Abstracts Table of Contents ECONOMIC THEORY; HISTORY; SYSTEMS The Role of Market Structures in Describing Free-market Dynamic Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Curvature in Economic Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stability and Instability in IS/LM Models: A Reexamination . . . . . . . Oil Discoveries in Industrialized Countries: Opportunities and Policy Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information Structure of the General Theory and General Equilibrium Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ramsey Economics: Some Inherent Problems . . . . . . . . . . . . . . . . . . . . . .
Coldwell Daniel, III 33 Jerry Donato 33 Olivier de LaGrandviUe 34
On the Synthesis of Theories of the Firm . . . . . . . . . . . . . . . . . . . . .
J. N. Robinson 34 Christopher Torr 35 Ran]it Vohra 35 Tsuneaki Yoshioka 36
Right Thinking, the Corpus Callosum, and a Salute to Subjectivism An Arm's Length Look at the Invisible Hand . . . . . . . . . . . . . . . . . . . . .
WillJohnston 36
Economics for Social Decisions: Applications of Cost-Benefit Analyses in Social Programs . . . . . . . . . . . . . . . . . . . . . . . . . Gale Anziano and Arie Rimmerman 36 Walras Versus Keynes . . . . . . . . . . . . . . . . . .
A. Monroe Moore and Clarence C. Morrison 37
Leon Walras, the Pure Scientiest Versus the Social Reformer
.........
Some Reflections on the Principles of Economics . . . . . . . . . . . . . . . . . Sherlock Holmes as a Practical Student of Neoclassical Political Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Progress and Poverty and Plutology . . . . . . . . . . . . . . . . . . . . . . . . . .
Anghel N. Rugina 37 Robert E. Emmet 38 M. Ray Perryman 38 Frank C. Genovese 39
The Slave Trade, Williams' Thesis and Britain's Industrial Revolution . . . . . . . Roy J. Grohs 39 A Comparison of Wage Rates in 19th Century Manufacturing and Whaling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Michael J. Maran 39 Poland-Prospects Through the 1980's . . . . . . . . . . . . . . . . . . . . . . . . . . Betty F. Fulton 40 Capitalistic Elements in the Yugoslavia Social Democratic System . . . . . . . . . . . . . . . . . . . . . . . . . . . Oscar Keeling Moore and Umesh C. Gulati 40 Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Daniel R. Hall 41
ECONOMIC GROWTH; DEVELOPMENT;PLANNING; FLUCTUATIONS William F. Ogburn and the Process of Economic Development . . . . . . . . . . . . . . . . . . . . . . June E. Brinkman and Richard L. Brinkman 41 The Limits to Growth Hypothesis: Some Empirical Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . Subramanyam Ganti and Bharat R. Kolluri 41 Canadian Transportation Regulation: Trends and Issues . . . . . . . . . . . . . . . . . Third World Labor Force: Transformation, Technological Transfer and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27
Z. J. Haritos 42 H. George Henry 42
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Sectoral Performance: International Competitiveness in the Canadian Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Donald J. McCulla 43
The Structure of American Industry in the 1980's . . . . . . . . . . . . . . . . .
K. Peter Wagner 43
Theories of Inflation: Evidence from a Developing Country, Turkey . . .H. Sonmez Atesoglu 44 Comment ...........................................
Frieda R e # m a n
The '°Green Revolution" in a Village in Indonesia Revisited . . . . . . . . . . . .
44
Paul R. Deuster 44
Defense Expenditures and Economie Growth in Developing Countries . . . . . . . . . . . . . . . . . . . . . . . . . . P. C Frederiksen and R o b e r t E. Looney 44 Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R o y J. Grohs 45 The Economics of Expropriation: Chile, A Case Study Comment ...........................................
.................
L. T. Geiger 45 Hugh iV. Dawes 46
Human Capital Formation in Developing Countries . . . . . . . . . . . . . . . . . .
