CRITICAL JOURNAL REVIEW

EKONOMI MIKRO
Nonclearing Markets ; Microeconomic Concepts and Macroeconomic
Applications

Student Name : Yoga ananda putra

Student ID Number : 7203510041

supporting lecturer :Armin Armansyah Nasution.SE.,M.Si
COURSES : Ekonomi Mikro

PRODI S-1 MANAJEMEN

FAKULTAS EKONOMI
UNIVERSITAS NEGERI MEDAN 2020
 FOREWORD
Praise be to Allah for the grace and gifts that have been given to us, so that the author can complete
the Critical Journal Review assignment in the Micro Economics course given by Armin Armansyah
Nasution.SE., M.Si The author also realizes that the Critical Journal Review assignment still has
many shortcomings, therefore the author apologizes if there are errors in writing and the author also
expects constructive criticism and suggestions for the perfection of the Critical Journal assignment.
This review. Finally, I thank you and hope it can be useful and can increase knowledge for readers.

Medan, November 2020

Writter

Yoga ananda putra

7203510041

CHAPTER I
 INTRODUCTION

A. Rationalize the importance of CJR

Critical journal review (CJR) is an important thing for students because it makes it easier to discuss
the core of existing research results. There are several important things before we review journals,
such as finding journals that match the topic raised, reading the entire contents of the journal and
trying to rewrite it with a language that is understandably understood from the journal. Journals have
several characteristics, such as being limited according to the provisions set by the organizing
organization that makes scientific journals; has the title and name of the author as well as the email
address and origin of the author's organization; There is an abstract that contains a summary of the
contents of the journal, introducation, previously used methodologies and previously used
methodologies and proposed methodologies, implementation, conclusions, and bibliography.

B. The purpose of writing the CRR

1. Understand and analyze the advantages and disadvantages of a journal
2. Make it easier to discuss the core of existing research results.
3. Look for and find out the information contained in a journal.
4. Make it easier to discuss the core of existing research results

C. Benefits of CRR
1. Helping all groups in knowing the essence of research results contained in a journal.
2. To be material for evaluation in making a journal in the next publication.

IDENTITY OF JOURNAL
✓Tittle :Nonclearing Markets ;Microeconomic Concepts andMacroeconomic
Applications
✓Year : 1993
✓Author : Jean-Pascal Benassy
✓Published By : American EconomicAssociation
✓Page : 31 Pages

A. INTRODUCTION
The lasttwentyyearshavewitnessedthedevelopmentof a newbodyoftheory, in
bothmicroandmacroeconomics, aimedatgeneralizingtraditionalWalrasiantheorytocaseswhere not
allmarketsclear. Thisgeneralizationwasachievedthrough a synthesisofthreeimportantparadigms:
Walrasian, Keynesian, andimperfectcompetition. The purposeofthisarticleistogive a
simpleandselfcontainedaccountofthesedevelopmentsforbothmicroandmacroeconomists.

B.PRESENTATION OF MATERIAL / 1st TOPIC

✓Study Nonclearing Markets

Itstartedwiththesimpleobservationthatononly a fractionof real worldmarkets, such as

thestockmarketwhichinspiredWalras,
istheequalitybetweendemandandsupplyensuredinstitutionallybyanactualauctioneer. For
allothermarketswherenoauctioneerispresent, thereis, as Arrow (1959) himselfperceptivelynoteda
logical gap in
theusualformulationsofthetheoryoftheperfectlycompetitiveeconomy,namelythatthereisnoplacefor a
rationaldecisionwithrespecttoprices as
thereiswithrespecttoquantities.Althoughquantityactionsbyallagentsresultfromrationalmaximizingbeha
vior,marketclearingisassumedaxiomatically, As wedemonstratebelow, ourmethodallowsustobuild a
consistenttheoryofprice (andquantity) determinationonmarketswithoutanauctioneer,
mainlybecauseitenablesustoderivethepotentialquantityconsequencesofanypricechoices,
whereasWalrasiantheoryallowssuch a
descriptionofquantityconsequencesfortheWalrasianequilibriumpricesonly. Furthermore,
theexplicituseofquantitysignals in thedeterminationofdemands, supplies,
andpricesbyprivateagentsmakesourrepresentationofthefunctioningofmarketsmuchclosertowhatisobser
ved in real worlddecentralizedmarkets. From a
moremacroeconomicandempiricalpointofviewitiscleartomostpeoplethat a
numberofhistoricalepisodes, such as
themassiveunemploymentoridlenessofproductivecapacitiesobservedduringthe Great
Depressionortherecentcrisis, seemextremelydifficulttoreconcilewith a
generalmarketclearingviewoftheworld. Finallyonthetheoreticalside, recentdevelopments in
industrialeconomics, laboreconomics, orfinancialmarkets (in particularcreditmarkets)
allpointtothepossibilityof non-marketclearingsituations,
duetoinformationalimperfectionsortothegametheoreticnatureofthepriceformationprocess.
Thistheoryisneededthatcanaccommodate in a generalequilibriumsettingthepossibilityofthese non-
marketclearingsituations.

