic derivative satisfies a Bernoulli differential equation which allows us to discuss the notion of what we call the Mobility function. This function conveys information about the relative difficulty of moving up the personal income distribution. We estimate various points along this function for the years 1977 and 1983.

Statistical outlier analysis in litigation support: the case of Paul F. Engler and Cactus Feeders, Inc., v. Oprah Winfrey et al

In the 1990s three decisions of the United States Supreme Court raised standards for admissibility of scientific and special knowledge testimony in Federal trials. Many states have adopted comparable standards. Expert economic testimony that seeks to prove facts from statistical generalizations has received considerable scrutiny in litigation. This article focuses on the nitty-gritty of performing regression studies that can meet the new standards for admissibility. The article redefines chance outliers in terms of tail probabilities of distributions. Tests for presence of outliers produced by anomalous factors are specified in terms of number of diagnosed outliers and waiting-times of their occurrence.

The Political Market for Real Income Redistribution through Choice of the Weights in COLAS

This paper studies alternative cost-of-living indexes derived from the generalized Fechner-Thurstone (GFT) utility form, their use in contracts for cost-of-living adjustments (COLAs), and the resulting effect of choice of index on the distribution of real income. The indexes and their distributional effects are compared to the officially reported Consumer Price Index (CPI) and a CPI computed from the same data set used to compute the GFT indexes. It is found that the choice of index used in adjustment clauses in contracts has an impact on the distribution of real income of the group. As an example, the U.S. federal government schedule of wages and salaries is adjusted from 1981 through 1984 by all of the indexes reported here. Use of alternative indexes illuminates the normative assumptions regarding the relative importance of different income strata (among other things) implicit in any public practice of pegging COLAs to a single form of price index.

The GFT Utility Function

Samuelson, in his Foundations of Economic Analysis (1947), credits Walras with having shown many years before that it is possible to modify utility analysis so as to take account of the peculiar properties of money; (Samuelson, 1947b, p. 118).The first part of this chapter is adapted in part from Basmann, Molina and Slottje (1987). The latter exposition follows Basmann, Molina and Slottje (1984a). In response to Walras’ critics who feared “that there was something viciously circular in assuming the existence of prices and of a ‘value for money’ in the midst of the process by which that value was to be determined” Samuelson sought to clear up such misconceptions, by deriving the consumer’s demand function for holding of money from a utility function subject to a linear budget constraint in which the price of “gold”1 and the rate of interest, as well as commodity prices and total expenditure appear as parameters; (Samuelson, 1947b, pp. 119–121). Samuelson introduced commodity prices and the price of “gold” into the consumer’s ordinal direct utility function U(X; p) as parameters.2 Apart from the usual restrictions on fixed-preference utility functions, only homogeneity of degree zero in all prices was imposed. Even without an explicit form of a direct utility function that restriction is sufficient to imply the meaningful, refutable hypothesis that the demand for (holding) money has unitary own-price elasticity; (Samuelson, 1947b, p. 121).

Chapter 5 The GFT Utility Function

This chapter presents an exposition of the Generalized Fechner–Thurstone (GFT) direct utility function, the system of demand functions derived from it, other systems of demand functions from which it can be derived, and its purpose and the econometric circumstances that motivated its original development. Its use in econometrics is demonstrated by an application to household consumer survey data which explores the relationship between prices, on the one hand, and expected exogenous preference changers such as household size, schooling of heads of household, and other social factors, on the other.

Significance of the Nonuniqueness of Neoclassical Direct Utility Functions Especially When they are Empirically Confirmed

Whenever a neoclassical direct utility function is in close (even perfect) agreement with consumer behavior data, there is always an alternative direct utility function that agrees at least as closely with the same data. Existence of this equally well (if not better) fitting alternative to such a neoclassical direct utility function has considerable significance for the rational conduct of potential problem analysis in the policymaking arena. [We shall give an important example later in this note.] However the nonuniqueness of the neoclassical utility function on empirical data is rarely mentioned in the literature of economic theory, it appears to be little understood among economists generally, and most doctoral students are never told about it in advanced economic theory courses.