This paper reviews and puts into perspective recent work reassessing the first and second Fundamental Theorems of Welfare Economics. It assesses the implications of the Greenwald-Stiglitz theorem establishing the (constrained) Pareto inefficiency of market economies with imperfect information...

This paper presents a simple, general equilibrium macroeconomic model incorporating financial constraints, both credit and equity rationing, as well as other informational imperfections in labor and product markets, such as efficiency wage effects. A formulation somewhat analogous to the...

This paper provides a critique of the DSGE models that have come to dominate macroeconomics during the past quarter-century. It argues that at the heart of the failure were the wrong microfoundations, which failed to incorporate key aspects of economic behavior, e.g. incorporating insights from...

This paper analyzes equilibrium, dynamics, and optimal decisions on the factor bias of innovation in a model of induced innovation. In a model with full employment, we show that (a) if the elasticity of substitution is always less than or greater than unity, there is a unique steady state...

It concludes by constructing a simple model in which knowledge flows slowly across national borders but moves easily within borders. We show there is a leadership-followership equilibrium, in which some countries are leaders, others are followers. Contrary to Solow's analysis, there need not be...

The pace of innovation is related both to the level of investment in innovation and the pool of knowledge from which innovators can draw. Both of these are endogenous: Investments in innovations are affected by the pool of knowledge and the ability of firms to appropriate the returns to their...