Economic Theory and the Ancient Mediterranean

604 Pages·2014·6.972 MB·English

by  Donald W. Jones

Trimsize:170mmx244mm Jones ffirs.tex V3-05/15/2014 3:03P.M. Pageii
Trimsize:170mmx244mm Jones ffirs.tex V3-05/15/2014 3:03P.M. Pagei
Economic Theory and the Ancient
Mediterranean
Trimsize:170mmx244mm Jones ffirs.tex V3-05/15/2014 3:03P.M. Pageii
Trimsize:170mmx244mm Jones ffirs.tex V3-05/15/2014 3:03P.M. Pageiii
Economic Theory and the Ancient
Mediterranean
Donald W. Jones
Trimsize:170mmx244mm Jones ffirs.tex V3-05/15/2014 3:03P.M. Pageiv
Thiseditionfirstpublished2014
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LibraryofCongressCataloging-in-PublicationData
Jones,DonaldW.
EconomictheoryandtheancientMediterranean/DonaldW.Jones.
pagescm
Includesindex.
ISBN978-1-118-62787-7(cloth)
1. MediterraneanRegion–Economicconditions.2. Econometrics.3. MediterraneanRegion–History–To476.
I.Title.
HC31.J642014
330.937–dc23
2014001157
AcataloguerecordforthisbookisavailablefromtheBritishLibrary.
Coverimage:TradingsceneonbowlfromNaucratis,6thcenturyBC.©Interfoto/SuperStock
Setin9.5/11.5ptMinionbyLaserwordsPrivateLimited,Chennai,India
1 2014
Contents
Preface xiii
Acknowledgments xvii
Introduction 1
Rationale 1
Organization 2
Method 3
ReaderOutcomes 3
Themes 4
RelevanceandApplicability 5
References 6
Notes 6
1 Production 8
1.1 TheProductionFunction 9
1.2 The“Law”ofVariableProportions 11
1.3 Substitution 13
1.4 MeasuringSubstitution 15
1.5 Specific“FunctionalForms”forProductionFunctions 16
1.6 AttributingProductstoInputs:DistributingIncomefromProduction 17
1.7 EfficiencyandtheChoiceofHowtoProduce 18
1.8 PredictionsofProductionTheory1:InputPriceChanges 20
1.9 PredictionsofProductionTheory2:TechnologicalChanges 21
1.10 StocksandFlows 22
1.11 TheDistributionofIncome 23
1.12 ProductionFunctionsinAchaemenidBabylonia 25
References 26
SuggestedReadings 27
Notes 27
2 CostandSupply 29
2.1 TheCostFunction 31
2.2 ShortRunandLongRun 32
2.3 TheRelationshipbetweenCostandProduction 33
2.4 Producers’Objectives 34
2.5 SupplyCurves 35
vi Contents
2.6 DemandsforFactorsofProduction 40
2.7 FactorCostsinGeneral:WagesandRents 41
2.8 AllocationofFactorsacrossActivities 43
2.9 OrganizingProduction:TheFirm 43
2.10 AMoreGeneralTreatmentofCostFunctions 46
2.11 TheEconomicsofMycenaeanVases,I:SupplyandCost 47
2.12 AccountingforApparentCostChangesinMinoanPottery 49
2.13 ProductioninanEntireEconomy:TheProductionPossibilitiesFrontier 50
References 52
SuggestedReadings 53
Notes 53
3 Consumption 55
3.1 RationalityoftheConsumer 57
3.2 TheBudget 57
3.3 UtilityandIndifferenceCurves 58
3.4 Demand 60
3.5 DemandElasticities 63
3.6 AggregateDemand 65
3.7 EvaluatingChangesinWellbeing 66
3.8 PriceandConsumptionIndexes 70
3.9 IntertemporalChoice 73
3.10 DurableGoodsandDiscreteChoice 75
3.11 VarietyandDifferentiatedGoods 79
3.12 ValueofTimeandHouseholdProduction 82
3.13 Risk,RiskAversion,andExpectedUtility 86
3.14 IrrationalBehavior 88
3.15 FixedPrices 90
3.16 ApplyingDemandConcepts:RelationshipsbetweenHousingConsumption,Housing
Prices,andIncomesinPompeii 93
3.17 TheEconomicsofMycenaeanVases,II:Demand 96
References 99
SuggestedReadings 99
Notes 100
4 IndustryStructureandtheTypesofCompetition 103
4.1 PerfectCompetition 104
4.2 CompetitiveEquilibrium 106
4.3 Monopoly 108
4.4 Oligopoly 110
4.5 MonopolisticCompetition 111
4.6 ContestableMarkets 112
4.7 Buyer’sPower:Monopsony 113
4.8 TheEconomicsofMycenaeanVases,III:IndustryStructure 114
4.9 AncientMonopolyandOligopoly:ReligionandForeignTrade 115
References 117
SuggestedReadings 118
Notes 118
5 GeneralEquilibrium 120