Youn-Suk Kim 46
Economic Development in the People's Republic of China: 1949-1977 . . . . . . . Comment ............................................
Sidney Klein 47 R o y J. Grohs 47
The Nationalization of Bolivian Tin: Conflict over the Economic Surplus of an LDC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comment .............................................
R o b e r t D. Ley Sidney Klein
47 47
Effects of Alternative Monetary and Fiscal Policy Packages During Recessions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Willy Setlekaerts 48
Selected Commercial Water Demand Elasticities . . . . . . . . . . . . . . . . . . .
R o b e r t C Camp
48
A Model for Forecasting U.S. General Imports . . . . . . . . . . . . Charles Dale, Gary Keynon, Victor Bailey, and Timothy Baxter 49 Labor Market Models and Reinforcers of Cyclical Fluctuations: Empirical Note . . . . . . . . . . . . . . . . . . . . . . . . . . . James J. Doyle and James J. Clarke 49 Development of Weather Simulated Price-Modelling Techniques . . . . . . . . . . . . . . . . . . . . . . Lawrence J. Heitkemper and John W. Wysong 49 Contributions of Disequilibrium Theory to Commodity Market Dynamics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Productivity Growth in a Simulation Model with Endogenous Technical Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impact of Minimum Wage Increases on Wage Inflation . . . . . . . . . . . .
Walter C Labys Hugh N. Dawes
50 50
David M. Chereb
50
Brigitte H. Sellekaerts
50
The Impact of Inflation on Functional and Personal Income Distributions . . . . .
Kilman Shin
51
The Lead-Lag Relationship Between Unemployment and Inflation Rate: A New Look at the Phillips Curve . . . . . . . . . . . . . . . . . . . . . . . Christopher B. Spivey
51
Price Determination During Price Controls . . . . . . . . . . . . . . . . . . . . .
Michael M. Tansey
52
R. Bharath and B. G. Gnauek
52
A n d r e w W. Braunstein
52
ECONOMIC STATISTICS Linear Discriminant Analysis with Discrete Data: A Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Bayesian Alternative to the Chow Test: A Labor Supply Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ABSTRACTS
29
MONETARY AND FISCAL THEORY AND INSTITUTIONS A Complete Causal Examination of the Monetary Reaction Function Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M. R a y Perryman Financial Asset Acquisition by Personal Sector in U.K . . . . . . . . . . . . . SaIahuddin A h m a d Is the Interest Rate Real or Imaginary? . . . . . . . . . . . . . . . . John Teluk and Joseph Parker Comment ........................................ Vincent R. Driscoll
53 53 54 54
The Effectiveness of the Monetary Control Act of 1980 . . . . . . . . . . . . . . . Comment ........................................
Joan G. Walters Salahuddin Abroad
55 55
Nicholas A. Lash and Bala Batavia William Jackson
55 55
Public's Perception of Women as Loan Officers in Commercial Banks . . . . . . Jerry M. Hood Comment ......................................... Barbara F. Mastro
56 56
Transfer Payments and the Cyclical Behavior of Personal Income . . . . . . . . . . .
Morris B e c k
56
Ivy E. Broder A n n e t t e Meyer
57 57
Oskar R. Harmon
58
R o c k w o o d Q. P. Chin
58
On Specific Factors in the Non-Traded Goods Sector and Some Propositions in the Pure Theory of International Trade . . . . . . . . . . . . . . . . . . . . . . . . . Bharat R. Hazari Comment ........................................ William M.. Holroyd
58 58
Import Relief Measures: Cost and Benefitis of the Firing Line . . . . . . . . . . . Comment ........................................
James I. Walsh William M. Holroyd
59 59
Floating Exchange Rates and Purchasing Power Parity 1973-79 . . . . . . . . You-Keng Chiang Comment ........................................... Carol Lopilato The Economic Cost of Correcting External Imbalances . . . . . . . . . . . . . . . . . . . . . . . . R. Stafford Johnson and Richard A. Zuber Export Share Relationships to Output, Employment, and the Payments Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . William M. Holroyd Distributive Income Effects of Foregin Direct Investment . . . . . . . . . . . Beat Burgenmeier
59 60
Bank Portfolio Composition and Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comment ..........................................
