The stability of stationary equilibria under genetic-algorithm adaptation is studied in an overlapping-generations economy with a unique, monetary steady-state and two-period cyclic equilibria. Agents use the genetic algorithm to update their labor-supply decisions. The results of simulations and the analysis of the dynamics show that the two-period cycle is stable and that the steady-state equilibrium is unstable under genetic-algorithm adaptation. The dynamics are driven primarily by the wealth and substitution effects that lead to the algorithm's convergence to the two-period cycle.

We investigate the extent to which agents can learn to coordinate on stationary perfect-foresight cycles in a general-equilibrium environment. Depending on the value of a preference parameter, the limiting backward (direction of time reversed) perfect-foresight dynamics are characterized by steady-state, periodic, or chaotic trajectories for real money balances. We relax the perfect-foresight assumption and examine how a population of artificial, heterogeneous adaptive agents might learn in such an environment. These artificial agents optimize given their forecasts of future prices, and they use forecast rules that are consistent with steady-state or periodic trajectories for prices. The agents' forecast rules are updated by a genetic algorithm. We find that the population of artificial adaptive agents is able eventually to coordinate on steady state and low-order cycles, but not on the higher-order periodic equilibria that exist under the perfect-foresight assumption.

Economists have long known that timescale matters in that the structure of decisions as to the relevant time horizon, degree of time aggregation, strength of relationship, and even the relevant variables differ by timescale. Unfortunately, until recently it was difficult to decompose economic time series into orthogonal timescale components except for the short or long run in which the former is dominated by noise. Wavelets are used to produce an orthogonal decomposition of some economic variables by timescale over six different timescales. The relationship of interest is that between money and income, i.e., velocity. We confirm that timescale decomposition is very important for analyzing economic relationships. The analysis indicates the importance of recognizing variations in phase between variables when investigating the relationships between them and throws considerable light on the conflicting results that have been obtained in the literature using Granger causality tests.

We introduce a frequency-domain test of time reversibility, the REVERSE test. It is based on the bispectrum. We analytically establish the asymptotic distribution of the test and also explore its finite-sample properties through Monte-Carlo simulation. Following other researchers who demonstrated that the problem of business-cycle asymmetry can be stated as whether macroeconomic fluctuations are time irreversible, we use the REVERSE test as a frequency-domain test of business-cycle asymmetry. Our empirical results show that time irreversibility is the rule rather than the exception for a representative set of macroeconomic time series for five OECD countries.

Interest in structural change over time has created a demand for analytical tools that can assist in exploiting trends and uncover tendencies in individual sectors or parts of sectors within the context of an economywide system of accounts. This paper offers an alternative approach and is designed to be used with annual input-output or social accounting systems. To date, analysts have been faced with the prospect of conducting simple comparative static approaches or the enormity of the task involved in constructing dynamic models with complex lead and lag structures. The temporal Leontief inverse, introduced in this paper, offers a less complex, more tractable method for examining structural change when a time series of input-output tables is available. The method draws upon some earlier work that proposed the notion of a field of influence of change and explored alternative methods of decomposition of change.

This interview with Wassily Leontief is the first to appear in Macroeconomic Dynamics. Other interviews of importance to the history of economic thought will appear occasionally in this journal. Since this journal prizes the openness that characterizes the scientific method, the views expressed by economists interviewed in this section may span a broad range and will not necessarily represent the views of the journal's editorial board or the primary focus of the journal. However, in all cases in which Macroeconomic Dynamics publishes an interview, the journal thereby evidences its deep respect for the scholar whose interview we publish.

Wassily Leontief is one of the central creators and shapers of twentieth-century economics. He invented input-output theory and the techniques for constructing input-output tables from economic and technological data and was responsible for making input-output tables the most powerful and widely used tool of structural economic analysis. The theory of input-output matrices played an important role in the clarification of general equilibrium theory in the 1940's and 1950's as well. Leontief has also made fundamental and seminal contributions to the theories of demand, international trade, and economic dynamics. His research interests include monetary economics, population, econometric method, environmental economics, distribution, disarmament, induced technical change, international capital movements, growth, economic planning, and the Soviet and other socialist economies. Leontief has played a vigorous part in formulating national and international policies addressing technology, trade, population, arms control, and the environment. He has also been a well-informed and influential critic of contemporary economic method, theory, and practice. Leontief received the Nobel Memorial Prize for Economics in 1973.

I met Wassily Leontief on April 14, 1997, at his apartment high above Washington Square Park in New York City. Leontief reclined on a sofa in the living room, with Mrs. Leontief going about her business in the background, occasionally asking after Leontief's comfort. Leontief's voice on the tape ranges from an assertive forte to a whispery piano. He is by turns animated, thoughtful, puzzled, inspiring, and charming. A chiming clock marking the passage of quarter-hours and characteristic New York street noise occasionally obscure his words on the tape. I have edited the transcript for continuity and clarity.