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This article explores two theories, one by H. A. Latané, the other by M. Friedman and A. J. Schwartz, regarding the significance of interest rates as an aspect of income velocity. The author presents an economic model using historic annual U.S. data from 1880-1970 to test both theories. He includes a variable allied with competitive interest payments on money, the inverse of the money supply multiplier, and a monetary aggregate which includes time deposits. He feels his results eliminate the major differences held to exist between the two theories.

One of the basic results of the traditional Keynesian model is that the greater the interest sensitivity of the demand for money, the less effective is monetary policy. In the limit, when the demand for money is infinitely interest elastic, the LM curve is horizontal, the economy is in a liquidity trap and monetary policy has no effect on GNP. Conversely, when the interest rate does not appear as an argument in the money demand function, leaving money demand a function of income only, monetary policy is all powerful. In this case, the economy is in the "classical" range where a change in money supply (M) produces a change in GNP equal to A M.V, where V is velocity. Friedman's early empirical work demonstrating that money demand was not (very) sensitive to interest rates was used to support the position that changes in money supply have a powerful impact on GNP. Indeed, most monetarists and neo-Keynesians who have produced empirical evidence showing a small interest sensitivity of money demand have concluded that this is synonymous with a more powerful impact of monetary disturbances on GNP than otherwise. [ABSTRACT FROM AUTHOR]

The regression phenomenon may seen simple to some technicians. Yet failure to grasp the underlying idea or to connect it to specific problems has led to frequent misinterpretation of data--the so-called "regression fallacy." Actually, while there is only one regression phenomenon, there are two distinguishable regression fallacies. This article explains the regression phenomenon and shows how the two fallacies can be identified and avoided. [ABSTRACT FROM AUTHOR]

The article seeks to define the relationship between per capita income and retail sales according to geographic location and to describe the limitations of income statistics when reaching these conclusions. The article distinguishes between the uses of income data, to both indicate standards of living and to determine markets for certain goods and services. The article reports a lack of correlation between the median income per family and retail sales per capita and shows the results of a study to prove this. The article compares the suburban and urban relationship of income and retail sales, but points out that while cities are largely self-sufficient (not closed), they too rely on markets beyond their geographic boundaries.

The article discusses the input-output analysis method utilized in marketing. The practice is a statistical data collection and analysis which is designed to provide insight on probable cost trends. It's largely used by industries which sell directly to consumers, investors, and government and foreign buyers. A prerequisite for the approach is the organized collection of quantitative information pertaining to purchases and sales among industrial or processing sectors of the economy. The input-output table represents a set of double-entry books for the economy, in which each sector is represented by debit and credit accounts. It also shows in compact form the transactions among the sectors during a stated time period.

The article reports the author's opinions regarding subjects of importance to both economists and marketing personnel. The importance of marketing research is discussed in connection with the economic implications of consumer behavior. It is suggested that marketing theory and economic theory may be intertwined. The functional approach to the study of marketing is compared to the managerial approach. It is proposed that economists may be most interested in the managerial aspects of marketing, as this is the area most affected by economics. The author presents a criticism of fundamental economic theory that focuses on possible inaccuracies associated with the cost curve concept. The theory of monopolistic competition is discussed in relation to equilibrium.

The article reports on the topics of product differentiation and the demand for marketing services. The author focuses of difficulties associated with economists applying theoretical models to the study of marketing. He recommends that modifications be made to production theory to account for the fundamental difference between commercial products and the commercial service of marketing. It is suggested that equilibrium of a marketing firm must be projected in terms of consumer demand for marketing services and the production function. The author references statements made in the work "Principles of Economics," by A. Marshall to further his argument.

The article discusses the problems associated with creating economic experiments in laboratory settings through the use of controlled and simulated conditions. The author explains that unlike other types of scientific experimentation, economics has too many variables that require real-life situations in order to observe. The author suggests that rather than creating scenarios, the most effective way to study the economy is through observing and discussing the actual trends that occur in relation to inflation, politics and growth.

