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Discusses paper money issues in the American colonies from 1720 to 1774. Misinterpretation of the colonial monetary policies; Overview of the political background of British monetary policies in the colonies; Controversy over colonial practices during the period.

In 1963 economists Milton Friedman and David Meiselman published a paper for the Commission on "Money and Credit," in which they attempt to test the relative predictive power of Keynesian and monetary theories of business fluctuations. Their methods and conclusions were sharply disputed in papers by scholars Donald Hester, Albert Ando and Franco Modigliani, and Michael DePrano and Thomas Mayer. The purpose is to review this controversy. The method is the simple one of first replicating the studies over the original sample periods and then examining the postsample performance of the competing equations. On a sociological level there can be little doubt that this controversy was and continues to be, enormously valuable. Many economists have been stimulated to work on the questions disputed by the monetarist and Keynesian combatants and it is probably correct to argue that two models of the U.S. economy are a direct outgrowth of the controversy. What has been missing from this continuing controversy, however, is an ex post evaluation of the earlier empirical work.

The article comments on the underlying theory and the conclusions on economic policy derived from the proposals by Professor Ragnar Frisch for a thorough study of balance of payments broken down by countries and currencies. Several countries, short of foreign exchange, balance their imports by state control at the amount available from exports and other sources; any increase in exports enables them to import more, any decrease in exports forces them to import less. In the U.S., on the other hand, the volume of imports is determined by private importers independently of the reserve position of the country; the total volume of imports is below the level determined by national income and relative prices, and no change of exports would influence the actual volume of imports. In these conditions, discrimination against imports from the U.S. will increase world trade.

This article discusses the effect on income of Phase II of the wage-price control program of the United States. Several discussants commented on the issue of income shares under the Phase II program. R. A. Gordon, William Branson, and others noted that, with productivity growing exceptionally fast because of the rapid cyclical expansion expected in the economy, profit margins would widen so much that some cost absorption by business would still permit the profit share to expand. Arthur Okun noted that Perry's neutrality was defined as the state of income shares that would prevail in the absence of the program and that the cyclical expansion of profit margins that we are experiencing would have occurred anyhow. Gardner Ackley argued that we did not know enough about what has happened to price-cost relations in recent years to take any strong position about what income shares should be. Therefore Perry's neutrality concept should not override the need to slow inflation, and some cost absorption was appropriate as a way to help accomplish this. James Duesenberry and Michael Posner felt that the most serious practical problem was not the question of existing income shares but rather delivering on the promise to slow prices noticeably. The trade unions are reluctant to accept wage controls because they have little faith that the inflation will slow down. Differing views were expressed on the use of profit margin ceilings in Phase II. Alan Greenspan pointed out that the application of the rules on the basis of the margins of individual firms would hold down overall prices and margins more than people thought.

The article sheds light on commercial banking in the United States during the sixties. The article makes the conclusion that if the trends emerging in the late 1950s and in 1960 are not reversed by major changes in economic conditions or tax and regulatory policy, then the commercial banks will be unable to play as important a role in financing the 1960s as they have done in previous years. The article's conclusion is based on the expectation that in all years, except those of recession, bank deposits will continue to expand at a slower rate than the growth of the gross national product.

This section introduces the articles which appeared in the March 1972 issue of the "Brookings Papers on Economic Activity." In the first article, William Branson estimates that the 1971 currency re-alignment, when fully effective, will bolster the United States merchandise trade balance by $7 billion to $8 billion a year. The effect of the devaluation of the U.S. dollar on the trade balance depends on how much it raises the dollar prices of U.S. imports, how much it lowers the prices of U.S. exports in terms of the currencies of buyers, and how responsive both buyers and sellers are to price changes -- that is, how large their price elasticities are. As Branson views the process, exporters set the price tags on tradeable goods in terms of their own currency. The paper by F. Thomas Juster and Paul Wachtel examines the effects of inflation and of transitory changes in income on consumer saving and spending behavior, with particular reference to the inflationary experience of recent years. The authors seek to explain consumer demand in several different ways, relying on both subjective data drawn from surveys of households and objective economic variables such as income, relative prices, and the rates of unemployment and of inflation. In the third article, Arthur Okun reaffirms analytically the desirability of an activist fiscal-monetary strategy. Like other Keynesian economists, Okun believes that fiscal and monetary policy should be shifted toward stimulus or restraint in light of observed and predicted economic fluctuations.