THE COMMENT OF FIRST TOPIC

✓onthefirsttopicdiscussingthe non clearingmarket. Thistopicprovides a clearexplanationofthe non-
clearingmarketstartingwith a simpleobservation. However, thereis a slightdifference in
thearticlewiththeexplanationonthe internet. I readthatonthe internet the non-
clearingmarketisdoingverywell. Even now, in themidstofthecorona virus pandemic,
theimplementationofthis non-clearingmarketisrunningquitewell. In contrasttothisarticle, in
thisarticleitisstillstatedthattheimplementationofthe non-clearingmarketisstillbeingplanned.
Thisdifferencecanbeseenfromtheyear. Because in 1993, wherethisarticlewasjustpublished, the non
clearingmarketisstillpartofthebig plan andatthistime, the non clearingmarket in 2020
isalreadygoingwell.

B.PRESENTATION OF MATERIAL / 2nd TOPIC

The Necessityof a General EquilibriumApproach One mightagreewiththeprecedingarguments,
butstillbesatisfiedwith a partialequilibriumapproachtononclearingmarkets. In
thiscasemarketimbalanceswouldbestudiedatthe level ofeachsinglemarket,
whiletheWalrasianstructurewouldbekeptforgeneralequilibriumandmacroeconomics,
thebasicideabeingthat, as far as policyisconcerned, demand-supplyimbalancescanbedealtwithon a
marketbymarket basis. We shallshowherethat, atleastfrom a
generalequilibriumandmacroeconomicpointofview, thisis not a soundposition. Indeedoneofthe main
insightsofthemodelsweshall study istheimportanceof "spillovereffects"throughwhichdisequilibrium
in onemarketcanactuallybeprovokedbycausesoriginating in anothermarket. We shallillustratethisby a
simpleexamplewhere, in spiteof a fullyflexiblewage, unemployment in
thelabormarketiscausedentirelybythemalfunctionofthegoodsmarket.
The Example
Consideraneconomywithtwoagents:
One firmwhoseproductionfunctionis y = F(f),
andonehouseholdsupplyinginelasticallyunitsoflaborandwith a utilityfunction:
U = a log c + (1 - a) log(m/pe) (1)
where c iscurrentgoodconsumption, m thequantityofmoneysavedandpefutureexpected price.3 We
assumethehousehold has a quantityofmoneymoto start withandreceivesfromthefirmallprofitsur = py -
we. Itsbudgetconstraintisthis:
pc+m=w4+ir+mO=py+mO. (2)
3The quantityrn/peshouldbethoughtof as expectedfutureconsumption,
theimplicitassumptionbeingthatthehouseholdexpectsnofutureincome.Maximizationofthefirm'sprofitss
ubjecttotheproductionfunction F(s) yieldstheWalrasiandemandforlabored =
F't'(w/p). Equatingthiswiththeinelasticsupply e0 givesustheWalrasian real wage:
* = F'(eo).
p
Employmentisthusequalto e0, andproductiontoyo = F(0).
Maximizationofthehousehold'sutilityfunction (1) underbudgetconstraint (2) yields a
consumptiondemand:
cd = a + (3)
p
With total real incomeequaltoyO, theequalityofdemand (cd) andsupply (yo)
onthegoodsmarketyieldstheWalrasianprice:
p*= aLmO . (4)
(1a)yO
The traditionalviewonunemploymentisthatitisduetotoohigh real wages,
i. e., wlp> F'(eo). This in turnmaycomefrom a "real wagerigidity" wlp> F'((0), or a "nominal
wagerigidity" w > w* . We shallseethatthisneed not bethecasebyexperimentingwith a
totallydifferentcause. Assumeindeedthat w isperfectlyflexible, butthatforsomereason p
isrigidlyfixedat a level above p*. Letusnowconsider a wage level w suchthatwlp ' F'((o) (ifthis were
not thecasetheexcesssupplyoflaborwouldmake w godown until theinequalityholds)
sothatunemploymentcannotcomefrom a toohigh real wage. With p > p* weseethat, evenif a real
incomeyoisdistributedtothehousehold, consumptiondemandwillbebelowyo (equations 3 and 4).
Facedwith a consumptiondemand cd <yO ' F[F'-'(wlp)], itisclearly not profit
maximizingforthefirmtocontinuedemanding a quantityoflabor F'-l(w/p).
Ratheritwillcurtailproductiontothe level demanded (y = cd)
anddemandthequantityoflaborneededtoproduceit, i.e., e= F-1(y). Usingtheconsumptionfunction (3),
thesetwoequationsyield:
a mo e F am1 [ ] (5)
We seethatwith p > p* weshallalwayshave e< e0. If thelabormarketiscompetitive,
thewagewouldgodownto zero, andunemploymentwouldremainatthevalue e0 - e, where e isgivenby
formula (5). We seethatunemnployment in
thelabormarketisdueentirelytothemalfunctioningofthegoodsmarket!
Ofcoursethisisonlyanexamplebutwemustkeep in
mindtheextremeimportanceoftheinteractionsacrossmarkets, whichis a majorreasonwhy a
fullgeneralequilibriumanalysisisneeded.
 THE COMMENT OF SECOND TOPIC
The secondtopicexplainsthe formula formulasorsimplecalculationsregardingthemarket. However, in
thisjournaltheexplanationandwritingofthe formula is not clear. The
useoflanguagethatistoodifficulttounderstandmakesthereaderconfusedbytheexistingcalculations.
Thisarticleisdifferentfromtheebookthat I read. In theebook,
itclearlyexplainsthewritingandcalculationofmarketcalculations. The ebookexplains in a
languagethatiseasierformanypeopletounderstand, especiallyjournalreaders. The
useoftheselectedreadingisveryimportant. The examplesgivenbytheauthors are alsolessclear.

