Showing papers on "Consumption (economics) published in 1971"

Economics and the Environment: A Materials Balance Approach

Abstract: This monograph length report, first published in 1970, originated from a program of research at Resources for the Future that dealt with the management of residuals and of environmental quality. It presents some of the broad concepts that the program was based on and represents the effort to break out of the traditional approach in pollution and policy research, which had treated air, water, and solid waste problems as separate categories. This book will be of interest to students of economics and environmental studies.

Consumer Demand for Food Commodities in the United States with Projections for 1980

Abstract: This study analyzes the demand for food commodities in the United States in the postwar period using both time-series and cross-section data. Income-consumption relationships are based on data from 1955 and 1965 USDA household food consumption surveys. The analysis co cross section data emphasized: (1) effects of grouping observations, (2) choice between expenditures are quantities as the dependent variable, (3) effects of household size on income-consumption relationships, (4) shifts in the regression coefficients (intercepts and income elasticities) between 1955 and 1965, and (5) regional variations in the income-consumption relationships. A demand interrelationship matrix was developed for 49 commodities or commodity groups at the retail level. Commodities were classified into 15 separable groups and all direct and cross elasticities for commodities within a group were estimated directly. The cross elasticities corresponding to commodities outside a given group were estimated through assumptions of cardinal separability. The synthesis of demand interrelationships was achieved by the use of restrictions on demand equations for an individual consumer as suggested by Frisch (1959) and quantified by Brandow (1961). Consideration also was given to the measurement of time trends on consumption. Marketing margins were analyzed and demand interrelationships were developed at the farm level. Projections of 1980 consumption per capita were developed for individual commodities and group aggregates. These projections are based on a specification of constant real prices, exogenous projections of real income per capita, and continuation of past time trends for certain commodities.

Uncertainty and optimal consumption decisions

Abstract: linear production function, that for some utility functions the optimal initial consumption in the random case decreases for all values of initial wealth as compared with the initial consumption in the deterministic case. For other utility functions the optimal consumption always increases. Hence it seems, from these examples, that two divergent forces are at work. The first is the desire to consume more initially as a hedge against the uncertain future. The second force is the desire to consume less initially so as to increase the future consumption prospects. (It is assumed, of course, that increased inputs increase outputs for all possible random events, or states of the world). The relative strength of each of these forces, as implied by the utility function, is the key to the relationship between random consumption and deterministic consumption in this model. The major conclusion of this paper is that the qualitative difference between optimal consumption decisions in the two different models is very strongly influenced by the shape of the utility function. In particular the third derivative of the utility function plays a rather large role. It is this derivative that determines the attitude toward the skewness of a distribution in the theory of portfolio choices, as may be seen from the analysis of Pratt [7] and Tobin [10]. Even in these models, however, the third derivative cannot be ignored, since ignoring skewness distorts the results. Moreover, there does not seem to be any intuitive economic reason to make any assumptions concerning the third derivative of the utility function. The extent to which the utility function influences savings and consumption decisions is exhibited in a precise manner. It may be shown that the qualitative relationship between random and deterministic consumption depends in general on the initial wealth. It is not true, as one would infer from the papers cited above, that random consumption is always either greater than or less than deterministic consumption independently of the initial wealth. In other words, for many utility functions the initial wealth turns out to be a decisive factor in the qualitative relationship between the random and deterministic case. Naturally this relationship will also normally depend on -the probabilistic structure of the model. The key result of this paper is a theorem which gives a necessary and sufficient condition for determining the qualitative relationship between random consumption and deterministic consumption. This condition, which is both necessary and sufficient, is in a particularly simple form in that it depends only on the known parameters of the model (i.e., the production function, the utility function, and the distribution of the random variable) and also on the optimal deterministic policy which, in general, is much simpler to exhibit than its counterpart in the random case.