The article presents a summary of the papers presented at a round table conference on problems of the U.S. commercial policy. The Chairman remarked that two types of conflict had emerged in American commercial policy: the conflict between their foreign trade policy and certain of the objectives in New Deal domestic policy, and the conflict of their foreign policy with the foreign policies of the so-called "totalitarian" states. Professor Frank A. Southard, Jr.'s paper states that the trade policy of Germany has not been more successful than that of the United States. It has not succeeded in driving American exports out of foreign markets, nor has it prevented the United States from finding countries willing to support a non-discriminatory trade policy. Trade agreements have already been made with twenty countries, accounting for about 60 per cent of their foreign trade. E.D. Durand's paper dealt with "The European War and the Import Trade of the United States." The first World War resulted in a quantitative decrease in American imports, and sharp changes in the commodity composition of the trade. There was a marked decline (in terms of value) in the percentage of total imports furnished by Europe and a corresponding decline in the imports of the finished manufactured goods which are the typical products of that region. The shift from indirect to direct trade in such commodities as wool, tin and rubber was also responsible for the decline in imports from Europe.

Modern macroeconomic theories are customarily classified as either neoclassical or Keynesian. Neoclassical theories are those that assume that most markets are in equilibrium most of the time; in particular, they generally assume that the labor market is always in equilibrium. Keynesian theories are those that assume that many markets are in disequilibrium much of the time; in addition to the labor market, they generally assume that financial markets and markets for capital goods are often in disequilibrium, in this paper, we will be interested in the extent to which a theory assumes that markets are in equilibrium, rather than in the intellectual tradition of the theory, so we will classify theories as "equilibrium theories" or "disequilibrium theories." We will be interested in dynamic theories, which describe the development of prices, stocks, and flows of goods and services over time, rather than in static theories, which describe the impact of events such as a one-time change in tastes, technology, or government policy. One of the purposes of this paper is to develop an aggregate model of the development over time of an economy that includes money and that is in continual equilibrium in the sense described above. Such a model would help in the analysis of the properties of a competitive monetary economy, and would be a logical starting point for the analysis of such phenomena as unemployment and changes in the rate of inflation. Since most Keynesian models of the economy do not pretend to be equilibrium models, let us turn to the neoclassical models of economic growth. [ABSTRACT FROM AUTHOR]

The principle objective of our paper [5] was to present the theoretical concept of the Monetary Full Employment Interest Rate (MFEIR). We argued (and still believe) that this concept should be acceptable for use as an objective indicator of monetary policy by economists who believe that the Keynesian monetary mechanism is a valid description of reality. The presentation of estimates of the MFEIR was a secondary objective. As we stated, "[o]ur empirical results are presented more as an example of how this variable might be measured and used rather than as a definitive set of estimates of the monetary full employment interest rate during the 1952-1966 period." [5, p. 638]. [ABSTRACT FROM AUTHOR]

In asking the question, "what can Europe do for itself?" in recovering and rebuilding after World War II, the article presents a conference paper that addresses information from the "General Report of the Committee of European Economic Cooperation." The author summarizes the European position into one: increase production. The author considers whether the goals outlined are attainable and what that will mean, discussing food, coal, electrical power, oil refinement, and steel production.

The article comments on a study which suggests that endogenous policy responses do not necessarily impair the structural estimation of the working of the economy and economic policy. The paper implies that the decision period for policy is shorter than the observation period for the data. A multitude of problems arises if one really believes that the U.S. Federal Reserve or some other authority is making monthly decisions. If the proper model is a monthly one but a quarterly model is estimated, an important problem of aggregation through time arises, which should be treated explicitly. Critics of structural models argue that they are very likely to be misspecified, so that they produce the wrong coefficients and results more misleading and more troublesome than those emerging from the reduced-form approach. Solow suggested that monetary and fiscal policy makers might manage in some ways on some occasions to offset contemporaneous shifts from private demand even if they did not systematically behave according to any reaction function. Such unsystematic actions would be enough to make the policy variables correlated with the error terms in private demand equations.

