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The article discusses the assumptions made in the paper "Income Distribution, Value Judgments, and Welfare," that appeared in a previous issue of the "Quarterly Journal of Economics." The paper assumed that distribution value judgments are independent of the level of total income. However, no such assumption can be maintained in the multi-commodity case as it either conflicts with the underlying postulate that welfare is a function of individual utilities or else implies that all indifference maps are homothetic (indifference curves are radial blow-ups of each other). An examination of the ordinary box-diagram convinces one that the only case in which this effect cannot arise is where all indifference maps are homothetic, a condition much too restrictive to be assumed. The assumption of distribution value judgments as independent of the level of total income must be removed in the multi-commodity case. Its removal can be easily accomplished without altering either the major theorems of the paper or its general argument. They are in fact strengthened by the removal of what was perhaps the most restrictive assumption made.

This article comments on a study entitled The Decline in the Relative Income of Negro Men, which investigated the trend in the relative income of African American men from 1948-1964. The purpose of the present paper is to investigate two of the propositions in the study regarding the trend in the income ratio of the employees. First, the hypothesis that fluctuations in aggregate demand affect the income ratio of African American male workers is analyzed. Second, a trend in relative income from 1948 to 1964 is sought in order to verify the conclusion in the study that the 1950s were characterized by a decline in the African American and U.S. employees income ratio. Thus, the values of the income ratio of the employees from 1939 to 1964 are recorded. Assuming that the 1939 value accurately reflects the relative income of African American workers in the pre-World War II period, there appears to be a dramatic increase since that time. Hence, the analysis of the study suggests that the secular increase in the income ratio represents a decline in discrimination against African American workers. However, this decline may merely reflect the migration of the workers from the South to the less discriminating North rather than a decline in the U.S. propensity to discriminate.

This article presents comments on the willingness to make larger sacrifices of personal consumption to increase the income of fellow men collectively than individually in the paper "One Economist's View of Philanthropy," by Stephen A. Marglin and William S. Vickrey. In his paper, William S. Vickrey points out that an individual might be willing to make a gift to one of his fellows if he knew that others were doing so even if he would not make the gift on his own. The interdependence of the transfers by different donors is the same as that used by Marglin. Clearly both Vickrey and Marglin are correct. Individuals who would not be willing, as individuals, to contribute to various causes may be willing, as participants in a group to make such contributions. Each may consider the sum of his own sacrifice and the sacrifice of others as less important than the gain derived from the joint gift. Vickrey, however, discusses a gift to the poor of this generation while Marglin uses essentially the same mechanism to argue the desirability of a sort of gift to the entire next generation. Neither offers any arguments as to why these particular groups are likely to be the beneficiaries of such collective gifts.

The article comments on Everett E. Hagen's paper "An Economic Justification of Protectionism," published in the November 1958 issue of "Quarterly Journal of Economics." He notes that the real wage rate in manufacturing industry is, even in the long run, higher than that in the agricultural sector of the economy for equivalent work. On account of this wage disparity, he argues that manufacturing industry, even with a real comparative advantage, would not be able to compete with imports. A tariff designed to protect such industry would help to increase real income in the economy. In view of the interesting theoretical issues and policy implications raised by Hagen's paper, the author undertakes to evaluate his empirical evidence and examines the policy implications of his analysis. In the first section the author draws on additional information in an effort to adjust Hagen's wage rate data to reflect the real difference in wage rates for equivalent labor between industry and agriculture. In section two, the author tries to determine how practical or realistic Hagen's subsidy scheme is to reach his optimum optimorum for the underdeveloped countries, at which his recommendation is aimed.

Comments on the development of the theory of induced innovation. Argument on the endorsement of proposition; Criticism on wage-rental ratio relative to labor saving activity; Distinction between the consequences of rising wage-rental ratio and the rise in ratio.

Probably the most important gap in our thinking on the Permanent-Income Hypothesis is the lacuna that exists between on the one hand the concept of permanent income as derived from a wealth construct related to anticipated income receipts, and on the other hand permanent income in what is now the familiar time-series analysis form as some kind of weighted average of past measured incomes. Because of this gap, we are unable to essay any kind of answer on theoretical grounds to questions such as the meaning of the "horizon" as calculated from time-series studies, the nature of the weights to be expected, and the correlation between permanent and transitory components one should specify. Some of these difficulties—in particular the role of windfalls in relation to the last of these problems—were the subject of a paper by Friedman which represented an attempt to resolve certain confusions which arose in the course of discussion following the publication of Friedman's original study. (See also Eisner and Houthakker). Unfortunately, Friedman was discouraged in this paper by a technical difficulty which forced him to adopt an unnatural accounting device which makes his paper difficult reading and greatly weakens the force of his conclusions. In addition his failure to take the depleting effect of consumption adequately into account (see for instance the strange reasoning in footnote 5 to page 9 of [3]) inclines his reasoning to opaqueness. in this paper we shall, by casting the PIH as a simultaneous model, work out some of its implications for the series of temporal flows involved. We overcome the technical difficulty which plagued Friedman (concerning the differentiability of jump functions) by working in terms of Lebesgue-Stieltjes integrals rather than the usual Riemann integral. In this way we are able to deal with flows in continuous time in a natural manner. We now proceed to a formal statement of the model. [ABSTRACT FROM AUTHOR]