Tissue temperatures and whole-animal oxygen consumption after exercise

Abstract: BROOKS,GEORGE A., KARL J. HITTELMAN,JOHN A. FAULKNER, AND ROBERT E. BEYER. Tissue temperatures and whole-animal oxygen consumption after exercise. Am. J. Physiol. 22 l(2) : 427-43 1. 197 l.-Forced treadmill running caused rat muscle and rectal temperatures to increase 8.1 and 5.1 C, respectively. After exercise, muscle temperature fell exponentially but did not reach control values in an hour. Rectal temperature fell rapidly for the first 20 min after exercise, after which only a slow rate of return to resting levels was apparent. An exercise-induced adjustment in the hypothalamic set point was suggested. 02 consumption was high immediately after exercise, declined rapidly for the first 20 min of recovery, and then plateaued at a level significantly above resting. The hypothesis that a sizable portion of postexercise 02 consumption is due to increased tissue temperatures is substantiated. The fact that severe exercise results in a large, prolonged elevation in tissue temperature necessitates, as a consequence of the Qlo effect, that 02 consumption be significantly elevated. Since a part of the postexercise 02 consumption is not associated with recovery from anaerobic metabolism, the classical definition of 02 debt requires revision.

Spatial equilibrium residential land values in a multicenter setting

Abstract: In his well known Location and Land Use, Alonso [l] extended the economic theory of consumer behavior to a spatial setting. According to this theory a rational household chooses a bundle of goods that maximizes the satisfaction of its preferences and that does not exceed its income. Alonso places these rational households within an ideal city in which all jobs are concentrated into a central location, and assumes that households (a) maximize their utility by choosing an optimal mix of quantity of residential land, of distance from the city’s center, as well 88 of consumption goods, (b) subject to the constraint that the sum of the expenditures for consumption goods, residential land, and commuting does not exceed their income. Alonso’s formulation however is not mathematically operational in the sense that it does not allow the derivation of continuous land value equilibrium functions generated by the households’ competitive bidding for the available residential land (Alonso [l, p. 1501). One operationalization of his model based on a spatial equilibrium technique is due to Casetti [2]. To this effect: (a) households were assumed to be identical in composition, income, and preferences; (b) a state of spatial equilibrium was postulated in which no household has any incentive to relocate or to alter its consumption mix; and (c) a sufficient condition for the existence of such spatial equilibrium was introduced by requiring that the optimal utility level attainable by the household be spatially invariant. In the present paper, Casetti’s work is extended to a central place setting with goods, services, and centers of Merent order. This generalization is based upon a method developed by Papageorgiou [3].

Consumption and the Problem of Time

Abstract: The author discusses the ways in which time enters into consumers’ product choices, how the consumer perceives the time involved in these choices, and the significance of adding consideration of time for marketing. Time is a neglected dimension in the study of consumer behavior in this article. The implications of time for marketing strategy are described, and new ways to look at both products and markets are suggested.

Essay On Economic Growth and Environmental Quality

Abstract: The major premise of this essay is that production-consumption and waste emis-sions tend to be joint products of the human species. Given this premise, a parable of an astronaut irretrievably lost in space is discussed in order to deduce several propositions on the astronaut’s optimal rate of consumption. A Harrod type of model is also analyzed with regard to the rate of consumption over time where the model includes a simplified depiction of the interaction between the economy and natural environment. Empirical estimates of the impact of effluent charges on comparative international advantage of selected countries are also presented. The major conclusion is that national and international economic policies and national environmental policies are not separable.