This article discusses various research papers related to price regulation published in the March 2, 1936 issue of the journal "The American Economic Review." As we begin to get at the essence of any problem, we are likely to find that it loses the appearance of simplicity that it may have first possessed. We find complexities, involutions, differences that we never suspected, and that baffle us while they stimulate and fascinate us. This is the beginning of wisdom in economic research. Researcher Spurgeon Bell's paper brings home to us the institutional character of price rigidities. In mechanization, heavy overhead, and all that they entail are found some of the most compelling causes of price rigidity. The economic characteristics of an industrial economy, rather than original sin, seem to be primary factors of this problem. This is not to say that there is not some trace of original sin in the situation. Perhaps if we could take a representative set of corporation accounts and boil them down to their essence, the final precipitate might contain some trace of this sin.

This article analyzes quantitative credit controls in the U. S. as of 1971. While public discussion of credit controls seems to have waned with the restoration of easier conditions in financial markets, an examination of their economic consequences appears worthwhile for at least three reasons. First, in the nature of things, a bout of financial stringency is certain to recur some day and the advocacy of credit controls as an anti-inflationary device is likely to recur with it. Second, credit controls as applied to banks share some features with other devices recently employed in the U.S. Third, some proponents of credit controls favor them mainly as a means of influencing the composition of aggregate demand rather than as a technique for restraining its total. The paper will consider the following kinds of credit controls: (1) quantitative limits on total bank credit, but not on the composition of bank credit, (2) quantitative limits on specific components of bank credit such as loans to business, finance companies and consumers, but not on the total and (3) quantitative limits on effective demand for credit--specifically, controls over corporate capital issues. Generally speaking, the main interest of credit controls seems to lie in their potential for altering the incidence, rather than the overall efficiency, of restrictive monetary policies.

This article focuses on three papers on the regulated industries. Economist George Wilson seeks to appraise the effect of regulation upon resource allocation in transportation. Economist Roger C. Cramton seeks to test the efficiency of regulation in certain subject-matter areas. Economist Richard E. Caves poses questions with respect to the market performance of the regulated industries and seeks to explore methods by which answers may be sought. In Wilson's discussion of regulatory attitudes toward discrimination he ignores, although he has elsewhere recognized, the tendency for the relatively uniform treatment of distance despite varying conditions of density, terrain, and other factors which affect cost to create a reverse discrimination akin to the type imposed by reluctance to countenance reduced rates for shipments in excess of carload lots. It is, perhaps, surprising that in his discussion of the share-the-traffic criterion he does not call attention to the consequences of enforcing a division of traffic between competing modes when the differences in cost levels are sharp.

The article discusses economic policies of agencies of the Federal government of the United States. The use by the federal government of semi-autonomous corporations and agencies to accomplish certain quasi-commercial tasks has always been controversial. Many of the quasi-commercial and revenue-producing operations of government should be put in the hands of semi-independent, self-financing agencies and kept completely out of the unified Federal budget. This would reduce the size of the budget and, since the expenditures thus made extra-budgetary would very probably exceed the revenues similarly affected, it would also make for a budget surplus. Administratively, there seem to be some major drawbacks to the extra-budgetary idea in general and to the security issuing process in particular. Unfortunate effects on the government securities market may occur when issues are allowed to reach the market from several sources. When the extra-budgetary paper is sold to about the same group of investors as the regular Treasury issues, a certain element of competition could arise. Real financial independence for an agency of the Federal government seems unlikely.

The ultimate objective of selective credit policies is to influence the composition of real investment, and not merely to influence financial markets. Although various forms of selective credit policies have been in use in the U.S.A. for many decades, there has been relatively little systematic investigation of the extent to which this ultimate objective can be realized. In this paper, we attempt to examine the theoretical and empirical justification for using selective credit policies; specify the structural conditions under which such policies might be expected to achieve their real objective; and look at the empirical evidence to determine whether or not these conditions are satisfied in one specific area where selective credit policies have been proposed. [ABSTRACT FROM AUTHOR]

Presents a paper that focuses on the link between monetary policy and changes in real economic activity. Assertion that ambitious goals for achieving short-run stabilization with monetary policy cannot be met; Comparison of different methods of making the compromise between aggregates and interest rates; Analysis of the current economic status in the United States in 1973.

