Research for Economic Theory

This paper explores the normative implications for government action on the presumption that factors are 'entitled' to their marginal product. The conclusions are that imperfections in knowledge, mobility, and competition should be removed by court action as a matter of distributive justice, and that collective goods, including income redistribution, should be paid for by those who demand the goods. Compensation is appropriate when government changes the rules it has itself imposed or when it recognizes new property rights where they did not formerly exist.

This paper presents an approach for analysis and estimation of dynamic market structures with rational expectations. Certainty equivalence is maintained and aggregate behavior represented by linear equations with some expected prices as arguments. Conditions imposed by the market structure are solved for an equilibrium, fixed point, price sequence. In this framework prices, current and expected, are linear functions of exogenous values and elements of a state vector. The structure poses an interesting estimation problem and suggests effective estimation procedures. Results for an application to the broiler chicken market using three years of weekly data are discussed.