Shiftable versus non-shiftable capital: a synthesis

Abstract: TO AN ECONOMIST the study of economic development is in large part an investigation into the mechanics of capital formation At least in theory, the output options open to a developing economy are more restricted in the case where possibilities for obtaining foreign exchange via trade or aid are relatively limited Society's menu of choices is even easier to enumerate if it is further assumed that labor is surplus in the sense that labor supply is a non-binding constraint on economic development now and for some time to come These conditions are roughly descriptive of the historical situation confronting some large underdeveloped nations wishing to industrialize rapidly; the USSR in the thirties is a classic example In such situations the key to economic growth is the capacity of the domestic capital goods sector Increasing that capacity by ploughing back a high proportion of investment goods for purposes of self-reproduction will permit high consumption levels eventually, but not just in the near future The reverse is true if, by bolting down a substantial percentage of investment goods there, the consumer goods sector is presently expanded These thoughts underlie a very interesting model of economic development first propounded by the Soviet engineering economist G A Fel'dman in 1928 [7] 2 We are indebted to Professor Domar [6] for pointing out the significance of this model and for relating it to current growth theory as well as to the Soviet industrialization debate of the twenties The same model has been independently formulated by the Indian statistician P C Mahalanobis [9] who places somewhat greater emphasis on making it operational enough to serve as a rough guide of sorts for Indian long term planning3 In its simplest form this model splits an economy into two departments, investment and consumption Investment goods are general ex ante and can be used to increase the capacity of either sector But ex post, capital is specific to the

Optimal Commodity and Trade Taxes

Abstract: In a recent article in this Journal, Friedlander and Vandendorpe (1968), hereafter referred to as F-V, derived the welfare-maximizing tax rates on consumption or production for a country that possesses some monopoly power in international trade but is free neither to use a tariff nor to exploit that power by an equivalent equal rate tax on the production of exportables and subsidy on the consumption of importables. The present paper considers the general case of their analysis, in which a country has some monopoly or monopsony power in international trade and is employing three fiscal instruments-an export or import tax or subsidy, a production tax or subsidy, and a consumption tax or subsidy-any two of which are arbitrarily fixed, so that the problem is to choose the level of the third so as to reach a second-best welfare optimum. Since a tax or subsidy on either exports or imports is a tax on trade, and a subsidy or tax on the production or consumption of one commodity is a tax or subsidy on the production or consumption of the other, the problem can be formulated with full generality in terms of a tariff, a production tax, and a consumption subsidy; and, given the starting point of an optimum-tariff possibility, it is most convenient to assume that all three fiscal impositions apply to the economy's exportable good (since, at zero levels of the other two, a positive level of the third will be required to exploit the optimum-tariff possibility). The paper develops formulas for the second-best optimal tariff, tax, and subsidy rates. These rates are shown to equal the "effective rate of distortion," a new concept which provides a unifying interpretation of the optimality conditions derived in the analysis.

Capitalist Development in Agriculture-Further Comment

Abstract: spend on these products and (b) that the average propensity to spend on these products is rising with the total expenditure on all products. In the case of the agricultural products, nil the contrary, the marginal propensity to spend is lower than the average propensity to spend, and hence the average propensity to spend on the agricultural products must decline as total expenditure rises. This becomes clear when we study the percentage of consumption expenditure on agricultural consumption goods in the different expenditure classes of the rural and the urban sectors of the economy during 1960-61 ( ie, the sixteenth lound of the NSS).

Income and Family Events: Family Income, Family Size, and Consumption.

Abstract: U.S. census data were analyzed in order to relate family income family size and per family member consumption. Among wives under 25 years a higher proportion of white than nonwhite wives had some 1959 income in families in which the husbands income was less than $5999. Among wives 25-44 a higher proportion of nonwhite than white wives had some 1959 income at each level of the husbands income (up to $14999). The percentage of wives contributing income declines as the husbands income passes the $5000 level among whites and the $7000 level among nonwhites. Among both younger and older wives a smaller proportion of nonwhite than white wives had an income which was competitive with their husbands income tending to disprove the theory that increased marital instability among nonwhites is due to the economic power of the nonwhite wife. The difference in percentage of nonwhite families with other adults in the household and white families with other adults increases in the higher income intervals. While 55% of the older nonwhite families in the $10000-$14999 interval had other adults present these other adults contributed only 22% of the aggregate family income indicating a negative effect of other adults. The larger family size of nonwhite families with income over $5000 is a result of a larger number of other adults rather than more children. Three definitions of poverty were developed in order to set per person consumption standards with which to evaluate effects of family income. Declining food expenditure per person with increasing family size was found in every income interval (up to $14999). In 1960-1961 a 4 person urban family needed about $5000 disposable income before it achieved an adequate per person food consumption of $329 per year. A casual model was developed which showed that only a limited number of factors--husband-wife income number of children number of other adults--need be changed to alter per person consumption. The higher income nonwhite family is less likely to be in fully adequate housing than white families in the lowest income intervals.