Indexers of industrial productivity in Germany, Sweden, the United Kingdom and the United States, and of real wages in industry in those four countries and France, were derived by Phelps Brown and Browne[2] for each of three periods within 1860-1960 separately, viz. the years down to the First World War; the inter-war years; and the years following the Second World War. Interest attaches to (a) linking the indexes for the three periods in each country so as to provide indexes of industrial productivity and real wages that will be continuous over the whole span of years; (b) comparing the levels of industrial productivity and real wages attained in the different countries at a given time, so as to be able to use the indexes obtained under (a) to show the changes in the relative levels of the different countries in the course of time; (c) within each country, comparing the movements of industrial productivity and real wages phase by phase. A first working of (a) and (b) for industrial productivity alone was made by the present writer in 1970.[3] The present paper reports a re-working of the series for industrial productivity together with a similar linking of those for real wages. At the same time estimates have been added for both variables in the 1960s: these are not continuous with the original series, but are believed to be sufficiently indicative of relative movements to be linked with the previous series, so as to afford some impression of the considerable changes during the last decade. The coverage and formation of the original estimates are described in the work by Phelps Brown and Browne. The methods used to form the indexes now set out in Tables III-V are described in the Appendix to the present paper. Some of the findings may be noted as they appear in Figs. 1-3. [ABSTRACT FROM AUTHOR]

Such accounts make hardly any mention of the importance of institutional factors in the working of the labour market. India in particular is well known for the degree of control and influence which the Government tries to exercise over the economy, not least over the labour market, so that in her case the omission of such factors can hardly be justified. There is a voluminous Indian literature on this subject, particularly since the report of the National Commission on Labour in 1969,[1] and one of the striking facts about wage settlements in India is the extent to which public debate and public policy have been continually brought to bear on such settlements. Wages are very much influenced by administrative and legislative factors, and, while not denying the importance of market forces, more attention should be given to the former. Thus the purpose of this paper is to give a simplified account of some of the institutional features of wage settlement in India's economy, together with some brief critical comments on the wider implications of the system and on recent proposals for changing it. The analysis of this paper has tried to show how the Government has evolved a politically viable wage policy which has ensured some restraint on, and equity in, the movement of industrial wages. But the Government cannot expect to have both its wage policy and an absence of industrial disputes in times of rising prices. Strikes are the inevitable cost of wage restraint, and the appropriate remedy is not to abandon a politically well-tried and feasible wage policy, but to try to ensure greater price stability: the best labour policy recommendation for India is to continue gradually to adapt the existing system to the changing demands of balanced economic development. [ABSTRACT FROM AUTHOR]

Presents a reply to a commentary concerning the application of economic and institutional theories on wage determination. Influence of labor supply and demand on wages; Ways to test the wage-round theory; Criticisms on industry-specific time series analysis.

This article presents the author's response to a comment on his paper about the theory of relative shares. Author Frederick Bell has raised certain fundamental questions with respect to the theory of relative shares proposed in my paper, questions of both a theoretical and empirical nature. From the theory side Bell suggests that I have perhaps played the neoclassical game to the extreme by not considering the possibility of unemployment of the economy's capital stock on the downswing of the business cycle. He rightly points out that such unemployment will produce a shift to the left of the real wage labor demand curve for the economy as a whole. Further, he argues that such a shift can lead to a fall in the real wage rate during the contraction phase of the cycle which raises the possibility of a fall in the relative price of labor. Such a result would reverse the adjustment mechanism suggested by me, although it would still produce an explanation for the behavior of relative shares. For his theoretical mechanism to function in the fashion he suggests during the contraction phase of the cycle, there must be a decrease in the relative price of labor, which, in turn, would induce a substitution of labor for capital.

The article examines an implication of the price variables effect in a growth model of the Harrod-Domar type. It is well known that in the absence of price changes the Harrod-Domar model gives a steady growth solution, which will in general be different from the growth path that maintains full employment. In fact, it is only when the Harrod-Domar rate of growth, the ratio of the marginal propensity to save to the capital coefficient, is equal to the growth rate of the labor force and full employment exists initially that it can be maintained over time. The purpose of the present paper is to show that the Harrod-Domar conclusion depends crucially on the assumption that there is no change in relative prices. Where the Solow model assumes a neoclassical production function and full employment, it is proposed to be more in line with the Harrod-Domar model. It assumes fixed coefficients of production and allow for the existence of over or underemployment. The introduction of relative prices in the Harrod-Domar model generally produces fluctuations of output about a steady growth path which tempts one to relate these fluctuations to the business cycle. The model consists of the national income identity, consumption and investment functions, price determination equations for general prices and the capital goods price and the wage determination equation.

