This chapter presents an exposition of the Generalized Fechner-Thurstone (GFT) direct utility function, the system of demand functions derived from it, other systems of demand functions from which it can be derived, and its purpose and the econometric circumstances that motivated its original development. Its use in econometrics is demonstrated by an application to household consumer survey data which explores the relationship between prices, on the one hand, and expected exogenous preference changers such as household size, schooling of heads of household, and other social factors, on the other.

As creations of the mind, intellectual property includes industrial property and copyrights. This paper presents an aggregate production function of the generalized Fechner–Thurstone (GFT) form to analyze the impact of an important component of intellectual industrial property, namely patent activity, on technical change in the USA for the period 1947–1981. Patents should alter isoquant maps, and measuring their elasticities is both intuitively and empirically appealing. We define a technology-changer as a variable that has an impact on the elasticity of the marginal rate of technical substitution (MRTS) between inputs of the GFT production function over time. Various types of US patent grant activity, specifically total, domestic, foreign, successful and unsuccessful patent applications, are used as instruments for the technology-changer. Using the GFT specification, the impacts of various technology-changers on the elasticity of the MRTS between inputs are estimated directly. It is found that granted (or successful) patents, patents granted to foreign companies and individuals, total patent applications, and even unsuccessful patent applications, have significant impacts on the rates at which inputs are substituted for each other over time in production.

A production system modeling tool is developed that implements recent work on autoregressive and endogenous stochastic production technologies associated with generalized Fechner-Thurstone (GFT) optimizing functions. A GFT-class production system is used to evaluate the empirical support for technology specifications inherent in the neoclassical theoretic structure of an agricultural production region. Little likelihood support is found for zero serial correlation, elimination of systematic technology changers from the production system, strict neoclassical production technologies, Hicks-neutral technical change, or zero homogenous factor demand functions.

This paper studies alternative cost-of-living indexes derived from the generalized Fechner-Thurstone (GFT) utility form, their use in contracts for cost-of-living adjustments (COLAs), and the resulting effect of choice of index on the distribution of real income. The indexes and their distributional effects are compared to the officially reported Consumer Price Index (CPI) and a CPI computed from the same data set used to compute the GFT indexes. It is found that the choice of index used in adjustment clauses in contracts has an impact on the distribution of real income of the group. As an example, the U.S. federal government schedule of wages and salaries is adjusted from 1981 through 1984 by all of the indexes reported here. Use of alternative indexes illuminates the normative assumptions regarding the relative importance of different income strata (among other things) implicit in any public practice of pegging COLAs to a single form of price index.

Methods of maximum-likelihood search (eg., Hildreth-Lu) for single equations models with autocorrelated disturbances are not easily extended to the multi-equation systems encountered in econometric studies of consumer demand. The obstacle is the large dimension of the space of independent serial correlation coefficients to be partitioned and searched. This paper treats stochastic disturbance vectors in demand/expenditure systems as functions of random disturbances in consumer utility functions. It specifies marginal utilities to be products of a systematic function and a nonnegative random disturbance. Under this specification, three hypotheses that readily come to mind in the context of consumer theory drastically reduce the number of independent elements of serial covariance matrices. This in turn makes practicable the extension of maximum-likelihood search methods in the estimation of parameters of large demand systems.

MetroeconomicaVolume 6, Issue 2 p. 69-71 A NOTE ON AN INVARIANT PROPERTY OF SHIFTS IN DEMAND* Robert L. Basmann, Robert L. Basmann Ames, Iowa (U.S.A.)Search for more papers by this author Robert L. Basmann, Robert L. Basmann Ames, Iowa (U.S.A.)Search for more papers by this author First published: June 1954 https://doi.org/10.1111/j.1467-999X.1954.tb00487.xCitations: 5 * The author is indebted to Professor Gerhard Tintner (Iowa State College) and Professor Paul A Samuelson (Massachusetts Institute of Technology) for their criticisms and advice. Responsibility for any errors in this paper belongs to the author alone. Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume6, Issue2June 1954Pages 69-71 RelatedInformation