CONCLUSION OF JOURNAL ANALYSIS

As comparedwiththeWalrasianapproach, in thisarticle a
moregeneralandrealisticviewofthemarketprocess, wheretheexchangeofinformationconsists not
onlyofpricesignals, butalsoofquantitysignalsgenerated in a decentralizedfashion in
eachmarketbytheagents' demandsandsupplies. All agents,
includingsomeexplicitlymodeledpricemakers, takethesesignalsintoaccountfortheirprice-
quantitydecisions. The resultis a moregeneralformulationofdemandandsupplytheory, as well as
ofprice making, thattakesfullaccountoftheintermarket "spillovers" generatedbythequantitysignals.
Somereadersmaybecuriousabouttherelationbetweentheapproachdeveloped in
thisarticleandthecurrently popular "New Keynesianeconomics." But, as wehaveseen in thisarticle,
manyinterestingresults (andcertainlymostofthe "trueKeynesian" insights) comefromthe "spillover"
effectsbetweenseveral non-clearingmarkets in a fullgeneralequilibriumframework, such as
theoneweprovided. Thisit would certainlybeworthwhiletointegratethemostrelevant "New Keynesian"
insightsintothegeneralequilibriumapproachdevelopedhere. There are
severalprospectivefuturedevelopmentsforresearch in thefieldwehavesurveyed. On thetheoreticalside,
varioustheoriesofpriceformationwithoutanauctioneercanbeaandintegratedwithinthegeneralequilibriu
mframeworkpresentedhere. (Sofaronlyimperfectcompetitionundercompleteinformation has
beenfullyintegrated.) Insightsshouldcome not onlyfrommacroeconomics,
butalsofrommicroeconomicstudies, particularly in thefieldsofindustrialorganization, labor,
andfinancialmarkets. The
methodologyandframeworkweoutlinedwillpermitthederivationofthemicroandmacroeconomicconsequ
encesofthesenewdevelopments, as well as
thepotentialconsequencesofeconomicpolicyprescriptions.Allthisshowsthatthisarticle,
andtheworkdescribedtherein, shouldcertainly not beseen as a completedresearch program.
Itspurposeisrathertosketch a fewaspectsandpotentialdevelopmentsofthisverylargefieldofresearch,
andtoencourageresearcherstoexploreitfurther.