This article presents response of the author on comments made by scholar S. Herbert Frankel on the paper "Report on Measures for the Economic Development of Underdeveloped Countries." These comments were published in the August 1952 issue of the periodical "Quarterly Journal of Economics." The questions, which Frankel has raised, touch upon some of the basic problems confronting economic development of the underdeveloped areas. The difference between his approach and that of the United Nations report is so fundamental as to warrant a re-examination of same of the points at issue. The first issue to which attention should be drawn is the income aggregate as a criticism of development. Frankel said that incomes couldn't be compared in the abstract; they have meaning only in relation to the social context in which they are embedded. It is fallacious, therefore, to assume that aggregate or average incomes are a measure of development, and he added that to say that the object of development is to achieve higher per capita incomes is in itself also meaningless.

The article focuses on interindustry wage structure variations in the United States. During recent years a number of writers have revived the investigation into the forces determining secular change in the industrial wage structure which had been comparatively quiescent. Two of the recent contributions, Professor John T. Dunlop's "Income, Employment and Public Policy," and Professor Arthur M. Ross' "Trade Union Wage Policy," focus attention on particular variables as explanations of variation in the industrial wage structure. It is the purpose of the present article to examine the position of the writers of the two papers cited with a view toward proposing a broader model to explain interindustry variations in wages. The statistical evidence provided in these publications is concerned with the behavior of average hourly earnings of a group of manufacturing industries plus bituminous coal and steam railroads over the period 1923 to 1940. The relationship between changes in output per man-hour and changes in earnings is tested by the use of rank correlation.

The article discusses various aspects of annual wage guarantee plans in the United States. Until very recently an economic literature on annual wage guarantee plans did not exist. No books entirely devoted to the subject had been published; periodical literature described experiences with such plans, but did not analyze them. Within the last year, however, three volumes' presenting an economic analysis of guarantee plans have appeared. The authors of these studies differ widely in their evaluation of such guarantees. The purpose of this paper is to consider the different assumptions and analytical approaches behind these opposing beliefs and, though this analysis, to arrive at some conclusions concerning guarantee plans and their place in our economy. In fulfilling these aims it will first be necessary to compare the views of the authors on such basic questions as the effect of guarantee plans on consumption, investment, employment, mobility of labor, and the policies of individual firms.

The article analyzes the causes of the aspect of rigidity in union wage policies. A perusal of the literature on labor costs and income variations will reveal that the following criticisms have been levelled at union wage policies: (1) union wage scales are not flexible enough with respect to a deflationary price level; (2) union wage scales are frequently "too high" compared with non-union scales in the same industry; and (3) union wage scales are often "too high" for a declining industry. At bottom these criticisms simply signify that union wage scales are "rigid" in a downward direction. The elimination of this rigidity would, according to critics, lead to a greater national income and/or a greater income for the unions in question. The writers making these criticisms generally support their assertions with more or less factual data. Furthermore, those who have investigated the causes have done so with respect to particular cases. As yet there exists no systematic analysis which can serve as a framework of reference in understanding these union wage policies. The purpose of this paper is not to condone or condemn the union policies in the light of any given criterion, but simply to analyze the elements accounting for rigid union wage policies in different circumstances.

The article focuses on taxation and social welfare. A study of the distribution of income involves investigating a dynamic cycle of income at three stages. At the first stage, workers receive income in exchange for productive activities. At the second stage, the government collects a portion of the workers' income in the form of taxes. The objectives of governmental expenditures, especially at the federal level, have changed greatly since the turn of the century. Traditionally, federal expenditures were primarily limited to defense against foreign aggression and to the preservation of law and order at home. To maximize income redistribution in favor of low-income families, governmental intervention at all three stages of the income cycle must be geared to attaining that end since the three stages are closely interrelated. This paper focuses on the second stage of the cycle of income distribution-that is, taxation. A tax payment is the amount that a person or a corporation actually pays in taxes to the Internal Revenue Service or to state departments of taxation.

This paper examines the case for a children's allowance as one component of a program to eliminate poverty. Among the crucial objectives of such a program cited are reduction of the Income deficit, provision of work Incentives, retention of human dignity, and benefits for the non poor. Although a children's allowance alone cannot eliminate poverty, it does, in the author's opinion, satisfy the other objectives cited. [ABSTRACT FROM AUTHOR]

The article presents information on some major aspects of the economic status of Negros. Since the major concern of this paper is not "whence" or "what," but "whither" the Negro economically, the general picture of the present economic status of the Negro has been surveyed under four main divisions, the gainful Negro workers in the U.S. classified into socio-economic groups in 1930, for purposes of comparison, Negro workers in the relief population classified into socio-economic groups as of May, 1934, the more insistent economic problems confronting the Negro in the recovery program and, that the solution of the Negro's economic plight is not to be found in any kind of tie-up with organized craft unionism in the U.S. In analyzing the present economic status of the Negro, the relief census for 1933 and estimates based by the Research, Statistical and Financial section of the Federal Emergency Relief Administration on this census have been used. The relief census rather than available estimates on incomes or expenditures has been chosen because the data of the relief census are more complete and more reliable than such estimates as may be deducted from available data on the incomes or expenditures of Negroes and because the relief percentages indicate marc accurately than do the income or expenditure estimates the degree of economic distress suffered by the various socio-cconomic classes of Negroes.