In this article the author replies to criticism of his article "The Effects of Collective Bargaining on Public School Teachers' Salaries." Robert N. Baird and John H. Landon had discussed research methods used by the author. The author clarifies two areas of misinterpretation with an argument that he did not use organizational membership as a measure of the extent of teachers' representation in a particular state. He also offers his evaluation of the coefficients and parameter estimates produced by one-equation models and simultaneous models.

This article examines the Cambridge theory of distribution on wages. According to the general role of wages in the Cambridge theory of distribution, the active economic force of investment, which generates economic growth, will determine the profits share in an economy. The rate of accumulation and thriftiness conditions and availability of labor are the factors that influence long-run wages and wages shares. A study is cited by economist Nicholas Kaldor reviewing several facts that influence the long-run view on wages.

The conceptual validity of the backward-sloping, short-run labor supply curve has long been a popular article of faith among professional as well as lay economists. Although the author of this article does not deny the possibility that such a supply schedule may exist, he attempts to show that its regressive segment probably lies well outside the range within which labor demand schedules are likely to intersect the supply curve. Moreover, he argues, if such a regressive supply curve exists, it is not reversible, and therefore is not a true supply curve in the conventional sense. In a mass-consumption economy, at least, income and labor effort are more likely to be positively related to a very substantial degree, and it is even becoming increasingly doubtful that the traditional concept of labor supply is relevant to so-called underdeveloped economies. [ABSTRACT FROM AUTHOR]

The authors present an economic forecasting model which they use to predict the annual growth of Southern California for 1967 using information from 1953 through 1961. Some of the assumptions used include a further escalation of U.S. involvement in the Vietnam War, strong inflationary pressure, and that U.S. defense expenditures and defense department payrolls in the area will remain unchanged. The econometric model predicts that the economy of Southern California will grow faster than that of the U.S. for 1967.

Prediction for 61: The recession is on its way out. Recovery should occur before midyear, and from then on the track is clear and. Business has the green light for expansion. By the end of 1961 the American economy should reach a new high with a GIVP of 514 billion dollars for the year. This is the collective opinion of twenty-three economists and authorities on business whose forecast of tile shape of things to come in the business world is printed here with substantiating data and figures. [ABSTRACT FROM AUTHOR]

This article presents the author's opinion on how the U.S. will deal with economic growth in the 1960s. He notes that numerous forecasts have called for a decade of continued growth and economic prosperity. Some controversy has arisen over whether this growth will be enough to supply both military and civilian needs and whether this wealth will be used to the best possible advantage. He examines the most popular economic indicators, various rates of growth and some of the expected changes that will occur during the decade.

The Duesenberry-Bosworth (DB) paper (and the impressive amount of work which ties behind it) are a welcome addition to the literature on models of the financial sector. In the first instance, there has been considerable interest in recent years in moving away from models with a heavy dosage of term structure and risk structure equations towards a model in which interest rates are explicitly determined by portfolio behavior of demanders and suppliers of various financial assets. Needless to say, the DB effort takes a giant step in this direction. To me at least, the other main attraction of the DB effort is that it attempts to exploit the flow of funds data, whose promise has long been touted but is as yet unrealized. The present paper reports a number of policy simulations with their complete macroeconometric model. The general structure of the model is given in the paper before us but most of the details are omitted. The model, however, is described more extensively in research which has recently been reported elsewhere. Since it is difficult to evaluate the simulations reported without some reference to the underlying model, I will be pardoned if I say a few words on this score. [ABSTRACT FROM AUTHOR]

Apparently there are some basic misunderstandings of the concept of regression. This article attempts a reconciliation of divergent viewpoints, and also explains the statistical theory underlying this phenomenon. [ABSTRACT FROM AUTHOR]

A pairwise trading process is formulated subject to conditions of non-negativity of traders' holdings, quid pro quo, and a limited number of trading opportunities. The following points are made: (i) there is a centralized procedure that achieves the equilibrium allocation for an arbitrary economy; (ii) it is not in general possible to find a decentralized procedure that achieves the equilibrium allocation for an arbitrary economy; and (iii) in a monetary economy there is a decentralized procedure that achieves the equilibrium allocation. The usefulness of money is that it allows decentralization of the trading process. [ABSTRACT FROM AUTHOR]

