Ronald Jones, Distinguished Fellow 2009
Ronald Jones makes the few equations of a small-scale general equilibrium model deliver profound insights. He has applied this talent to the KeynesOhlin transfer problem, the effects of tariffs, international factor flows, and the incidence of technological progress. Jones always has just the right set of equations to capture the essence of a resource-allocation problem without unnecessary clutter.
Few papers have had as much influence on a field as Jones’s classic expositions of the structure of simple general equilibrium models. He showed that the Heckscher-Ohlin-Samuelson model of trade can be captured in four simple equations, two relating price to unit cost and two describing equilibrium in local factor markets. The specific-factors model needs one more equation, as there are three factor markets to clear. Comparative statics follow readily from log-differentiation and yield intuitive and readily interpretable expressions.
General equilibrium interactions are as comfortable and familiar to Jones as supply and demand are to most other economists. His early papers laid bare the structure of familiar trade models based on cross-country differences in factor endowments and technology. These papers clarified greatly the causes and consequences of trade based on comparative advantage, and of impediments to such trade. Extensions to incorporate more goods, non-traded goods, distorted factor markets, variable factor supplies, and variable returns to scale (to name just a few) were readily accomplished.
Jones’s subsequent work relaxed the assumption that only final goods are tradable. With characteristic elegance and clarity, Jones explored the implications of international factor mobility, trade in products that require further value added—processing, packaging, or distribution—in their final destination, and fragmentation of the production process. As he showed, factor trade is driven by absolute rather than comparative advantage, and fragmentation in an industry is akin to technological progress there.
Ron Jones practices what he preaches—like the countries in his models, he specializes according to his comparative advantage. Rarely does he venture into imperfect competition or imperfect information, and even less frequently into empirical research. But what he does, he has done for more than 50 years, and he has done it superbly. Small-scale general equilibrium models are his milieu. No question of resource allocation or income distribution in an open economy receives a cleaner or more incisive treatment than in his capable hands.