Economists have found that improved insight into the dynamics of consumer behavior can be obtained by studying attitudes toward income, expenditure, and the national economic picture. Over the course of the years, surveys have helped establish relationships between economic attitudes and economic behavior and have made a number of generalizations possible. The panel method, in particular, has contributed to greater understanding of the economic attitudes and behavior of individuals, and their relationship to aggregate changes in the total population. Economic research has greatly benefited from the development of sample surveys and of opinion and attitude research over the past 20 years. At the same time, economic surveys have contributed to progress in opinion research, primarily through studies of the relation of attitudes and their changes to behavior. This paper, following a few historical remarks about the relation of opinion research to economic research, will describe developments in economic research which open new avenues for the study of people's motives, attitudes, and opinions.

This paper attempts to identify some of the economic and demographic factors responsible for the growth of southern metropolitan areas during the 1950's. Several basic patterns of relationships are established tentatively through application of the Simon-Blalock technique of employing partial correlations in alternative models. Past metropolitan growth appears to operate both directly and indirectly through net migration and suburban growth to influence metropolitan growth. Increased family income acts indirectly on metropolitan growth through income level and labor force growth. Past rates of growth also operate directly and indirectly through net migration and increased family income. Finally, past rates of growth influence present growth through their influence on income level and increase in income. [ABSTRACT FROM AUTHOR]

The purpose of this note is to attack the underlying problem by examining the relationship between unpredictable fluctuations in export prices [1] and fluctuations in national income and welfare within the framework of the standard neo-classical model of international trade. Specifically the paper deals with what we thought at first to be the reasonable conjecture that a country which possessed a high "capacity to transform" would suffer less from unpredictable export instability than a country with a rigid economy, since the flexible economy would be able to adjust and adapt to changing circumstances, whereas the rigid one would not (i.e., we thought that the variability of welfare associated with a flexible economy would be less than that of a rigid economy for a given variability in export prices). To the extent that this were true a country might mitigate the harmful consequences of uncertainty by choosing a flexible economic structure, even in it involved some loss in average income. For some ranges of price fluctuations the flexible economy had greater variability in income than the rigid economy; for some the opposite was true. In presenting these results we wish to emphasise the very limited nature of the framework used to approach this problem. Our analysis applies to a very specific way of defining flexibility and welfare, and though the approach is an interesting one, it is only one of many possible ways of defining the problem. In the last analysis it 0........... serves more to raise questions than to answer them. [ABSTRACT FROM AUTHOR]

This article presents a rejoinder to a commentary about the author's paper on money and its effect on money income made by Milton Friedman. Friedman's tone of pained indignation obscures his essential agreement with the main points of my paper. Indeed, much of his reply says that this agreement should already have been clear to any reader of his work. Nevertheless I am glad to have his current stipulations. He agrees that cyclical leads of money over money income say virtually nothing about direction of causation; he says that he studies and reports these timing sequences for quite other reasons. He agrees that, while consistency with timing observations is not decisive evidence for a hypothesis, inconsistency with those observations requires rejection of the hypothesis. He agrees that his permanent income theory of money demand does not yield the observed timing relations between money and business. Therefore, he says, it is only an element of a complete theory, an element designed to account for the observed tendency of cyclical fluctuations in income to be wider in amplitude than cyclical fluctuations in money. That was my concluding point: The element of Friedman's monetary theory that accounts for his amplitude evidence--that is, the procyclical movement of velocity--is not consistent with his timing evidence. Likewise, as well as I can understand other elements of his theory, they may be consistent with timing evidence but cannot account for the amplitude observations.^

Replies to a comment on induced innovation on macro-economic labor in a market economy. Criticism on negative proposition relative to high and constant wage-rental ratio; Comparison between the effects of high and low wage-rental ratios; Different factor price ratios.