Nutrition and development in infants of poor rural areas. Pt. 1. Consumption of mother's milk by infants.

Abstract: This study was designed to examine the pattern of mothers milk consumption of infants from poor Mexican rural areas. A standardized sample of 17 mother-infant units was longitudinally studied in ad-libitum conditions estimating milk volume by difference in body weights before and after feeding from the breast. Average total milk consumption during the 1st year of life was 183 +or- 23 liters. Daily milk consumption started low (423 +or- 85 ml) increased to a peak at 450 +or- 80 ml and finally dropped to about 350 +or- 44 ml at 18 months. About 1/2 the cases reached the peak at 8 weeks and the rest at 24 weeks; this difference in presentation of the peak was connected to the mothers parity and nutritional status. Consumption seems to depend on mothers production since the baby keeps a high demand as evidenced by high feeding frequencies and too long sucking times. The gap resulting from decreasing milk production at a time when nutritional needs increase progressively affects the babys development and nutritional status. (authors)

Differences in Consumption Patterns of Farm and Nonfarm Households in the United States

Abstract: This article examines the hypothesis of differential consumption patterns in farm and nonfarm households, using the 1960–1961 BLS and USDA survey of consumer expenditure data Comparisons were based on Engel curves for major consumer categories of consumption Parameters of Engel curves were derived by OLS and TSLS The results of the comparisons clearly indicate that consumption patterns differ significantly in the two households for the United States as a whole, although the differences are not as marked on a regional basis The level and stability of income are not important factors contributing to the differences

An Alternative Econometric Approach to the Permanent Income Hypothesis: An International Comparison

Abstract: PpTHE theory of aggregative consumption function has undergone several developments since Kuznets' [27] saving-income estimates for the United States showed disagreement with Keynes' [ 2 1 ] "fundamental psychological rule." Noteworthy among these developments are the Relative Income Hypothesis [10] the Life-Cycle Hypothesis [33] and the Permanent Income Hypothesis [ 13 ]. Although these different hypotheses are rather complementary yet the Permanent Income Hypothesis (PIH) has been more widely studied than the others. According to the PIH, measured income and consumption are composed of two components permanent and transitory. Under the assumption of zero correlation between transitory and permanent and also between the two transitory components, it postulates that permanent consumption constitutes a constant proportion of permanent income. The basic concepts of permanent income and consumption, although theoretically attractive, involved considerable difficulties in regard to their measurability. This stimulated a number of debates and empirical researches. Some corroborated the PIH, while others showed a strong disagreement over some of its major assumptions. A close investigation of these debates and researches suggests that Friedman's own proposal to use Cagan's [7] distributed lag scheme, as one of the alternatives for constructing an estimate of permanent income in time series studies, has perhaps invited more troubles than it actually solved. Clearly, it does not allow for a separation of the permanent and transitory components from the observed data.' It is not surprising then that Laumas [28] and Choudhury [8] can obtain significant marginal propensities to consume transitory income for Canada and India respectively, and that Walters [41] can show a relationship between transitory and permanent income. A cursory look at such studies may sometimes shatter the faith in the strict version of the PIH but if one studies them more carefully one feels inclined to speak with Ovid "it often happens that the material is better than the workmanship." The purpose of the present paper is two-fold: first, to improve upon the workmanship and second, to investigate whether the PIH is applicable to economies with different structures. The improvement in the 'workmanship' lies in the application of Nonlinear Iterative Least Squares (NILES) procedure 2 to estimate the coefficient of proportionality when both permanent income and consumption are unknown. The advantages of this method over the commonly used Ordinary Least Squares procedure are that it overcomes the problem of identification in the consumption function arising from the nonlinearity of parameters and that it yields individual estimates of the parameters with least squares properties. In addition to this, it is computationally more convenient than other nonlinear procedures. This method has been applied on the one hand to the existing approach in which the estimate of permanent income has been defined in terms of Cagan's distributed lag scheme, and on the other hand to an alternative approach in which it considers the PIH on the lines of the classical two-variables linear model where both variables are subject to errors of observation. In neither case do we violate any of Friedman's assumptions. The advantage of the second approach lies in the fact that the estimation of permanent income does not require any extraneous informa* The authors would like to express their gratitude to Professors A. R. Dobell, S. J. Turnovsky and T. A. Wilson for constructive criticism and encouragement, and to the referee for helpful comments on an earlier draft of this paper. Needless to say, the responsibility for any errors lies with the authors alone. 'Singh [38], pp. 3-6. 2For the NILES procedure see Wold [43], pp. 433-434 and 438-440.

