Roemer has contributed mainly to six areas:
Marxian economics,
distributive justice, political competition, equity and
climate change, and the theory of cooperation.
Marxian economics Roemer's early work was an attempt to state the main themes of Marxian economics using the tools of general equilibrium and game theory. In Roemer (1982), he proposed a model of agents who were differentiated by their endowments and had to choose occupations—involving either selling labor, hiring labor, or working on one's own capital stock. In optimizing with respect to market prices, agents choose one of five class positions, each consisting of various combinations of these three activities. This gives rise to a class structure, whose agricultural nomenclature would be landlords (who only hire labor), rich peasants (who hire labor and work themselves on their fields), middle peasants (who only work for themselves and do not participate in the labor market), poor peasants (who work on their own plot and sell labor), and landless laborers (who only sell labor). Independently of this taxonomy, individuals are either exploiters or exploited, depending upon whether they consume goods embodying more or less labor than they expend. The central result, the Class Exploitation Correspondence Principle (CECP), states that individuals who optimize by hiring labor are necessarily exploiters, and those who optimize by selling labor are exploited. Thus, a classical Marxian principle, taken as an observed fact in Marx's writings, emerges here as a theorem. Microfoundations are provided for the relationship between exploitation and class. In simple models (e.g., that of Leontief), the definition of 'labor embodied in goods' is straightforward. With more complicated production sets, it is not, and hence the definition of exploitation is not obvious. Roemer's program was then to propose definitions of embodied labor time, for economies with more general production sets, which would preserve the CECP. This led to the observation that, for general production sets, embodied labor time cannot be defined before one knows equilibrium prices. Thus, contrary to Marx, labor value is not a concept which is more fundamental than prices. Roemer's work is considered one of the seminal works of
Analytical marxism. Rather than maximizing a sum of discounted generational utilities into the future, which is the virtually ubiquitous practice of economists working on climate change, the authors maximize an objective which sustains welfare at the highest feasible level, or sustains growth in welfare at a chosen growth rate. Roemer (2011) critiques the discounted utilitarian approach. In Llavador, Roemer, and Silvestre (2012) the authors propose how the bargaining problem between the global North and South can be resolved, over the allocation of rights to emit greenhouse gases. The proposal does not begin from an ethical position which postulates an a priori distribution of pollution rights to nations, but rather with a politically motivated postulate that the authors argue is necessary and sufficient for an agreement to be reached.
Cooperation Although evolutionary biologists, anthropologists, and behavioral economists increasingly view
Homo sapiens as a cooperative species, almost all of economic theory assumes non-cooperative behavior: general equilibrium theory and non-cooperative game theory are the main tools. Even 'cooperative' game theory does not model cooperation but treats it as a black box: the values of coalitions in a cooperative game are taken as given, and it is not explained how coalitions produce these values. In Roemer and Silvestre (1993), the authors proved the existence, for quite general economic environments, of an allocation they called the proportional solution (PS): an allocation of goods and labor which is Pareto efficient, and in which each receives goods whose value (at supporting efficiency prices) is proportional to the value of their expended labor. In particular, if such an allocation could be realized, it would rectify the inefficiencies exhibited in the Nash equilibrium known as the tragedy of the commons. But how could it be realized? Roemer (1996) showed that the proportional solution is a 'Kantian equilibrium' of a natural game. In Nash equilibrium a player asks, autarkically, whether he can improve his payoff by altering his action, assuming all others' actions remain fixed. In Kantian equilibrium, a player only alters his labor supply by a certain multiple, if he would prefer that all players alter their labor supplies by the same multiple. In other words, he takes an action only if he prefers the situation in which his action is 'universalized.' A Kantian equilibrium is a vector of labor offers such that no player would like to multiply all offers by any non-negative number. This captures a kind of cooperation—agents do not contemplate deviating independently of others, but only in concert with others. In Roemer (2011), it is shown that, in a variety of games, Kantian equilibria deliver Pareto efficient allocations—they rectify the inefficiencies associated with Nash equilibrium. In particular, if a tribe of fishers, who live on a lake, learn to optimize in the Kantian manner, they will use the lake in an efficient manner, avoiding the tragedy of the commons. ==See also==