The Net Cost Per Job of Alternative Countercyclical Programs . . . . . . . . . . . Comment ........................................... The Incidence of the Property Tax: A Case Study of New Jersey . . . . . . .
INTERNATIONAL ECONOMICS Trade Policy Towards China's Textile Exports . . . . . . . . . . . . . . . . .
The Role of International Banking is Recycling of Petrodollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Umesh Gulati and Oscar Moore Foreign Acquisitions in the United States: A Performance Analysis . . . Jacobus 7". Severiens
60 60 61
61 62
ADMINISTRATION; BUSINESS FINANCE; MARKETING; ACCOUNTING Product/Service Demand Analysis for Marketability by the Minority Entrepreneur . . . . . . . . . . . . . . . . . . . . Carl M. CoIonna and R o b e r t C. Coker
62
Financial Management and Local Development . . . . . . . . . . . . . . . . .
John Eugene Pierce
63
A Going Concern Theory of Profits . . . . . . . . . . . . . . . . . . . . . . . . . .
Frank C. Genovese
63
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Black-Owned Businesses: Black Capitalism in Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Joe W. Lee and Sriprinya Ramakomud 63 Shimshon Kinory 64
Regressions on Corporate Data, Demonstrating Narrowing Range of Plausible Strategies . . . . . . . . . . . . . . . . . . . . . Edmund J. Luksus and James B. R u b y A Declaration on Independence with a Revolutionary Proposal . . . . . . . . .
Edward O. Lutz 65
Determinants of Corporate Debt and the Rate of Return on Common Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Profitability, Why Do Some Mutual Savings Banks Perform Better? . . . . . . . . . . . . . . . . . . . . . . . . .
64
Shimson Kinory 64
Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kilman Shin 65
David J. Walker and Frieda Reitman 66
Predatory Pricing: Recent Developments under the Robinson-Patman A c t . . .
John Houlihan 66
INDUSTRIAL ORGANIZATION; TECHNOLOGICAL CHANGE; INDUSTRY STUDIES The Impact of Government Regulation on Productivity in the Post War American Economy . . . . . . . . . . . . . . . . . . . . . James J. Doyle and Edward J. Mathis 6"/ Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Harold Hotelling, Jr. 6"/ The Demand for and Supply of Firms for Merger . . . . . . . . . . . . . . . . . . . .
Pauline Weber 67 Celia Thomas 67
Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Connecting Arrangements as a Barrier to Entry in the Terminal Equipment Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Joseph P. Fuhr, Jr. 6"/ Graduating Business Taxes to Increase Competition and Productivity . . . . . . . . . . The Bank Holding Company Act: A Cost-Benefit Analysis . . . . . . . . . . Regulation of Monopolies: Proper Pricing as a Substitute for Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BillParks 68
Harvey Rosenblum 68 Michael Thompson 69 Harriet Hinck 69
Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technological Development in the Manganese Nodule Industry . . . . . . . . . .
James B. Marsh 69
Michigan Transit Performance Evaluation Process: Application to a U.S. Sample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shirley Coffer Anderson 70 The Need for R & D in Developing Countries . . . . . . . . . .
A. R. Montazemi andM. Ahmadi 70
Evaluating the Benefits of Protecting Aquifers Framework and Problems . . . Frieda Reitman 71
AGRICULTURE; NATURAL RESOURCES Probable Effect of a Successful Grain Embargo Upon a Nation Having a Centralized Agricultural Planning System . . . . . . . . . . . . . . . . . . . Will Johnston and John Wysong 71 Economics and a Solution to the World Hunger Problem . . . . . . . . . . . . . . . Property Tax Incidents: New Examination . . . . . . . . . . . . . . . . . . . . . . . . Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy in Twenty Oil-Importing Countries . . . . . . . . . . . .