This paper demonstrates how the short-run static stability conditions of the two-sector growth model can be derived by converting the problem into a two-person, two-good exchange model. It is shown that the only necessary and sufficient condition for short-run stability is the Marshall-Lerner condition, and that the Drandakis (sufficient) condition follows easily from the former. [ABSTRACT FROM AUTHOR]

This lecture surveys the history and recent resurgence of interest in models with errors in variables and substantive unobservable variables. Among several examples of such models, special attention is paid to a schooling-occupation-income achievement model in which identification and estimation are based on the variance-components structure (across families) of the unobserved individual ability variable. [ABSTRACT FROM AUTHOR]

A concept of competitive equilibrium is proposed for a game. The following three reasons are given, proving that this is really a generalization of the concept used in economic theory: (i) The mathematical definition is the same; (ii) an existence theorem is proved in the same way; (iii) when the number of players becomes very large, in a suitable way, the core and the equilibrium are the same. The concept and utilization of a characteristic function, a generalization of the one defined by yon Neumann and Morgenstern, form the basis of this paper. [ABSTRACT FROM AUTHOR]

This article presents a list of books on general economics, economic growth, economic statistics, monetary and fiscal theory and institutions, international economics, administration and business finance, industrial organization, agriculture, manpower, labor, population and welfare programs. Some of the books are ""The Penguin Dictionary of Economics", "The Retreat from Riches. Affluence and Its Enemies", "What Has Happened to Economic History", "Principles of Political Economy", "The Ethical and Economic Theories of Adam Smith", "Studies of Field Systems in the British Isles", "The World in Depression 1929-1939", "Frontier Elements in a Hudson River Village", "Medieval Trade and Finance", "The History of Trade Unionism", "Education and the Rise of the Corporate State", "Growth and Distribution", "Accumulation, Financing and Money in a Dynamic Economy", "Price Consistency in Development Planning", "Economic Growth in China and India 1952-1970", "A New Look at Inflation: Economic Policy in the Early 1970s", "The Economic Consequences of Reduced Military Spending."

This article discusses a microeconomic approach to induced innovation. It presents a microeconomic model by reformulating innovation possibilities on the basis of research processes which have expected pay-off functions in terms of efficiency improvements. This leads to the specifications of research as an investment problem in which present value is maximized. A comparative static model is developed and examined under various budget constraints, which have a substantial impact on the behavior of the model. It is shown that Syed Ahmad's and Charles Kennedy's approaches are special cases of the model and that Kennedy's Innovation Possibility Frontier cannot be stable over time if it is meant to characterize the outcome of research as an economic process.

One of the memories that every former student of Frank Knight undoubtedly carries with him is that of the circular-flow diagram which Knight used to illustrate the workings of the economic system. To the best of one's knowledge, the first appearance of this diagram in Knight's writings was in the mimeographed material that he prepared for teaching purposes at the University of Iowa in the early 1920's.' Knight first published the diagram, however, in the four chapters on the economic system that he wrote for the volume of Readings prepared for the famous undergraduate Social Science Survey Course at the University of Chicago. Subsequently, Knight reissued these chapters as a separate booklet entitled "Economic Organization," in which form it became a standard feature of his graduate theory course at Chicago over the years. So it was only natural for me to dwell upon this diagram in my memoir on Frank Knight as a teacher which appears elsewhere in this issue. After having in this way built conjecture upon conjecture in the search for the "familiar figure" that inspired Knight's wheel-of-wealth diagram, the possibility that Knight never drew his inspiration from any such figure in the first place.

This article presents a reply by the author in response to the comment made by scholar Kevin Clinton. Clinton has provided an interesting counterexample to the verbal argument that the omission of cross-adjustment coefficients necessarily misspecifies the system of asset adjustment proposed by economists William Brainard and James Tobin. However, Clinton's specification is not a counterexample to any of the formal propositions developed in the paper. As Clinton observes in a footnote, the author dealt with two alternative sets of sufficient conditions for consistency of that system. He has presented a third alternative. All three of these alternatives are special cases of the complete set of necessary and sufficient conditions for consistency. The author did not develop these latter conditions in my paper since, at the time he wrote it, the author did not recognize their economic interpretation. This interpretation can now be provided. He therefore welcome the opportunity to develop the complete set of conditions.