This article criticizes the Phase II of the wage-price control program of the United States. A number of issues concerning the present program of price and wage controls divide members of the Brookings Panel on Economic Activity, as they divide economists generally. This paper does not deal with the more basic of these issues. Rather, it takes as given the decisions to freeze prices and wages last August 1971, and to follow the freeze with a program for Phase II having essentially the objectives of the present one. It considers how well the program is achieving these objectives and whether and how they might be achieved more effectively. The treatment is selective rather than comprehensive. Assuming that the administration knew what it was getting into in adopting mandatory wage and price controls, it surely deserves credit at least for courage in electing to use them. And having taken that decision, it did some things well. First, it gave no indication that it was going to take this course; the public, business, and the unions were taken completely by surprise. The result is in sharp contrast with the terrible mess created in 1950, when discussion of a possible freeze was allowed to go on for nearly six months -- and government officials themselves actively contributed to it.

This article presents the author's comments on the Phase II of the wage-price control program of the United States. I agree with so much of what Gardner Ackley has written about the Phase II program that I hesitate to take issue with his paper at all. Since the end of the freeze, prices have risen too rapidly, and the goal of bringing the inflation rate below 3 percent will not be reached unless the Phase II authorities get tougher. Some of the operating procedures of the Price Commission should be revised to accomplish this improvement; and I agree, in particular, that the commission should not rely on term-limit pricing arrangements and on cost estimates supplied by firms themselves. But I do disagree with Ackley's treatment of cost absorption. And that point is so central to the issue of income shares under Phase II -- an issue that, in turn, is so emotionally charged that it threatens to disrupt support for the overall program -- that a comment is in order. At another time, some cost absorption by business might have seemed both more necessary and more appropriate than it seems now. In early 1968, I proposed a new guidepost formula that called for absorption, as defined here, by both labor and business.' At that time, wages under the large number of long-term wage contracts that were coming up for negotiation clearly had fallen behind in the inflation that started in 1966. To ask a slowdown from wages in this environment was clearly to ask for a sacrifice, and some cost absorption by business seemed necessary as the other half of the bargain. Today's situation is not the same.

This article comments on a paper by William Poole about the wage-price policy of the U.S. in 1971. Poole offered a model of incomes policy that is like balancing an egg. Finding a middle approach for policy that works is like trying to stand the egg on its head: It is clearly unstable and cannot be done. Poole fears that a policy that is enforceable only against large firms and unions would find controlled firms unable to meet the demand for some of its products. In this situation, he sees customers forced to switch their purchases to uncontrolled firms, and this development leading either to broader controls or to their complete abandonment. Under the incomes policy, prices is expected generally to be governed by costs and so to present no special problem. For the areas where market power is great, a price-wage board would monitor price movements. While excessive price increases in oligopolistic sectors are not the main cause of the inflation, there are reasons to guard against them: First it is important to demonstrate an evenhanded treatment of wages and prices under the incomes policy; second, we want to ensure a prompt pass-through of cost moderation into prices; third, we want to avoid the occasional instance in which administered pricing might contribute independently to inflation. The biggest problems would come from a few sectors in which classical market power is not the issue but in which prices have been rising in ordinately for special reasons. If allowed to continue, these increases would make cooperation under the incomes policy in other sectors more difficult.

The article presents discussions by economists on some papers that are published in the May 1, 1970 issue of the journal "American Economic Review." The author states that economist Joseph L. Bower's fascinating discussion of problems of control in the diversified corporation is illuminating for national planning as well as for understanding of the potent but troublesome conglomerates. Bower states, "The job of top management is to keep self-interest and corporate interest aligned." The author points out that he cannot find an equally terse statement of the essential point in his consideration of the same problem at the national level, but his perceptive contrast between the conglomerate's operating efficiency and its lack of responsiveness to social goals makes issues clear. According to the author, the essential job of national economic policy is to align the corporation's self-interests with goals of the society. It is not enough to spell out targets and discuss them with corporate executives, policy has no meaning unless those taking daily decisions gain from pursuing goals set by the society and lose when they go in the wrong directions.

