Innovations that reduce costs of transport from rural locations may also reduce transport costs to rural areas. As transport costs fall, producers can afford to concentrate and achieve economies of scale. This paper explains an initially negative, but ultimately positive, relationship between reductions in transport costs and rural development. A two-region general equilibrium model with firm a...

Models of macroeconomic learning are populated by agents who possess a great deal of knowledge of the “true” structure of the economy, and yet ignore the impact of their own learning on that structure; they may learn about an equilibrium, but they do not learn within it. An alternative learning model is presented where agents’ decisions are informed by hypotheses they hold regarding the economy...

A conventional wisdom in economics is that a model dealing frictionless markets with a large number of agents always yields a Walrasian outcome. In this paper we assess the above argument in a dynamic framework by modeling centralized auction markets, and show that in such markets the outcomes are not necessarily Walrasian; the set of stationary equilibria in our model is a continuum which incl...

This is an extended write-up of a lecture introducing the concept of Nash equilibrium in the context of an auction-type game that one can observe being played by “ordinary people” in real time. In a simplified model, we give an explicit formula for the Nash equilibrium. The actual game is more complicated and more interesting; players place a bid on one item (among several) during a time window...

What is the best description that we can construct of a thermodynamic system that is not in equilibrium, given only one, or a few, extra parameters over and above those needed for a description of the same system at equilibrium? Here, we argue the most appropriate additional parameter is the nonequilibrium entropy of the system. Moreover, we should not attempt to estimate the probability distri...

Emerging market economies, which have much of their growth ahead of them, either run or should run persistent current account deficits in order to smooth consumption intertemporally. The counterpart of these deficits is their dependence on capital inflows, which can suddenly stop. We make two contributions in this paper: First, we develop a quantitative global-equilibrium model of sudden stops....

I show that an advertising ban is more likely to increase rather than decrease total consumption when advertising does not bring about a large expansion of market demand at given prices and when it increases product differentiation (thus allowing firms to command higher prices). In this case, the main impact of a ban on advertising is to reduce equilibrium prices and thus increase demand. I arg...

Orthographic neighborhood (N) size effects have been extensively studied in English consistently producing a facilitatory effect in word naming tasks. In contrast, several recent studies on Chinese character naming have demonstrated an inhibitory effect of neighborhood size. Response latencies tend to be inhibited by inconsistent characters with large neighborhoods relative to small neighborhoo...