Abstract:
Dobell and Ho have recently presented in this Journal 1 an aggregate
model of the economy in which unemployment may be
optimal with respect to a maximum consumption-over-time criterion.
They carefully abstract from Phillips curve-type trade-offs involving
the price level, or from frictional unemployment. Rather, they
extend optimal capital accumulation models to include, in effect,
human capital, with training costs and mortality considerationsi ntroduced.
Their treatment of investment in training is analogous to wellknown
results with respect to investment in physical capital. As is
the case with respect to physical capital, there is some level beyond
which consumption is diminished by further "human capital" accumulation.
Costs of training (analogous to gross saving and investment)
exceed returns, so that output remaining for consumption
(output less investment in physical capital and less resources
used in training) is lower than it might otherwise be. Dobell and Ho
conclude that some unemployment (of "untrained" humans) may
be consistent with maximum aggregate consumption through time.
They mention the possibility of transfer payments to the unemployed,
of course, though they are necessarily concerned with questions
of production, not distribution..................