5.1 GeneralEquilibriumasaFactandasaModel 120
5.1.1 Thefacts 121
5.1.2 Themodels 121
5.1.3 Thequestions 123
Contents vii
5.2 TheWalrasianModel 124
5.3 Exchange 127
5.4 TheTwo-SectorModel 128
5.4.1 ThebasicswiththeLerner–Pearcediagram 128
5.4.2 Growthinfactorsupplies 130
5.4.3 Technicalchange 132
5.5 ExistenceandUniquenessofEquilibrium 133
5.6 ComputableGeneralEquilibriumModels 134
References 136
SuggestedReadings 137
Notes 137
6 PublicEconomics 139
6.1 GovernmentintheEconomy:ScopeofActivities,ModernandAncient 139
6.2 PrivateGoods,PublicGoods,andExternalities 141
6.2.1 Privategoods 141
6.2.2 Publicgoods 142
6.2.3 Externalities 143
6.3 RaisingRevenue 149
6.3.1 Taxation1:rationalesandinstruments 149
6.3.2 Taxation2:effectsoftaxes 154
6.3.3 Taxation3:taxincidence(whoreallypays?) 165
6.3.4 Taxation4:optimaltaxsystems 169
6.3.5 Otherrevenuesources 173
6.4 TheTheoryofSecondBest 174
6.5 GovernmentProductiveActivities 175
6.5.1 Publicproductionandpricing 175
6.5.2 Thesupplyofpublicgoodsandsocialchoicemechanisms 181
6.5.3 Publicinvestmentandcost–benefitanalysis 186
6.6 RegulationofPrivateEconomicActivities 191
6.6.1 Rentseeking 192
6.6.2 Thecostsofregulation:theAverch–Johnsoneffect 193
6.7 TheBehaviorofGovernmentandGovernmentAgencies 194
6.7.1 Theoriesofgovernment 194
6.7.2 Theoriesofbureaucracy 195
6.7.3 Levelsofgovernment 196
6.8 SuggestionsforUsingtheMaterialofthisChapter 196
References 197
SuggestedReadings 199
Notes 199
7 TheEconomicsofInformationandRisk 202
7.1 Risk 202
7.1.1 Theubiquityofriskydecisions 203
7.1.2 Conceptsandmeasurement 205
7.1.3 Riskandbehavior:expectedutility 209
7.1.4 Riskversusuncertainty:thesubstanceofprobabilities 215
7.2 InformationandLearning 217
7.2.1 Thestructureofinformation 217
7.2.2 LearningasBayesianupdating 218
7.2.3 Expertsandgroups 223
7.3 DealingwithNature’sUncertainty 225
7.3.1 Contingentmarkets 225
7.3.2 Portfoliosanddiversification 230
viii Contents
7.4 BehavioralUncertainty 235
7.4.1 Asymmetricinformation:problemsandsolutions 236
7.4.2 Strategicbehavior 242
7.5 Expectations 246
7.5.1 Theroleofexpectationsinresource-allocationdecisions 247
7.5.2 Adaptivemodelsofexpectations 247
7.5.3 Therationalexpectationshypothesis 249
7.6 CompetitiveBehaviorunderUncertainty 252
7.6.1 Productionbehavior 252
7.6.2 Searchproblems 253
7.7 SuggestionsforUsingtheMaterialofthisChapter 253
References 254
SuggestedReadings 255
Notes 255
8 Capital 258
8.1 TheSubstanceandConceptsofCapital 258
8.1.1 Capitalasstuff 259
8.1.2 Capitalintheproductionfunction 262
8.1.3 Stocks,flows,andaccumulation 263
8.1.4 Pricesandvalues 264
8.1.5 Temporalaspectsofcapital 265
8.1.6 Measuringcapital 268
8.1.7 Thelabortheoryofvalue 269
8.2 Quasi-Rents 270
8.3 InterestRates 272
8.4 TheTheoryofCapital 276
8.4.1 Presentandfutureconsumption,investment,andcapitalaccumulation 276
8.4.2 Demandforandsupplyofcapital:flowsandstocks 279
8.4.3 Capitalrichnessandinterestrates 283
8.5 UseofCapitalbyFirms 284
8.5.1 Investment 284
8.5.2 Maintenance 287
8.5.3 Scrappingandreplacement 289
8.6 ConsumptionandSaving 290
8.6.1 Intertemporalutilitymaximization 290
8.6.2 Hypothesesaboutconsumption 291
8.6.3 Individualandaggregatesavings 294
8.7 CapitalFormation 294
8.8 SuggestionsforUsingtheMaterialofthisChapter 296
References 297
SuggestedReadings 298
Notes 298
9 MoneyandBanking 301
9.1 TheServicesofMoney 302
9.1.1 Moneyasamediumofexchange 302
9.1.2 Moneyasastoreofvalue 302
9.1.3 Moneyasaunitofaccount 303
9.1.4 Stabilityofvalue 303
9.1.5 Monetizationpriortocurrency 303
9.2 TheTypesofMoney 304
9.2.1 Commoditymoney 304
9.2.2 Creditmoney 304
9.2.3 Onespecialcaseofcreditmoney:bankmoney 305