Showing papers by "Robert E. Lucas published in 1978"

Asset prices in an exchange economy

Abstract: THIS PAPER IS A THEORETICAL examination of the stochastic behavior of equilibrium asset prices in a one-good, pure exchange economy with identical consumers. The single good in this economy is (costlessly) produced in a number of different productive units; an asset is a claim to all or part of the output of one of these units. Productivity in each unit fluctuates stochastically through time, so that equilibrium asset prices will fluctuate as well. Our objective will be to understand the relationship between these exogenously determined productivity changes and market determined movements in asset prices. Most of our attention will be focused on the derivation and application of a functional equation in the vector of equilibrium asset prices, which is solved for price as a function of the physical state of the economy. This equation is a generalization of the Martingale property of stochastic price sequences, which serves in practice as the defining characteristic of market "efficiency," as that term is used by Fama [7] and others. The model thus serves as a simple context for examining the conditions under which a price series' failure to possess the Martingale property can be viewed as evidence of non-competitive or "irrational" behavior. The analysis is conducted under the assumption that, in Fama's terms, prices "fully reflect all available information," an hypothesis which Muth [13] had earlier termed "rationality of expectations." As Muth made clear, this hypothesis (like utility maximization) is not "behavioral": it does not describe the way agents think about their environment, how they learn, process information, and so forth. It is rather a property likely to be (approximately) possessed by the outcome of this unspecified process of learning and adapting. One would feel more comfortable, then, with rational expectations equilibria if these equilibria were accompanied by some form of "stability theory" which illuminated the forces which move an economy toward equilibrium. The present paper also offers a convenient context for discussing this issue. The conclusions of this paper with respect to the Martingale property precisely replicate those reached earlier by LeRoy (in [10] and [11]), and not surprisingly, since the economic reasoning in [10] and the present paper is the same. The

On the size distribution of business firms

Abstract: This paper proposes a new theory of the size distributions of business firms. It postulates an underlying distribution of persons by managerial "talent" and then studies the division of persons into managers and employees and the allocation of productive factors across managers. The implications of the theory for secular changes in average firm size are developed and tested on U.S. time series.

On the Size Distribution of Business Firms

Abstract: Examines the size distribution of firms at an economy-wide level by allocating productive factors over managers of differing abilities in order to maximize output. A firm is defined as one manager and the capital and labor which that manager controls. To begin, a serious of theories that have been proposed in this area are considered including those of Herbert A. Simon, Jacob Viner, Charles, Bonini, and Yuji Ijiri. The model then developed in this analysis is based on the suggestion of Henry G. Manne. Production technology and managerial technology are considered separately in this model with production technology viewed in terms of labor and capital and managerial technology viewed in terms of variable skill or talent. Further development of the model invokes Gibrat's law. The results of this model show the effect of gross national product per capita on average firm size. Using human capital and hierarchical managements as variables would help to refine this model. (SRD)

Advances in Finite Element Techniques for Calculating Cable Resistances and Inductances

Abstract: In theory, finite element procedures can be applied to arbitrary conductor configurations in order to determine their frequency dependent resistances and inductances to an arbitrarily high degree of accuracy. In practice, limitations are imposed by the shapes of the finite elements used and by the accuracy of the formulae invoked to estimate their inductances. This paper reviews the concepts underlying extant finite element procedures, proposes a more efficient set of element shapes than are used in extant procedures and develops the inductance formulae necessary to implement these shapes. This results in a considerably more capable algorithm.