The article presents a critical discussion of the papers by George H. Hilderbrand and William Fellner on long-run policies of the U.S. government. The author comments that with respect to long-run period both the economists correctly imply that full employment is assured only if we act right. There is among economists a vast amount of agreement bearing on what constitutes right action. Still, there remains a conflict of advice which is crucial when we come to specifics. The conflict is such that we dare not gloss it over but must, if we are to arrive at a stable consensus, keep it well to the fore. When it comes to selecting means for the control of aggregate demand, it notoriously may make a great difference, in what devices one will espouse, whether he does or does not believe that changes in the real value of cash balances exert significant force. If we turn to the problem of selecting a guide to action upon aggregate demand, we find again disagreements which the author doubts will be cleared up unless we frequently leaf through a well-kept record on the sources of disagreement, which goes back to and includes the argument over the automaticity of full employment.

The progress of European recovery has been anything but steady since the winter of 1946-1947. It moved forward rapidly in 1948 and the very beginning of 1949, but the U.S. recession in the summer of 1949 set Europe back sharply. Indexes of production were stagnant or declining in most of Europe during that summer. It looked as if what was originally conceived as a largely physical task of expanding agricultural and industrial production had already, at a much earlier stage than anticipated, encountered the problem of inadequate markets for the output that could be produced. The setback was climaxed by the devaluation of sterling in September and devaluations of practically all other European currencies that followed immediately in its wake. This paper is concerned with the economic state of Europe now and in the near future, it contains certain views which may have a wider application in time and in space. It is written in the belief that there are lessons to be learned from current European experience which have quite general significance for economic policy, public and private, here as well as in Europe. As the title of this paper suggests, it is intended as an essay in political economy rather than in pure economics or economic theory.

The article presents the author's comments on the research paper "Some Problems of Methodology in Modern Economic Theory" by professor Otto von Mering. The paper discusses the relation between economic theory and economic policy, with particular reference to the new developments arising from economist J. M. Keynes's The General Theory of Employment, Interest and Money. Von Mering's principal conclusion is that political trends largely determine important new developments in economic theory. The adaptation of theory to political trends may take place merely by shifting the emphasis on one or the other of the various data in the economic system. Without attempting to belittle the achievements of Keynes, von Mering attributes the great triumph of the General Theory to the fact that it lends scientific support to the important political trends of the time, whereas the body of doctrine Keynes attacks, so-called classical theory, is often out of line with the necessities of present- day economic interventionism. The author is surprised that in a discussion of methodology dealing particularly with the relation of theory to practice von Meting does not even mention pragmatism in the U.S.

Two papers on the role and status of the U.S. in the world economy during 1940 are presented. The first paper examined the role that war played in the position of the U.S. in international economy. In the second paper, the impact of more than a year of war on the international economic relations of the U.S. is described. The author believes that the most important element in the country's economic relations with the rest of the world is foreign trade. Significant changes in imports and exports have occurred during the war.

The article presents summary of articles present at a round table conference on banking reform through supervisory standards. Homer Jones, in his paper, stated that there are no codified uniform statements of the rules and procedures of bank supervision. Their appraisal depends upon learning something of these rules from their very limited legal basis, from the traditions of the supervisory agencies, and from observation of supervisory operations over a period of time. Two aspects of bank supervision have been of chief interest since the reorganization period after the holiday. Allegations have been made that the influence of bank supervisors has helped to retard the extension of bank credit and consequently the recovery process. Ronald I. Robinson, in his article, expressed that bank examiners apparently can influence the quality of bank loans and investments and the practices in acquiring, handling and collecting such assets. They apparently can also influence the extent to which banks keep liquid. In his paper, Robert G. Rodkey stated that the traditional emphasis in bank examinations has been on technical routine matters with only incidental attention to general policies. Sound general policies are usually accompanied by sound assets, and general policies can be sound only.