1.1. RECENT studies by Houthakker (1957, 1965) and by Goldberger and Gameletsos (1970) show that income and especially price elasticities of demand vary considerably from country to country when estimated from time series data on per capita expenditure, per capita income, and prices for O.E.C.D. countries during various intervals in the post-war period. We could attribute the observed differences to differences in taste or preferences in the countries. On the other hand, by extending our framework slightly to incorporate variables other than prices and income, we may be able to explain part of the observable differences in demand behaviour in a more satisfying way. 1.2. In this paper we proceed from the hypothesis that part of the differences in demand behaviour between countries can be explained by differences in the age composition of the population. This is clearly an incomplete hypothesis; it does not encompass the full range of possible explanations to be derived from aspects of the population and it ignores possible explanations by factors other than population. Also as will be seen, the explanation relates primarily to the price response leaving explanation of differences in income response to a different approach or different variables. The results show a significant influence of population composition on the parameters of the demand model after correcting for the effect of differences associated with the level of real income. The influence of population is strongest for food, clothing and housing, somewhat weaker for durables and other (services). The effects of shifts in the population composition show a remarkably consistent pattern which tends to influence all commodities in a similar way rather than a complicated commodity-specific pattern. The patterns show considerable conformity with intuitive notions of the influence of changes in composition and with patterns estimated from household data. [ABSTRACT FROM AUTHOR]

This article examines the relationships between the structure of internal labor markets and the mobility, experience, and income of workers. The first section discusses the taxonomy of internal labor markets and the predicted differential impact of experience. Section 2 classifies industries into three types of structures according to the degree of firm and industry mobility. The relationships between income and experience across structures and income classes are examined in Section 3. In order to examine the relationships between structure and training, a measure is required that will allow us to classify internal labor markets. Most of the previous research in this area has been based on case studies in which an industry has been intensively analyzed and subjectively classified. One of the goals of the present work is to develop classification criteria of structures, based on objective and comprehensive data, that are consistent with the results of the case studies. Mobility, firm experience, and income form one interrelated system. Variations in mobility patterns are linked to different internal labor market structures. Income, industry concentration, capital intensity, and mobility are also bound together.

The special character of the intertemporal theory of production arises from more detailed specifications of technology, permitting more precise characterization of producer behavior. The most important specialization of technology results from introduction of capital as a factor of production. Although the central concepts of capital theory-capital assets, capital services, and investment are inessential to the development of the intertemporal theory of production, they provide additional structure that permits a much more detailed analysis of producer behavior. The present paper is not written with the intention of stemming this tide, which surely represents a wholesome reaction and response to current problems. It is grounded, however, in the strong feeling and insistent recollection of one participant observer that the intellectual enthusiasm for development in the fifties and early sixties reflected elements of real hopefulness that were then actually present in many developing countries. What was not correctly perceived was the precarious and transitory nature of that early hopeful and even exuberant phase.

SUMMARY The absence of Census or other government data on the income of the population of British towns has resulted in a continuing search for proxy variables that are correlated with income. This paper suggests a method for estimating both incomes and expenditures for towns, based entirely on published government data. While the proposed method is rather simple and crude, it should be of value in marketing, economic, and social research applications where rapid, economical estimates of incomes and expenditures are required. [ABSTRACT FROM AUTHOR]

It is the purpose of this paper to suggest that the role of wealth has been underestimated by ignoring uncertainty and to propose and test empirically a model which allows the wealth decision an independent part in the determination of consumption behaviour. In the next section, the model is presented as it concerns the individual; an analysis is made of wealth effects under perfect certainty and the considerable modifications needed in order to deal with uncertainty are discussed. In Section III, a macroeconomic version of the model is derived and tested against UK quarterly data. This section concludes with a discussion of the results and a numerical example designed to illustrate the magnitude of reactions to a change in stock market prices. Finally, in Section IV, the behaviour of the model in a steady growth environment is demonstrated and the steady growth savings ratio is tabulated as a function of the rate of growth of real income, the rate of inflation, and the rate of revaluation of wealth. [ABSTRACT FROM AUTHOR]

Recent empirical studies (Schultz [8] and [9]) show that an accumulation of knowledge contributes much more to the growth of per capita income than does an increase in the capital-labour ratio. Major parts of the increase in productivity come from investment in human capital and learning by doing. While the learning-by-doing theory has been well formulated (Arrow [1]), there is no theoretical formulation of the link between productivity change and human investment. The purpose of this paper is to provide such a discussion by incorporating the theory of investment in human capital (Becker [2], Ben-Porath [3]) into a model of economic growth. It is shown that for a simple form of a return-to-labour function the existence of nonHarrod-neutral technical change, when it is the result of investment in human capital, is a source of externality. A general result which relates the form of the return-to-labour function to the form that technical progress must take if externalities are to be avoided is then established. [ABSTRACT FROM AUTHOR]

If an individual's utility function is additive and his demand functions exhibit expenditure proportionality, it is well known that his utility function belongs to the "Bergson family". For some problems (e.g., deriving a consumption function from an intertemporal utility function) expenditure proportionality is a useful simplifying assumption. But for demand analysis the assumption that all income elasticities are unity has little merit even as a first approximation. In this paper I investigate the class of additive utility functions yielding demand functions which are locally linear in income, or, equivalently, yielding income-consumption curves which are linear in some region of the commodity space. The assumption that income-consumption curves for broad aggregates of goods are locally linear is not grossly inconsistent with our knowledge of the world, so this class of utility functions and the corresponding demand functions may be of empirical as well as theoretical interest. In the first section I consider various additive direct utility functions which yield demand functions locally linear in income, and, in the second section, the corresponding indirect utility functions. In the third section I prove that the utility functions considered in Section I are the only additive direct utility functions yielding demand functions locally linear in income. In the fourth section I consider the "counterparts" of the utility functions of Section I (i.e. the additive indirect utility functions obtained by replacing each quantity variable by its dual price variable). In Sections I and IV, I present explicit expressions for the demand functions corresponding to each utility function considered. [ABSTRACT FROM AUTHOR]