Raphael Shen 71 David E. Mills 72 Sandra R. Baum 72
S. K. Kaushik and R. K. Bhatia 72
Market Response and Natural Resource Adequacy . . . . . . . . . . . . . . . . . . .
Raphael Shen 73
ABSTRACTS
31
MANPOWER; LABOR; POPULATION Impact of Wages on Labor Turnover in Textiles . . . . . . . Comment ..........................................
Sloan Crayton and Ralph D. Elliott 73 R o b e r t B. Harris "/4
Training, Experience and the Earnings of Men and Women Scientists . . . . . Comment .........................................
Labor Market Policy-Swedish Style . . . . . . . . . . . . . . . . . . . . . . . . . . . Convict Rehabilitation Through Manpower Training: A Cost Benefit Analysis of a Pilot Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comment .........................................
Free Agents' Impact on the Labor Market for Baseball Players . . . . . . . Comment ........................................
Michael G. Finn 74 Eugene B. Gendel 74 Eric E. Pedersen 74 Curtis Adams 75 Herbert N. Kessel 75 Henry J, Raimondo 75 Libby T. Rittenberg 75
Impact of Labor-Management Relations on Productivity: U.S, versus Japan . . . . . .
K. K. Seo 76 C, Timothy Koeller 76
Comment ........................................
Human Resources Development in Saudi Arabia: Problems and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
M e h m e t E. Tahir 76
WELFARE PROGRAMS; CONSUMER ECONOMICS; URBAN AND REGIONAL ECONOMICS The Impact of Inflation on Student Work Hours and Study Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Michael T, Doyle and Keith K. Turner 77 Impact of Technology on the Laboratory: Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . Comment ..........................................
R o y a l A. Crystal and Jerome A. G, Russell 77 Laddislav J. Sula 77
Jury Awards and the Assignment of Costs to Pain and Suffering . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chester G, Fenton and R o b e r t F, Stone Health Manpower Planning: Essential Component of Social Progress . . . . . . . . . . . . . . . . . . . . . . . . Harold M. Goldstein and Morris A. Horowitz Utilizing Women and Minority Practitioners to Solve Maldistribution Problems In Dentistry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R o b e r t A, I-Iankin A Model of Injury Costs . . . . . . . . . . . . . . . . . . . . . R o b e r t D, Kurtz and R o b e r t F, Stone Marginal versus Incremental Pricing of Ancillary Services: University Health Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Celia Morgan A Methodology for Assessing the Effects of National Health Insurance on Health Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gustav Schachter Complementarity and Substitution in Hospital Services . . . . . . . . . . . David J, Weinsehrott
78 78 79 79 79 80
Employment and Earnings of Pediatric Nurse Practitioners . . . . . . . . . . . .
M e h m e t E. Tahir 80
Can Black-Owned Business Attain Parity? . . . . . . . . . . . . . . . . . . . . . . .
Don Markwalder 81 Beth T. Niemi 81
Comment ............................................
Political Pressure and Wage Discrimination . . . . . . . . . . . . . Utilizing the Employment Beta as a Measure of Industry Employment Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comment ..........................................
L. H. Zincone and R. L, Kerns 82 Sam G. Berry 82 Peter M, Allaman 82
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Local Taxes and Personal Income: An Impact Analysis . . . . . . . . . . . . . . . Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jacob De Rooy 82 Rudolph E. De Pass 82
Employment Relationships within the Supply Side of Regional Econometric Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Steven L. Green and M. Ray Perryman Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Elizabeth J. Lott
83 83
The Income Equity of Two Transit Funding Sources . . . . . . . . . . . . . . . . .