The article examines the issue of underinvoicing of imports in Pakistan. It describes the system of import control in Pakistan from 1965 to 1968. The technique used to establish the existence of underinvoicing of imports is presented. The article also discusses the relationship between underinvoicing of imports and the import control policies followed by the government during that period. The study provides evidence that underinvoicing of imports in Pakistan existed during the period.

The article tests the hypothesis that the inclusion of investment grants would eliminate the downward trend in post-tax profitability of companies in Great Britain. It discusses the association between depreciation provisions and replacement costs, and the impact of inflation on different industries' disposable profits. It demonstrates the way in which the choice of measure can so drastically affect the apparent record.

The article examines the association between corporate inventories and sales in Great Britain, so as to permit the use of such associations as "prior" information in time series analysis. The study failed to find a substantial amount of evidence that would permit the author to reject the hypothesis on the elasticity of inventories. The article provides evidence to refute the use of the square root rule in inventory holding.

The article proposes a method for estimating the stabilizing influence of real balance and income redistribution effects on the British economy. It focuses on a Keynesian multiplier for calculating real balance effects and redistribution effects. The calculations for the interest rate effects are presented. The article suggests how real balance effects, redistribution effects, and interest rate effects may be incorporated into the traditional multiplier formula.

The article discusses the effect of innovations on patterns of rural development and in particular on output per acre and on labor input per acre. Data from a sample of 240 smallholdings in five different areas of Malawi are examined. The article indicates that the existence of differing patterns of rural development in these areas. It discusses the implications for rural development policy. The article shows a bias among the smallholders in favor of innovations and a skepticism about the viability of yield increasing innovations.

The article shows that the projections of the intermediate outputs of industries are largely dependent on the reliable estimation of a few major coefficients. It also shows that the location of these cells within the input-output matrix can generally be determined with considerable accuracy from examination of a firmly based table. The article used the input-output tables for 1954 and 1963 in Great Britain. The problems involved in defining and identifying major coefficients are discussed.

The article examines a formulation of the relationship between consumption and income. It explores the proposition that the formulation of the consumption function implies a positive relationship between the savings ratio and the rate of growth of income. The proposition is examined in the light of average savings ratios and rates of growth of income of a sample of industrial countries. The various theories of consumer behavior are discussed. Finally, the article comments on some of the implications for simple economic growth theory.

The article explains the asset choice behavior of clearing banks. It distinguishes two different lines of approach to bank asset choice behavior. The results of an examination of the usefulness of interpreting Commercial Bank behavior in Great Britain, over the period 1953 to 1967 are presented. Four models of bank asset choice behaviors are described. The article details the items included in the balance sheet of clearing banks. A restatement of the conventional approach of asset choice under conditions of uncertainty as adapted to cater for situations in which the choice set does not comprise all assets and liabilities in the portfolio of the decision-taking unit is presented.

The article examines the main characteristics of the international pharmaceutical industry as it functions in the developed world. It focuses on the anomalies and distortions which exist because of the peculiar structure of the drug market and of the great oligopolistic power exercised by the leading firms. The implications of the international pharmaceutical industry for developing countries are discussed. The additional social costs imposed on the developing countries by playing host to the drug multinationals are described, using the Indian case as an example.

The article presents a case study on the analysis of inter-industry relationships in Turkey. It discusses the effects of inter-industry linkage on industrial performance by using an extension of the conventional Rasmussen technique to accommodate both final demand repercussions and explicit policy objectives. Turkey was chosen as a case study since the problems it currently faces are representative of those encountered by many developing countries. The results provide a useful quantitative indication of the severity of the constraint imposed by the structure of the economy on the government's ability to attain desired policy objectives, and also indicate the chief areas of policy conflict and compatibility.