In this paper we investigate the effects of income and non-human wealth on the way in which households structure their holdings of financial assets. We are interested principally in two aspects of this structure. They are: (1) the level of diversification; i.e., the number of different types of financial assets which households hold, and (2) the probability of holding a particular type or combination of types of assets and the amount which is held. Unlike the literature which has been concerned with developing techniques for choosing efficient portfolios for large investors, we are concerned with explaining the portfolio behaviour of relatively small investors. For such investors the transactions costs of holding diversified portfolios—both monetary and psychic—may be substantial and the indivisibility of some types of assets reduces their options. [ABSTRACT FROM AUTHOR]

This paper is an attempt to analyze the effects of the two types of uncertainty in a systematic manner. The vehicle of analysis is the familiar two-period model of consumption and investment. The two-period framework is hardly very restrictive for a study of the problems that concern us here. Indeed, recent work by Fama [4] shows that under very general conditions, the empirically observable implications that can be derived from a multiperiod model of saving and consumption are indistinguishable from those implied by a two-period model. [ABSTRACT FROM AUTHOR]

Until recently in the growth theory of both competitive and centrally planned economies, innovations of all kinds and, in particular, the flow of technological innovations had been treated as something given from the outside, as a factor of considerable importance but of no cost. Only in the last few years have some papers been published in which besides the sector producing material commodities a so-called "technology sector" or "research sector" was discussed. Besides the ordinary production function, whose properties are by now fairly well known, the production function of innovations or the technology function was introduced into the above-mentioned theory. The technology function expresses the relation between the flow of new innovations and the stock of capital and labor present in the "research industry ". Economist E.S. Phelps in his report on" Models of Technical Progress and the Golden Rule of Research " derived the form of the technology function from four general principles (axioms), which seem fairly plausible. Using properties of this function he found an expression for the rate of steady growth of the income-labor ratio in the sector producing material commodities and services and a new golden rule of accumulation.

In a recent paper Prof. R. G. Lipsey defines structural unemployment with reference to the empirical trade-off relationship between unemployment and price changes. Although it would seem possible to devise an alternative definition which relies on information concerning individual labour markets, the definition advanced by Lipsey has the advantage of testability. That is, providing one can agree on the specification of the trade-off relation it is possible to say whether or not structural unemployment has increased in a particular period. The following represents an attempt to test whether structural unemployment in the Canadian economy has become more pronounced in the post-war period and specifically in the years from 1957 on. The year 1957 is designated as the milestone because of the frequently heard allegation that the increased unemployment experienced after 1957 is largely of the structural rather than demand-deficient variety. The model used is a small simultaneous equation model of wage and price level determination which is presented here in its reduced form. The rate of price change in the consumer price index is expressed as a linear function of three variables: (i) the inverse of the unemployment rate, (ii) the rate of change in the import price index, and (iii) the one period lagged rate of change in the consumer price index, giving a Koyck-type lag distribution to the other two explanatory variables. The underlying model from which this reduced form equation is derived can be visualized as consisting of two equations: (a) a wage change equation in which unemployment and price change appear as explanatory variables, and (b) a price change equation containing the wage change variable and the change in import prices as determinants. An increase in structural unemployment, as defined by Lipsey, will result in an upward shifting of the relation between unemployment and the rate of price change. That is, other things being equal, a particular unemployment rate will now be compatible only with a higher rate of inflation than in the past. To test for such an increase (or decrease) in structural unemployment we therefore include time variables in the reduced form price equation mentioned above. If such time variables obtain statistically significant coefficients the conclusion may be drawn that the trade-off relation between price changes and unemployment has in fact worsened. [ABSTRACT FROM AUTHOR]

The concept of disguised unemployment or underemployment has drawn considerable attention in the economic development literature for almost a decade. The efforts to reconcile a zero or "low" marginal productivity of labor with a higher wage rate have followed two directions. First, the approach usually associated with W. Arthur Lewis' work bases the phenomenon of underemployment on a postulated dualism that exists between the industrial and the agricultural or subsistence sector of an underdeveloped economy. Second, the theoretical approach first suggested by Harvey Leibenstein postulates a certain relationship between the wage rate and productivity and complements this relationship with certain assumptions on institutions. The purpose of this article is to refine some aspects of the "wage-productivity" theory of underemployment. We will argue that the analysis as it stands supplies some of the necessary but not alt the sufficient conditions for the theory to be correct. Accordingly, this approach to underemployment may be confirmed or rejected by theoretical or empirical evidence that has yet to come. In the last section of this paper we will argue that even if the wage-productivity relationship be confirmed by future research, still the conclusion to which the theory leads is not, thereby, logically necessary. [ABSTRACT FROM AUTHOR]