This article focuses on the short and long-term credit in early U.S. banking system. The first U.S. banks specialized in short term self-extinguishing credit, and exercised a function that was almost purely monetary. But due to the pressure of demand for long term credit by growing population, this specialization rapidly diminished. In some states, particularly in New Orleans, where there was a great concentration of commercial activity, the pressure was resisted, and banking was mostly confined to the monetary function. Elsewhere, however, the banks abandoned specialization in short term credit, instead they attempted to supply simultaneously both the circulating medium that the country required and a large part of its permanent capital. During the first sixty years of American banking there was a continuous conflict over the need for a circulating medium and the need for permanent capital. The conflict involved the fundamental question of what the function of a banking system should be.

This article presents information on several papers and memorandums related to economic conditions in various countries. The Parliamentary documents for 1886 will contain a good deal of evidence of the increasing uneasiness as to the condition and prospects of the foreign trade of England. A Blue Book has been issued, giving the rates of duty levied on imports by the different European countries and the United States; and a second is to give the duties levied by the British colonies, these returns being on the plan of the similar documents published in 1882. The Commission on the Depression of Trade have also collected and published reports from the English consuls, showing the impediments to British trade in the different countries. Another snippet reports that the opening of fertile wheat lands in the United States, and the cheap transportation of grain to Europe have had an influence not only on England and Ireland, but on France, Germany, and Russia. French and German legislation has been invoked to protect the farmer. But now an interesting movement is in progress among the Russian peasants, by which the former serfs are becoming separated from the land. At the time of the emancipation of the serfs, Russia controlled the wheat markets of Western Europe; while the prices of agricultural products were high, and even rising.

The article discusses the effects of U.S. government buying policies on commercial products and prices. The product policy of the U.S. government contrasts significantly with most other industrial buyers. Products are grouped into classes and bought either through sealed bids, if they pose direct price competition, or through individual contracts. Sealed bids appear to result in lower prices as compared with limited-competitive bids. Experts say this is a result of increased price competition and lower sales costs due to open bidding, single awards, and use of specification.

The article focuses on the structure of the U.S. federal revenue system and the formation of the budget in accordance with national economic objectives. It is suggested that secular changes made to federal revenue modeling do not match the economic policy goals of the state and, that in its present form as of 1973, it is incapable of doing so. Alternative federal revenue management is presented to directly address economic goals through the budget process, taxation, and spending allocation policies.

The authors discuss articles that focus on the discipline of the balance of payments as it may operate in Western Europe, Latin America and the United States. The authors explain that the balance-of-payments discipline does not arise from the actions and interactions of the economic processes themselves but rather from the ability of public policy to exercise greater or lesser self-restraint, depending on the trends of the balance of payments and the causes of the imbalance. It is suggested that the true meaning of the balance-of-payments discipline relates largely to the question of how far a country could or should deflate or inflate in order to maintain external balance at given exchange rates.

The article examines the administrative aspects of the treasury-central bank disagreement in the United States. The article presents a proposal for a single new executive department be created to take the place of the U.S. Treasury Department and of the Board of Governors of the Federal Reserve System. The central benefit for the department would be that neither the Treasury Department nor the Federal Reserve would be subordinate, nor would either be independent. The article provides a background for the details of the proposal, and the nature of the problem is analyzed.

The article discusses bank supervision and its relationship to monetary policy in the United States. The author notes that the objectives of bank supervision are vague, and its powers spread across various authorities, both state and federal. Practical effects of supervision are discussed, as are arguments against simplification and consolidation of supervisory duties. The author presents the case in favor of consolidation and notes the impact this would have on bank liquidations and monetary policy.

The article presents an examination of the success of anti-inflation policies in the United States. The author notes the political climate in which this paper is being published, the fall of 1971, as the U.S., he claims, has just endured a failure in conventional stabilization policy to control inflation, marked by the use of aggregate fiscal and monetary policies in controlling economic demand. The article examines the past fiscal policy, asking which anti-inflationary policies were worth the cost and which were not. The author's conclusions note the tradeoff between inflation and unemployment, considers the new incomes policy, and addresses structural changes in the composition of employment.

