W. M. Gorman

Tariffs, Retaliation, and the Elasticity of Demand for Imports

This article has two main purposes: 1. To examine the effects of tariffs on the volume and terms of trade.2 2. To examine the conditions under which a given country will gain from a tariff war.

Separability and Aggregation

W.M.(Terence) Gorman has been a major figure in the development of economies during the past forty years. His publications on separability, aggregation, duality and the modelling of consumer demand are recognized as fundamental contributions to economic theory. Many of his unpublished papers have achieved similar status as privately-circulated classics. This volume brings together for the first time all Gormans important work, much of which has never been published before, on aggregation across commodities and agents, including separability, budgeting, representative agents, and the construction of capital and labour aggregates. Each chapter is preceded by an editorial introduction which describes its origin and place within the literature as well as the main results themselves. A forthcoming second volume, Modelling and Methodology, will cover topics on duality, demand, trade, and welfare. This book will appeal to academic economists interested in either specific aspects of Gormans work or in the evolution of economic theory.

More Measures for Fixed Factors

Abstract Existing ‘perfect’ aggregates can be considered as quantities, v = (vm) of intermediate goods m ∈ M: intermediate, eg, between fixed inputs u = (uf), say, and current goods measured as outputs . where v = ϕ(p, u), in an obvious notation. Here I take (1) and its Muellbauer style analogue Xi/X1 = θi(p, v) as definitions, and explore their implications informally. These are that corresponding subaggregates Vf = (vfm)m∈M exist for each firm f such that v = ΣfVf in an appropriate normalisation: that its gross profit function πf(p, uf) = λmf(a(p), uf) + μf(p), say, where a(p) = (am)(p))m∈M is a vector of shadow prices for the aggregates so normalised; and that Vfm = λmf(a)p), uf = ∂λf/∂am as one would like. These results clearly apply to aggregates for Labour, or Food, as well as for Capital, and to groups of households as well as firms. Various related topics are discussed briefly in the text and in appendices.

The Effect of Tariffs on the Level and Terms of Trade

PRESUMABLY tariffs reduce the volume of trade most when they are high and when the demand for imports is elastic in each country. Presumably, too, the terms of trade turn against the country that levies the lower tariff-if its demand for imports happens to be the less elastic as well. But it is not even clear what is the appropriate measure of elasticity, for we not only move along the offer curves when tariffs are levied, the curves themselves move; and it is not clear by how much.2 How much more difficult it is to guess by how much given tariffs will affect the volume or terms of trade, even when there are only two countries and two goods, as I shall assume throughout the greater part of this paper. Presumably it depends on the shape of the exportimport indifference curves over a considerable region. We can hardly hope for a simple general solution to such a problem, but perhaps it can be solved in some interesting special cases.

Le Chatelier and General Equilibrium

I have recently been reading the papers presented at a conference on methodology sponsored by the Royal Economic Society in the home of lost causes and the presidential addresses that gave rise to it. Some of these1 are by old gentlemen like myself bewailing the conduct of the young, especially their use of mathematical and statistical arguments not heard in respectable households in the old days. As one these I have my own particular complaint: I was taught economics as a way of thinking about problems; it has become a body of theorems. Intuition and imagination have been sacrificed to precision and rigour, or so it seems to me.