In this paper I shall re-examine the effect of a financial transfer between two countries upon relative prices and real incomes. In Section One the main assumptions are stated and the model is developed. In Section Two we consider precisely how substitutability between non-traded and traded commodities affects the movement of the terms of trade and real incomes. Finally, in Section Three, a corrective change of emphasis is given to the role in the adjustment mechanism of a shift in the prices of non-traded commodities relative to the prices of the internationally traded goods. [ABSTRACT FROM AUTHOR]

Much of the controversy about capital theory between the two Cambridges has been presented in terms of stylised doctrinal history. Modern versions of the "classical" system, especially Sraffa (1960), are contrasted with the models of latter day neo-classicists, or neo-neo-classicists, especially Solow (1963). Unfortunately many such references to the past are based less on historical scholarship than on now well-understood polemical needs (Kuhn, 1962). To the historian of economic thought this is rather tiresome, the more so as Walras' "great name," to use Schumpeter's phrase, has been linked with other neo-classicists in an undiscriminating way (Harcourt, 1972) and the generic term "Walrasian" loosely used (Nell, I967). I appreciate that, in establishing a new paradigm, too fine a regard for detail can be counter-productive. But a reconsideration of Walras in the light of the Cambridge caricature is due lest it becomes the orthodox view of neo-classical economics and, to steal Joan Robinson's words from their different context, "sloppy habits of thought are handed on from one generation to the next." The neo-classical theory of capital, as criticised by Cambridge (England) holds that the marginal rate of return on capital is equal to both the rate of interest (profit) and the marginal rate of time preference: sometimes the period of production (or investment) acts as a proxy for aggregate physical capital. The rate of profit is determined, like all other prices, within the market system. The following are some recurring points of criticism: (1) Market efficiency dominates the question of distribution.[2] (2) The technological structure of the system is relegated to a subordinate role.[3] (3) Capital is either explicitly homogeneous or an "unobtrusive postulate" effectively makes it so.[4] (4) The high theme of economic progress is neglected. My purpose in this paper is simply to examine Walras' Elements in relation to these points. [ABSTRACT FROM AUTHOR]

This paper examines the relation of non-white residential segregation to black-white differentials in education, occupation, and income for southern cities as of 1960. Utilizing van den Berghe's paternalistic-to-competitive theory of race relations in an industrializing society, a causal model is postulated and empirically examined which views the black ghetto as instrumental in institutionalizing inequalities. The 1960 census data for a sample of southern cities provide some support for conceptualizing residential segregation as an "intervening" variable, between age of city and percent non-white, on the one hand, and the status inequality measures, on the other. A discussion of the theoretical significance of the residential factor, and of the methodological complexities involved in such research, follows. [ABSTRACT FROM AUTHOR]

This paper replicates an earlier study of the determinants of the speed of admission to Pacific State Hospital. Data from both the 1960-61 and 1965-66 cohorts of applicants are compared. There was a dramatic change in the variables that differentiate admissions from nonadmissions. The degree of retardation becomes the primary consideration for admission in 1965-66 cohort in contrast to the family income which appeared to be most predictive of early admission in 1960-61 cohort. It is suggested that some implications of the structural and normative changes in both hospital and the community are related to these findings. [ABSTRACT FROM AUTHOR]

The article describes a simulation model which fits cross-section regression equations into input-output accounting relationships to generate value-added shares of aggregate producing sector as functions of income and population. The value-added levels by sector can be derived from gross outputs by multiplying them by the value-added ratios from the input-output matrix. A constant positive elasticity for the share of some component of gross national product (GNP) will lead ultimately to that share's exceeding unity as GNP increases. The quadratic term allows an easily interpreted varying elasticity with respect to per capita income. One could argue that the concave curve for the large country industrial share shows the influences of declining final demand elasticities and completed import substitution, there seem to be offset in the S-shaped small country curve by the rapid growth of manufactured exports at high income levels. To get more precise measures of the relative importance of exports, import substitution and domestic demand in creating differences between the share functions, the model was run with various limiting assumptions about how the factors behave as income increases. The implication of the shape of the lines for next section's regressions of sector value added on per capita income are clear cut. Large countries should demonstrate a relationship of industrial share to per capita income which is concave on a double-logarithmic scale. The primary share in large countries should lie at a considerably lower level than in small countries, with the gap narrowing slightly as income increases.

This article discusses the properties of the nonswitching theorem. It is very unlikely that any activity of the consumption-good industry is more capital-intensive than any of the activities available to the capital-good industry. The inequality implies that the consumption-good industry will select the second process at very low wages. It is clear that there is a watershed wage rate at which the consumption-good industry switches from the second process. Processes of the consumption-good industry are monotonically ordered on the partial envelope.

