The Transactions Demand for Cash : a Critical Analysis of Baumol's Model
The above presented considerations allow to prove an a priori Baumol's theorem of the function of total economic costs due to holding by market entities cash balances erroneous. Although it has no consequences on final implications of the model (the first derivatives of functions that were corrected in this paper yield the same result as Baumol's functions), it still has to be stressed that each economic model must display internal integrity. Hence, it is to be hoped that the authors of papers on microeconomic theory of demand for cash in terms of the theory of inventory will bring more attention to that matter, this way reducing the number of misled readers. Maybe it will be worth their while to become acquainted with the above quoted J. Tobin's work which, apart from W.J. Baumol's work, they keep presenting as the foundation of their theories? (fragment of text)
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