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An open expanding economy model

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  • Oskar Morgenstern
  • Gerald L. Thompson

Abstract

The authors extend the generalized von Neumann model they developed (with J. G. Kemeny) in 1956 to an open model by assuming that there are exogeneously determined export and import prices and that any amount can be exported or imported at these prices. The open model is then characterized by means of seven axioms. It is shown, by applying the theory of linear programming, that if four economically reasonable assumptions hold, the open model has at least one solution in which at least one good with positive export price is exported and at least one good with positive import price is imported. It is also shown that, in general, a continuum of expansion rates can be achieved by varying certain control variables. The choice of these expansion rates gives indirectly the choice of a suitable sub‐economy and also determines the exports and imports of the economy. Other results and examples are discussed.

Suggested Citation

  • Oskar Morgenstern & Gerald L. Thompson, 1969. "An open expanding economy model," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 16(4), pages 443-457, December.
    • Handle: RePEc:wly:navlog:v:16:y:1969:i:4:p:443-457
    DOI: 10.1002/nav.3800160401
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