This article presents the author's comments on a paper by Lowell E. Gallaway about the short-run behavior of income shares. The mystery of functional income distribution has confounded many able economists and has led to a myriad of theories, speculations and empirical investigations concerning the behavior of relative income shares. Gallaway argues that at the macro level changes in the ratio of investment to income are negatively correlated with changes in labor's share of private income. This theory, which has been advanced by Kaldor, hinges on the marginal propensity to save of proprietors being larger than that for workers. However, Gallaway states that the short-run behavior of income shares may have micro-economic rather than macro-economic roots. The fall in real wages in the expansion phase of the business cycle induces labor-capital substitution. If the sectoral elasticities are less than unity, labor's share will fall with a rise in labor intensity. The rise in real wages in the contraction phase reverses the above process and labor's share will rise. It must be remembered that these relationships imply constant returns to scale. If his theory is to be accepted, we must first be sure of the validity of the assumptions employed. Although we have played the neoclassical game with Gallaway other explanations of the behavior of relative shares seem more realistic.

The article establishes a theoretical link between modern growth theory and economist David Ricardo's tradition of treating labor as an endogenous factor. It analyzes the two class models of growth and the law of diminishing returns. The article draws attention to some important interactions between capital formation and population in the process of economic growth, presents a simple technique with the help of which at least the first steps in the analysis of these interactions can be taken and submits a series of substantive propositions about the effects of population and savings behavior on the growth process. In particular, it was shown that in the two class model, except for certain limiting cases, diminishing returns set a finite limit to economic growth, whereas in the one class model they do not necessarily prevent economic growth from going on forever. It was also shown that in a one class world the relative position of the income levels at which people begin to save and to increase their numbers can be of about the same crucial importance for the course of growth as returns to scale in the two class model.

This article presents some new theoretical considerations concerning the determination of personal income. It is well known that the distribution of income follows the asymptotic law of Pareto. As to the non-asymptotic part of F(u), it is quite irregular and sometimes multimodal, but can easily be represented by a mixture of simpler distributions. As a matter of fact, when one plots the distributions relative to sufficiently narrowly defined "occupations," one obtains a set of simple unimodal curves, for which skewness and average income tend to increase simultaneously. Then one encounters several different categories of income that have a markedly skewed distribution but still have a very small probability of attaining high values. Such categories have been quite successfully fitted by the log normal distribution, and it is well known that this law has been rationalized by considering the logarithm of income as being the sum of very many components, such that even the largest of them contributes very little to the total.

The article presents a study on Alfred Marshall's concept of unity. The author presents an introduction, the analysis on the theory of value, the discussion on the issue regarding money, interest and fluctuations, the aspects of the economic development, and the conclusion. Although no one today would question the "individuality" of Marshall's contribution to economics, the author argues Marshall's claim of "unity" in his scheme saying that what has possibly not been discussed so much by the scheme is the unity of Marshall's work, given his "real" position on fundamentals.

This article analyzes confusion in translating the concept of saving into concrete statistical measurement. Possibly there is something like general agreement among economists as to the definition of saving, but in the translation of the concept into concrete statistical measurement there is much confusion. The author is of the opinion that the confusion arises chiefly from the fact that, having defined the term in one way, an attempt usually is made to equate the thing so defined to something else, and this equational effort is usually a logical failure. Most theories of saving undertake to establish some fairly simple functional relationship between rate of saving and rate of variation of income, when both rates are expressed in dollars per period of time. The conception of variation in income cannot be expressed in units having only a first order time dimension without the introduction of an arbitrary interval of integration. Therefore any functional relationship which is asserted to exist between rate of saving and rate of variation of income can only exist for some arbitrary interval of time. The evaluation of rate of variation of income in units of single time dimension is achieved by integrating a function of second order time dimension over the interval.

This article investigates the influence of labor movement in equalizing wage rates for comfortable jobs in New England. Economic analysis of the influence of labor movement in equalizing wage rates for comparable jobs has been based on a common-sense interpretation of how the labor market might be expected to operate. Labor market investigations, both in England and in the U.S., have been focused largely on the transfer of unemployed workers to other regions and the experience of workers after the layoff. This article is based on a study of a New England labor market during the prewar years of 1937, 1938 and 1939, and a re-examination of the same market in 1942. Attention was focused on the amount of movement between firms and the effect of movement or lack of movement on equalization of wage rates for comparable jobs. Two adjacent, medium-sized Massachusetts cities were chosen for this study. They contained a considerable number of different industries, and were the trading centers of a substantial fanning area. The method followed in this investigation was to call on all the manufacturing concerns in the community which had more than fifty employees. Permission was requested at the interview to visit the plant and have the principal operations explained.

The article presents a time sequence or process analysis of bank credit expansion. In the evaluation, Phillips' analysis, a version of a multiplier and Keynesian analysis are used. Bank credit expansion are hypothesized to constitute an initial step toward the integration of the monetary concepts developed with the traditional theory of bank credit expansion and contraction. It is important to consider changes in income, consumption demand, investment, savings ad employment when analyzing bank credit expansion.