Anarchy, state, and utopia

Econometric policy evaluation: A critique

Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process.

The History of Economic Analysis

Impact of COVID-19 on the travel and tourism industry

How is it that prices, which are merely a vector of numbers, come to coordinate the myriad and complex plans of millions of economic actors? After all, there is a quantum difference between the information conveyed by prices and the information necessary to capture the specifics of the ways in which the plans of different actors can dovetail with each other. Put differently, the flow of information necessary for each actor to convey to others the ways in which his plans can ‘fit’ with theirs is orders of magnitude greater than what is conveyed by prices. In this paper, we argue that prices are able to play a role in coordinating economic activity because of certain structural properties of the network of connections between firms, which enable the plans and behavior of each firm to directly depend on only a small subset of other firms. These structural properties also engrain the concomitant use of two forms of communication. The first of which involves private signals between firms with direct connections to each other, signals which go from specific senders to specific recipients. And the second involves public signals which are made available to all. Prices are the singularly most significant public signals generated by the economic system.

Order, Structure, and the Price System

Empirical evidence shows monetary shocks have two temporary effects on the distribution of prices. One, the dispersion of cross-section of prices increases in response to monetary shocks. Two, some prices change in the "wrong" direction: some prices decrease in response to positive monetary shocks, and increase in response to negative monetary shocks. We present a model that generates the two effects of monetary shocks on the distribution of prices as an out-of-equilibrium phenomena. Firms are related to each other through a production network. Monetary shocks change the working capital of a subset of firms and percolate to other firms through buyer-seller linkages. Price dispersion increases because the percolation of a monetary shock through the production network causes prices to differentially deviate from their steady state values. Some prices change in the wrong direction because a shift in one firm's demand causes a shift in another firm's supply (and vice-versa), thereby generating complicated chains of bi-directional price changes. Monetary shocks can significantly disturb relative prices even when all prices are fully flexible.

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Price Effects of Monetary Shocks in a Network Economy

We generalize Hotelling’s model of spatial competition with more than two firms in a two-dimensional space. Firms choose both price and location to maximize profits. The principle of minimum differentiation does not hold in general. Local duopolies emerge from the interaction between firms. Firms do not spread uniformly across the two-dimensional space, nor do they all charge the same price. Firms in more competitive locations charge lower prices. More product attributes produce more price competition.

A General Model of Spatial Competition

Government schools in Delhi are not providing quality education to the masses since many years, and this phenomenon has not escaped the eyes of experts, activists, and policy makers. However, there seems to be a general perception that the main, and sometimes even the sole, source of this problem are the low levels of government expenditure of education. And to prove their case supports of this view cite educational expenditure to GDP ratios in India in comparison with that of some other nations. Though there may be reasonable arguments to increase the level of government expenditure on education, such hijacking of public debate to focus on 'the level of expenditure' often overlooks more important issues. Contrary to common perception the level of per student expenditure on government schools in Delhi is reasonable, ranging from Rs.6000 to Rs.12000 p.a. There are a number of organisational deficiencies which do not create checks and balances for appropriate utilization of fund. Moreover, the division of these funds among social groups and for different purposes is also questionable. Though, female literacy lags significantly behind male literacy, about 15% points, extra resources provided for female education are insignificant. And in some schemes such as the one run for 'street children' and 'child labourers' large amounts are budgeted year after year without a single Rupee being spent. Also government schools catering to richer regions of Delhi seem to be spending more per child as compared to the poorer counterparts. The paper also proposes an education voucher model, which may have the potential to address some of the issues raised in the paper. Trends in expenditure under some schemes have been studied in relation to the purpose of expenditure. The issue of government expenditure on education is a complex one, and public space should be utilized to discuss them as they are, rather than reducing discussion to dogmatic wars aimed at increasing the levels of expenditure. Though, one may agree or disagree with the methods and findings of the author, hopefully the paper highlight the complexity of the issue at hand, and the need to understand the institutional deficiencies and allocative inefficiencies in government expenditure on education.

/pdf/government-expenditure-on-elementary-and-secondary-education-4su8lpyzwg.pdf

Government expenditure on elementary and secondary education in delhi from 1993-94 to 2003-04

This paper develops an explanation for why some activities are organized through firms and others through markets. It studies the problem of coordination in an idealized firm and an idealized market. Both the firm and the market face the problem of using knowledge that is widely dispersed among individuals. They solve the problem in different ways. In the market, decision-making rights are vested in the individuals who possess knowledge. Coordination happens through a process of decentralized interactions and the prices that emerge from these interactions. The market has to incur the cost of discovering prices. The firm does not have to incur the cost of discovering prices because coordination happens through managerial direction. However, this means that widely dispersed knowledge has to be transferred to the manager. Knowledge that changes with time is difficult to centralize, so is knowledge that is difficult to communicate. The firm has to incur the cost of collecting knowledge. The relative cost of the market and the firm depends on the relation between the cost of discovering prices and the cost of collecting knowledge.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2640228_code582878.pdf?abstractid=2640228&mirid=3

Vipin P. Veetil

Papers

Order, Structure, and the Price System

Price Effects of Monetary Shocks in a Network Economy

A General Model of Spatial Competition

Government expenditure on elementary and secondary education in delhi from 1993-94 to 2003-04

Distributed Knowledge and Economic Organization