The paper presents a model of a monetary economy where there are differences in liquidity across assets. Money circulates because it is more liquid than other assets, not because it has any special function. There is a spectrum of returns on assets, reflecting their differences in liquidity. The...

In the last few years, a new area has emerged in economic theory, which goes under the heading "incomplete contracting." However, almost since its inception, the theory has been under attack for its lack of rigorous foundations. In this paper, we evaluate some of the criticisms that have been...

We develop a model of hierarchies based on the allocation of authority. A firm's owners have ultimate authority over a firm's decisions, but they have limited time or capacity to exercise this authority. Hence owners must delegate authority to subordinates. However, these subordinates also have...