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Showing papers on "Factor price published in 1972"




Journal ArticleDOI
TL;DR: In this article, the authors consider the long-term changes in relative prices of the productive services of the factors of production and find that rent per acre in countries with high per capita incomes declines over time relative to the price of human time.
Abstract: HEN data and theory talk to each other there is hope for economics. We are very much in need of such talk with a view of explaining the long-term changes in relative prices of the productive services of the factors of production. When we leave the equilibrium static state and endeavor to bring theory to bear on the economic processes that change these prices relative one to another, our factor price economics is wanting. Modern economic growth theory puts this issue aside on the convenient assumption that these prices do not change relative to each other. The classical economists, however, had more courage and a broader perspective of economic processes, and their theories continue to influence our thinking about long-term changes in rents relative to wages and relative to the price of the services of reproducible capital. By their theory, rents would necessarily rise relative to wages. But the data have been hard on this theory. We were all taught that the rent paid for the services of land must rise relative to the price of other factor services in accordance with the rise in Ricardian Rent as a consequence of population increases and of economic growth because of the highly inelastic supply of land. But what we observe in countries where per capita incomes are high is that rent per acre declines over time relative to the price of human time. In the United States, for example, the total real compensation per hour at work of all manufacturing production workers increased between 1929 and 1970 more than four times as much as did the rent of farm

47 citations



Journal ArticleDOI
TL;DR: The work of H. J. Habakkuk, Peter Temin, Robert Fogel, and Nathan Rosenberg on the effect of relative factor price differentials between America and England in the nineteenth century on the course of technological development has generated considerable interest in providing some empirical evidence on the labor scarcity hypothesis.
Abstract: The work of H. J. Habakkuk, Peter Temin, Robert Fogel, and Nathan Rosenberg on the effect of relative factor price differentials between America and England in the nineteenth century on the course of technological development has generated considerable interest in providing some empirical evidence on the labor scarcity hypothesis. Briefly stated, the hypothesis claims that relatively higher wages in America brought about the invention and use in production of a relatively capital intensive technology, and since “technical possibilities were richest at the capital intensive end of the spectrum,” this phenomenon was somehow responsible for the unique characteristics of American technology, that is, interchangeable parts, certain machine tool developments, and the proliferation of self-acting mechanisms.

11 citations




Journal ArticleDOI
TL;DR: The model in this article is a vintage capital joint production model of international trade, which assumes that capital poor countries will conserve capital not only by adjusting output ratios, but also by varying the methods of production.
Abstract: THE MODEL set out in this paper is a vintage capital joint production model of international trade. Rather than simplifying the model as good assumptions are supposed to do, they considerably complicate it, so that it is more necessary than usual to justify viewing the trading world from this particular angle. Any model which attempts to describe the world must explain the lack of factor price equalization. The traditional way of doing this is to postulate factor intensity reversals and multiple solutions. However, there are two objections to this. First, if this postulate is made, very little of the positive results of trade theory survive.1 On intellectual grounds alone one would prefer a way of introducing lack of factor price equalization which was not so damaging to the theoretical structure. Secondly, there is some empirical evidence that the existence of multiple solutions is unsufficient in itself to make the standard type of trade theory consistent with the real world.2 The assumption of joint production also leads to a model in which factor prices are not equalized. In addition, all the standard trade theorems remain intact3 and needless to say there is as yet no empirical evidence against it. For these reasons joint production seems a better starting point than multiple solutions. Once factor price equalization is dispensed with, capital poor countries will conserve capital not only by adjusting output ratios, but also by varying the methods of production. They can do this in two ways; they can vary the capital to labour ratios on new machinery and they can vary machine life spans.

2 citations


Proceedings ArticleDOI
13 Dec 1972
TL;DR: In this article, the authors describe a firm in atomistic competition, motivated by the need to specify a dynamic equation of price behavior to be tested on U.S. manufacturing time-series data.
Abstract: The following description and analysis of a firm in atomistic competition is motivated by the need to specify a dynamic equation of price behavior to be tested on U.S. manufacturing time-series data. It will be shown that uncertainty of price information in a market composed of many competing firms leads to a model which is more or less in the Evans tradition of dynamic monopoly theory.3 The key dynamic element is the firm's reaction to customer behavior in an uncertain price situation. Price uncertainty forces newcomers to the market to search for an acceptable price which is less than the marginal utility of the good. Old customers may decide to search after a price increase, if the expected difference in search costs and price is less than the recently experienced price change. The implications of the theory are examined using a phase diagram analysis. Of particular interest for empirical study are the effects of changes in model parameters on the time path of the optimal price control equation. In line with the conclusions of the theoretical model the estimation results seem to suggest that price adjusts to a moving equilibrium path in a variable manner determined by cyclical factors in the economy.

1 citations