This review of the Commission on Money and Credit is in three sections. The first section describes the background of the commission. The second section discusses the economics of the commission's report. The third section appraises the impact of the commission. The paper is directed to the contributions of monetary commissions to the formation of public policy, and the relationship between the design of the Commission on Money and Credit and its impact. [ABSTRACT FROM AUTHOR]

This article focuses on the macroeconomic policy in the U.S. after World War II, which brought no steady improvement in the performance of the country's economy. Under the view that the economy has become increasingly difficult to manage, policy has prevented economic performance from deteriorating even though it has not been successful in bringing about a definite improvement. Although substantial disturbances have occurred in the past decades, such as assassinations and the Vietnam War, they have been no worse than the disturbances in the earlier postwar years. The end of World War II required an enormous reallocation of resources from wartime to peacetime uses. There were earlier instances in which the rate of inflation was slow to decline in the face of excess capacity. In the most infamous example, wages and prices stopped falling after 1933, in spite of continuous high unemployment. In the late fifties and early sixties, the inflation rate, which had risen to about 4 percent in 1956 decelerated only slowly before stabilizing at a little over 1 percent in 1962-63, in spite of two recessions and an unemployment rate continuously above 5 percent. The behavior of the inflation rate after 1969 is quite consistent with these earlier instances.

This article focuses on the issue concerning the need for a more expansionary monetary policy that will stabilize the U.S. economy in 1974. The expected and approved path appears to be quarter-to-quarter rates of growth of real gross national product in 1974, with unemployment rising to about 5.6 percent in the second quarter and remaining there the rest of the year. The rate of price inflation would fall sharply in the second quarter, but rise slightly toward the end of the year. Likewise, it is a fallacy to conclude that real rates of interest are low simply because current rates of inflation are high compared with nominal market interest rates on dollar-denominated assets. The important thing is the comparison of earnings prospects and interest rates. This is the comparison the stock market makes, and it is hard to argue that real rates have declined in any meaningful sense after price-earnings ratios have declined by a third over the year. On the other hand, the rate of increase of price indexes do not represent operational investment opportunities. Recent increases in price indexes have large one-shot components, which are the rational savers and investors who would not extrapolate those rates into the future.

This article comments on the two papers by economists Marinas Brownlee and Eric Maisel in which they analyze the effects of monetary policy of the U.S. in 1966. While Brownlee is primarily concerned with the demand for long-lived assets and Maisel with the flow of funds, both papers tend to emphasize the interest-rate effects of monetary policy. Both authors conclude that the major impact of monetary policy is on housing. The substantive differences between Brownlee's demand analysis and Maisel's supply-of-funds analysis are discussed in Section I. Interest rates play a major role in both papers as an indicator of monetary policy, as a measure of the cost of money, and as a transmitter of monetary impulses. Maisel begins his thorough review of 1966 with the observation that there are several conflicting theories as to the manner in which money affects the real economy. He adopts an eclectic view and analyzes "the relationship of monetary changes to expenditures in housing and other fixed investment," where the monetary influence on expenditures is more readily understood. Accordingly he traces, carefully and in detail, the link between interest rates, disintermediation, portfolio adjustments, changes in the flow of funds, and changes in private expenditures.

This article discusses the key features of welfare economics and welfare reform in the U.S. The article discussed that the primary reasons why economists prefer to transfer purchasing power is the fundamental proposition of consumer sovereignty. The two forms of transfer equivalent to the donor's eyes only if: (1) he and the recipients have identical tastes and income elasticity with respect to the recipients' consumption (2) only utility externalities exist. The study implies that in a world of externalities, everyone is a term inclusive of the donors as well as the recipients of welfare programs.

