This paper examines the dynamic effects of international commodity trade by merging two benchmark environments, namely, the static factor endowments model and the neoclassical growth model. Two main questions are asked. First, how does commodity trade affect the capital-accumulation paths of two trade partners? Second, do the welfare effects associated with these dynamics serve to reinforce or mitigate the well-known welfare effects associated with the static factor endowments model? It is demonstrated that trade will eventually, if not immediately, narrow the difference in domestic capital accumulation paths. This narrowing introduces a negative welfare effect that is large enough to worsen overall welfare for the country whose capital accumulation has declined. Thus, although the dynamic effects of trade are large enough to dominate the static effects, they do not reinforce the concept of mutually advantageous trade.

The Generalized Axiom of Revealed Preference (GARP) can be violated because of random measurement errors in the observed quantity data. We study two tests proposed by Varian (1985) and de Peretti (2004), which test GARP within an explicit stochastic framework. Both tests compute adjusted quantity data that are compliant with GARP. We compare and contrast the two tests in theoretical terms and in an empirical application. The empirical application is based on testing a large group of monetary assets for the United States over multiple sample periods spanning 1960–1992. We found that both tests provided reasonable results and were largely consistent with each other.

We investigate the dynamics of a cobweb model with heterogeneous beliefs, generalizing the example of Brock and Hommes (1997). We examine situations where the agents form expectations by using either rational expectations, or a type of adaptive expectations with limited memory defined from the last two prices. We specify conditions that generate cycles. These conditions depend on a set of factors that includes the intensity of switching between beliefs and the adaption parameter. We show that both Flip bifurcation and Neimark–Sacker bifurcation can occur as primary bifurcation when the steady state is unstable.

We first explore empirical evidence of parameter and shock uncertainties in a state-space model with Markov switching. The evidence indicates that uncertainties in the U.S. economy have been too great to accurately define monetary policy rules. We then explore monetary policy rules under uncertainty with two approaches: the RLS learning algorithm and robust control. The former allows the parameters to be learned for a given model. Yet, as our results of the RLS learning in a framework of optimal control indicate, the state variables do not necessarily converge even in a nonstochastic model. The latter, by permitting uncertainty with respect to model misspecification, allows for a broader framework. Our study on robust control shows that robust optimal monetary policy rules reveal a stronger response to fluctuations in inflation and output than when no uncertainty exists, implying that uncertainty does not necessarily require caution.

Who is Robert Aumann? Is he an economist or a mathematician? A rational scientist or a deeply religious man? A deep thinker or an easygoing person?

These seemingly disparate qualities can all be found in Aumann; all are essential facets of his personality. A pure mathematician who is a renowned economist, he has been a central figure in developing game theory and establishing its key role in modern economics. He has shaped the field through his fundamental and pioneering work, work that is conceptually profound, and much of it also mathematically deep. He has greatly influenced and inspired many people: his students, collaborators, colleagues, and anyone who has been excited by reading his papers or listening to his talks.

Aumann promotes a unified view of rational behavior, in many different disciplines: chiefly economics, but also political science, biology, computer science, and more. He has broken new ground in many areas, the most notable being perfect competition, repeated games, correlated equilibrium, interactive knowledge and rationality, and coalitions and cooperation.

But Aumann is not just a theoretical scholar, closed in his ivory tower. He is interested in real-life phenomena and issues, to which he applies insights from his research. He is a devoutly religious man; and he is one of the founding fathers—and a central and most active member—of the multidisciplinary Center for the Study of Rationality at the Hebrew University in Jerusalem.

Aumann enjoys skiing, mountain climbing, and cooking—no less than working out a complex economic question or proving a deep theorem. He is a family man, a very warm and gracious person—of an extremely subtle and sharp mind.

This interview catches a few glimpses of Robert Aumann's fascinating world. It was held in Jerusalem on three consecutive days in September 2004. I hope the reader will learn from it and enjoy it as much as we two did.