A Nonlinear Consumption Function Estimated from Time-Series and Cross-Section Data

Abstract: T DEALLY, to determine the extent to which persons of a particular income group spend an increment to income, time series data on consumption and disposable income for individual households (panel data) are needed. Unfortunately, such data are not available. Available are time series aggregate data, which do not allow one to determine differential marginal propensities to consume for different income groups, and cross section data which do not allow one to trace over time the effects of changes in income on consumption. However, by utilizing both time series and cross section data, the hypothesis that the marginal propensity to consume decreases as income increases can be tested.

Issues in the economics of a population policy for the United States.

Abstract: This economic analysis of population policy assumes that human choices involved in the determination of population size are rational and are affected by economic and political circumstances In advanced c ountries population growth depends primarily on fertility morbidity and migration are relatively small factors The population bomb decried by many authors lies not in the fact that Americans want too many children but in the fact that contraception is not freely available to all to avoid unwanted children Also the decried density of anticipated population is actually due to poor population distribution in this country However a slower growth rate would be desirable Those who feel that population growth in developed countries is more dangerous than population growth in underdeveloped countries because of higher consumption per person do not take into account the fact that persons in developed countries produce more per person and add more value to what is produced An economic model of fertility decision-making by households is basically a model of demand for consumer durables Children yield psychic income over a span of many years The households demand for children is a function of income taste price of children prices of complementary and substitutable goods and the prevailing institutional or cultural environment The direct cost of raising a child to the age of 18 in a family earning $9000 annually is about 13300 The indirect costs including the labor of the wife and the income she loses by being forced to quit her job amount to an additional $17600 Total cost is roughly $31000 Ways to decrease the demand for children include: raising wage rates for women to make the cost of children greater; not subsidizing day care for children thus raising the cost; lower tax deductions for children; changing welfare payments so that the amount increases as the child gets older and costs more and giving proportionately less for each additional child in the family; subsidizing birth control and other antinatalist measures External issues such as a desire for larger populations to gain advantage in war or desire of ethnic groups for larger populations to gain more power operate against rational economic decisions In a discussion by others which follows the rationality of a couples decision-making on children is questioned It is also questioned whether people make rational choices concerning the welfare of their children or grandchildren; it is felt that people do not make fertility decisions with the conscious wish of doing what is best for society

The Normal Income Hypothesis in Chile

Abstract: This study attempts to discriminate between two of the main alternative explanations of consumption behavior, the normal income hypothesis and the current income hypothesis, with data from a survey of Chilean households. The results support the normal income hypothesis but reject the secondary hypothesis that the normal income elasticity of consumption is unity. A review of other results using comparable testing procedures and data is provided.