The article presents a comment on public policy problems in the domestic crude oil industry in the U.S. Researcher Paul Davidson developed a model of the domestic crude oil industry and attempted to evaluate certain policy matters in the light of his model. Three of Davidson's more important conclusions relate to conservation, the price of crude oil and the relationship between percentage depletion and exploration. The paper as a whole is interesting and worth, while endeavor to apply economic analysis to such policy problems. Unfortunately, these issues are extremely complex and the author feels that there are a number of points, at which the analysis suffers from the failure to consider certain relevant facts and from imperfections in the mode of analysis. The comment presented in the article proposes to take issue with Davidson's major policy conclusions and to suggest that a closer look at some facts may raise questions about the validity of Davidson's conclusions. Davidson argues that compulsory field unitization would eliminate the undesirable effects of the rule of capture and would insure that lower-cost wells were operated more intensively. The author does not propose to take issue with Davidson on the purely economic desirability of unitization.

The article focuses on econometric growth model of the U.S. There has been increasing concern among academic economists and other interested parties during the past several years about the related problems of economic growth and what appears to be an undesirably high plateau of persistent unemployment in the economy. The rates of growth of capital formation and output in the U.S. have been compared unfavorably with those of both the Soviet Union and the resurgent economies of Western Europe. At the same time, the recent tendency of the unemployment level in the U.S. to remain above 5 per cent of the labor force even during comparative boom periods has been a matter of some consternation. Whether the first problem exists or can be simply attributed to the free market's reflection of a utility function which possesses a positive time preference for current output as opposed to the future production of goods and services, and whether the second problem can be blamed upon such disaggregated factors as technological changes, shifts in demand, and labor immobility are questions which it is hoped can be at least partially answered in this paper.

This paper considers whether the interest cost of E bonds to the Treasury is justified in view of the money-like nature of the bonds. The character of the bonds and the empirical evidence suggests that E bonds are weak anti-inflationary debt instruments and that both short-run and long-run policy considerations call for replacing the public's holdings of this type of debt with less money-like types of assets. Series E bonds are ten-year Treasury obligations issued at three-quarters of their face value. If held to maturity, the annual yield rate is 2.9 per cent. This is a higher rate than that prevailing on long-term Treasury bonds, and as an investment for income E bonds are the most attractive security sold by the Treasury. The offer is limited to sales of $3,750 issue price to any one person in a calendar year, an effort to prevent the wealthy from getting an unduly large return merely by holding government debt. During the war period, the campaign to sell government debt to individuals rather than monetize it through the banking system was centered on pushing the sale of E bonds.

This paper focuses on the bearing of U.S. fiscal policies on the problem of World War II and post-World War II inflation. Some elements of the analysis could be made to fit the usual developments during the cyclical process; others could not. The main point that remains true, even for normal periods, is that an ex ante inflation potential calls for higher taxes, while an ex ante deflation potential calls for tax reductions and--if the deflation potential is substantial enough--for consumer subsidies. It is, of course, possible to substitute other expansionary monetary policies for tax reductions and consumer subsidies, but the other monetary measures are either less effective or inferior in certain respect and it would therefore be highly desirable to combine them with those here considered. Measures other than those of a "monetary-fiscal" character are also very important, but we are not concerned with them here. A flexible tax policy is a promising means of reducing economic instability. A reasonable degree of flexibility could, however, scarcely be accomplished without maintaining the pay-as-you-go system and without the possibility of adjusting tax rates in, say, quarterly intervals. The difficulties standing in the way of such adjustments are political in nature. The necessary measure of flexibility cannot be accomplished without some delegation of power on the part of Congress--possibly to a committee of its own, rather than to the administration.

The purpose of this paper is to describe the present use of differential pricing in the wartime regulation of three important nonferrous metals, namely copper, lead, and zinc in the U.S. and to suggest certain problems that have arisen, which may be of interest to people. Due to price instability in an area of large importance to a wartime economy, the Office of Price Administration and its predecessor agencies' selected certain of the principal nonferrous metals for early regulation. As the pressure of demand for each of the metals increased sharply, it became apparent that the continuance of a single-price system would produce highly inflationary consequences. Moreover, the demand for materials so essential to a war economy is highly inelastic and it appeared improbable that material price increases could choke off demand to any appreciable extent. The physical limitations associated with supply were too serious, especially in copper and zinc, to make it at all possible fully to satisfy the necessary demand of government and of private industry for these essential metals.