Showing papers in "Economics of Planning in 1980"

Optimal control of linear econometric models with intermittent controls

Abstract: Dynamic Programming is used to derive the optimal feedback solution to the minimization of a quadratic welfare loss-functional subject to a linear econometric model, when the value of some instrument variables can not be optimized in every model period, but only in single ones. In this way, the relative inertia of fiscal policy-making, as compared to monetary policy-making, can e.g. be taken into account. Analytical expressions are derived for the optimal feedback rules and for the minimum expected losses, and iterative schemes are proposed for their numerical computation. It is suggested that a numerical analysis of the economic gain to be realized by making more frequent adjustment of fiscal policy variables than is actually undertaken could yield valuable information for policy-makers.

Why did NEP fail

Abstract: Why did NEP fail? I should like to distinguish three ways in which this question has been answered, indicating why the third appears to me to be the most satisfactory. In the first view, NEP was abandoned because it was inconsistent with any further industrial development of a socialist kind, and its abandonment was therefore a rational economic decision. In the second view, strongly reacting against the first, NEP is seen as consistent with a wide variety of development patterns, including the industrial development actually achieved in the inter-war Five Year Plans. Therefore the abandonment of NEP had no strictly economic rationale, but was an outcome of brute political struggles and the formation of the Stalinist political system. In the third view, NEP is seen as inconsistent with the degree and rate of industrialization actually undertaken from 1928 onwards, but contained the possibility of alternative development patterns involving a lesser commitment to industrial growth. In this case, the abandonment of NEP was neither simply rational (according to the first view) nor irrational (according to the second), but was the outcome of a political conflict over the course of Soviet economic development.

The derivation and comparison of employment multipliers and labour productivity indexes using monetary and physical input-output tables

Abstract: There have been numerous attempts to measure total employment coefficients and productivity indexes since the early work ofLeontief(1944). These measurements have been based on the Leontief inverse ( I A ) -~ of recorded input-output tables. Examples of this are Bezdek's 1973 manpower analysis and the employment multiplier study of Diamond (1975). However, not much attention has been paid in these investigations to the derivation of coefficients of the A matrix, although at least two different procedures exist. Perhaps this is because the procedures lead to different input-output tables only when subsidiary production is present in the classification of industries and commodity groups. The objective of this paper is to show that the two input-output accounting schemes, recommended by the United Nations (1968) in the case of insufficient information about subsidiary production, generate two different measures of total factor requirements (Section 2). In the next section attention is focused on the case of pure joint production. Sraffa's interpretation of joint production and employment multipliers is summarized and a new concept of average labour content, or productivity, is compared. It is shown in Section 4 that the UN method for calculating total labour requirements per dollar of output value from input-output tables leads either to Sraffa's or the new interpretation of physical requirements, depending on how the A matrix is derived. Subsequent sections examine additional properties of these employment multiplier and productivity concepts. In sum, this paper demonstrates that it is unnecessary to reduce to simpler form the 'technological data' underlying the input-output accounting framework of the UN. Homogeneity of activity outputs (United Nations, 1973, p. 20) is not required for the proper calculation of total labour requirements measures.

The performance of French planning, 1952-1978

Abstract: The previous sections of this paper have examined the relationship between virtually every published plan forecast, and the outcomes between 1952 and 1978, and offered an assessment of the additional information provided by the aggregate and certain industrial projections. Simple forecast-outcome ratios suggest that the projections became increasingly accurate at all levels of aggregation from the Second to Fourth Plans, after which the degree of predictive error rose. Generally, plans were pessimistic about growth prospects before 1970, but optimistic after that date. The planners were least successful in forecasting imports, Government expenditure, sectoral labour availability and productivity, and industrial rank orders during periods of unbalanced growth.

A ‘rational modelling procedure’ (and the estimating of input-output coefficients)

Abstract: 1.1 According to the rational expectations hypothesis people form expectations as if they know the process which will ultimately generate the actual outcomes. In practice this means that when an economist formulates a stochastic economic model, 'rationality' is imposed by modelling expectations as if the people forming them essentially know this economist's model (including the parameters of the stochastic error generating process), and thus utilize this information in forming their (mathematical) expectations. This process ensures a degree of model consistency and guarantees that expectational errors are unbiased.l In 'justifying' this hypothesis its new classicist proponents typically resort to criticising alternative very simple and rigid expectations models and frequently attempt to associate the latter with Keynesian theory. In this manner Keynesians are often accused of underestimating the capabilities of people to understand and interpret the situations surrounding themselves and about which they form expectations. Such associations and accusations are, of course, illegitimate; whilst Keynesians certainly hold different views to the new classists concerning the structures of underlying, economic processes, they do not reject the assumption of capable and informed expectation formation (see for example Lawson, 1981). It does seem the case, however, that the latter assumption could be more fully exploited by Keynesian (and other) model builders, especially if there exist groups of people whose informed predictions are a relevant source of otherwise scarce information. This in fact, represents the main proposal of this paper: that in a situation where data limitations and other factors inhibit detailed economic analyses, a 'rational' response, for purposes of model construction, is to attempt to identify the subjective model implicitly adopted as a useful approximation to an underlying process, by a relevant informed person. For want of a better term this informed person will be referred to throughout as an expert. To slightly misquote Muth (1961) 'the procedure can be rephrased a little more precisely as follows: that predictions of modellers (or more generally the forecaster's

Choice of strategy in a labour abundant developing economy — An empirical analysis

Abstract: This paper aims at evaluating a set of strategies in the context of a labour-surplus developing economy. Given the primacy of the employment objective, an important consideration is the employment potential of a strategy. The choice of a strategy cannot, of course, be limited to a choice in terms of the employment potential alone. Questions relating to investment requirements of the strategies in question also need to be examined. To the extent that scarcity of foreign exchange acts as a constraint — undeniably an important constraint for most developing countries — the relative effectiveness of a strategy in overcoming this constraint adds another important dimension to the choice at issue. These are some of the questions examined here with Indian data.

Optimal growth models as Economic Planning Tools

Abstract: In the present paper, I have carried out an investigation into the form of models which would be suitable for economy-wide planning. Optimal growth models have usually been constructed in an abstract framework. Therefore, the economies for which optimal growth models would be suitable are not identified. I have shown that, because these models only embody purely physical constraints, they will, in general, only be suitable for totally controlled economies. The conclusion, establishing the general inapplicability of optimal growth models to non-controlled economies, is dependent on the view of economic planning which regards the economic structure, particularly the scope of government policy, as fixed prior to plan construction.

Simulations of a Resource-Value-Transfer model for the UK, 1974

Abstract: We have illustrated in a small model for the UK the resource-value-transfer model of Drews-Charnes-Cooper and have shown that it can be used to evaluate one aspect of public policy. The model has advantages over the usual type of the economy-made models because it includes some of the institutional factors. The model can be easily expanded to include many more sectors and commodities in order to make it practically useful.