Investment Decision with a General Equilibrium Mean-Variance Approach

Abstract: I. Introduction, 667. — II. Assumptions and a review of the market equilibrium model, 668. — III. Consumption and investment decisions jointly considered, 672. — IV. General equilibrium in a pure exchange economy, 676. — V. Productive activities by firms, 679. — VI. Conclusions, 682.

Investigations on the consumption of sugar by South African populations.

Abstract: By means of questionnaires, appropriate for both individuals and households, surveys of sugar intake have been carried out in the Transvaal on groups of South African Whites, Indians, Malays, Coloureds, and Bantu.

The relative income hypothesis‐a cross country analysis

Abstract: This paper presents an attempt to examine the applicability of the relative income hypothesis (RIH) in terms of its various specifications proposed by Duesenberry, Duesenberry, Eckstein and Fromm (DEF), Davis and the authors (MD). Using the time series data for 1951 through 1968 the analysis has been carried out for Canada, Finland, Guatemala, Honduras, India, Japan, Philippines, Sweden, United Kingdom and the United States. It is found that RIH provides a fairly good representation of the consumption behaviour of all the countries included in the study. All specifications, however, do not perform equally well. DEF and Davis functions score the maximum points; MD comes at par with DEF in case of Finland, Guatemala, and India. The original Duesenberry specification performs very poorly. This leads us to conclude that the process of habit formation is continuous contrary to what is implied by Duesenberry's original specification and that consumption is a better indicator of the standard of living than income is. Estimates of the long-run marginal propensities to consume are essentially the same as those computed from the permanent income hypothesis by Singh and Drost [1970]. This lends support to the view that the two hypotheses have essentially the same long-run implications.

Joint Products, Collective Goods, and External Effects: Comment

Abstract: Mishan's recent article on the distinctions among private goods, collective goods, jointly produced goods, and externalities (Mishan 1969) has prompted some additional observations. It appears that certain phenomena, traditionally called by different names, have an underlying similarity as manifestations of nonseparabilities across commodities or individuals, in production or consumption activities. It appears further that the "collective good" concept has meant different things to different people, each definition yielding its own particular set of effects. This comment attempts to clear up some of the semantic and analytic confusion and sets forth implications which are partly complementary and partly competitive with Mishan's. Let us start by listing the major properties which have, at various times, been associated with collective goods: 1. Nonseparability among consumers. A collective good is one "which all enjoy in common in the sense that each individual's consumption of such a good leads to no subtraction from any other individual's consumption of that good" (Samuelson 1954, p. 387). Alternatively, each individual "partakes jointly of the benefits of any unit of the collective service" (Mishan 1969, p. 335). 2. Nonoptionality. Individuals are not free to vary their consumption of the commodity once it has been produced. 3. Nonexcludability. Producers are not free to exclude people from consuming the commodity once it has been produced. 4. Fixed coefficients among consumers. All people must consume fixed amounts of the product once it has been produced, regardless of the desires of producer or consumer. Sometimes it is additionally assumed that the fixed amounts must be equal for all people (for example, Mishan 1969, p. 337). More generally, however, consumption may be fixed at different levels for different people (for example, people on the outskirts of an area benefit less from induced rainfall than do people at the center). The condition of completely fixed consumption coefficients is equivalent

Consumption Behavior Across Ethnic Categories

Abstract: This study compares the consumption behavior for consumer products displayed by 150 Japanese-American, white, and black housewives. The results revealed relatively few differences in attitudes toward name brands but showed significant differences in the number of new products owned by black, Japanese-American, and white consumers.

A Welfare Analysis of the Voluntary Corn Diversion Program, 1961 to 1966

Abstract: The welfare effects of the com diversion program are analyzed. A three-sector (corn, other crops, and the rest of the economy) supply-demand model is developed which incorporates substitution in production and consumption between com and other crops. Using observed data as the restricted market equilibrium and parameters derived from previous research, free market equilibrium is estimated. The net welfare costs and income transfers are computed from the two equilibrium points. In general, the net welfare costs are small and the income transfers are substantial. However, the model is quite sensitive to the parameter values.