84
Steven M. Rock
ABSTRACTS The Role of Market Structures in Describing Free-market Dynamic Processes COLDWELLDANIEL, III Memphis State University
The conventional quadripartite of free-market structures has been appropriately and forcibly criticized heretofore in various ways. Remarkably, however, little, if any, criticism has been directed toward the fundamental hypothesis of the conventional treatment which, nevertheless, is invalid. As the structural elements of free markets are identified and explained in the literature, they are said to be stable. But a stability of the structural elements of free markets is patently not a characteristic of such markets, as is argued here, where it is assumed that, if barriers exist, they are the consequence of private entrepreneurial activity rather than of governmental intervention. In summary, as
new products and processes displace old ones in a free-market system, the market for a particular product will typically emerge, grow, mature and then sometimes resume growing or decline. In this process, the structure of the product's market is practically certain to change. Moreoever, at any given time, the markets within a free-market system will exhibit a wider variety of structures than that which is given by the conventional quadripartite of monopoly, oligopoly, monopolistic competition, and competition. Thus, market structure should be viewed as a continuum whose points correspond to particular market structures only transitorily.
Curvature in Economic Analysis IERRY DONATO Syracuse, New York
Message information distoration: "indifference curves" existing on curved surface (manifold). Use anti-Eudlidean Geometry. Curvature: (de) accelerations of curves as they change directions. Major ideas. (1) Events (data) points exist on n dimensional manifold with n parameters; construct the manifold from observed points. (2) Many reference systems exist simultaneously; specify transformation properties for compatible system. Reference system selected influences view of (dis)equilibrium model. (3) Initial dynamic location of points require specification of first/ second order conditions. (4)Point movements that meet obstructions are path dependent.
Taking partial derivatives doesn't commute. Order of alternatives in social welfare function is important. (5) Manifold is an intrinsic invariant. Point movements are covariant. The force field (utility, production, etc.) requires specification according to investigation considered. Riemannian Geometry selected. Lie's and Cartan's approach outlined using structure/ compatibility (integrabilitity) conditions. Examples results: curvature reflects interest rate, with money increasing curvature. Reference: Guiseppe Palomba, '7l Problema Del Consumatore In Una Concenzione Relativistica, '" Giornale Degle Econornisti, 1975.
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Stability and Instability in IS/LM Models: A Reexamination OLIVIER DE LA GRANDVILLE University of Geneva-Switzerland
It has been shown in this paper that the standard hypotheses used in IS/LM models are insufficient to guarantee the convergence of the economy towards an equilibrium. In particular, it has been demonstrated in the familiar twomarket economy that even if the money market is supposed to clear instantaneously, a macroeconomic equilibrium will not necessarily be reached. This instability is due to the largely underestimated role of inventory accumulation or decumulation. The paper concentrates first on the evolution of transition income on the goods market, leaving alone the money market (i.e., supposing that the rate of interest is constant). The adjustment process
is then applied in the standard two-market model, where the rate of interest is supposed to adjust instantaneously. Particular emphasis is placed upon the precise determination of the location of the economy after 1, 2 or n periods. This instability of the IS/LM model has, in our opinion, some importance, because it raises the question of the exact significance of the demand curve in the (p, Y) space. Indeed, it is possible to show that the effects of an increase of prices and those of a price decrease are asymetrical. A demand curve may not be defined for an increase in prices, if this increase occurs in an IS/LM system which is not stable.
Oil Discoveries in Industrialized Countries: Opportunities and Policy Problems J. N. ROBINSON Chase Manhattan Bank-London
If oil prices remain high, many industrialized countries may develop domestic supplies. These may be used in (a combination of) five different ways, ranging from long term investment to short term consumption. The five uses are: (1) leave the oil untouched; (2) use revenues from oil sales to invest abroad; (3) use revenues to import investment goods for home use; (4) use revenues to import consumer goods; (5) replace traditional export revenues with oil revenues and reduce working hours to provide jobs for those previously employed in exporting. This represents consumption in the form of leisure. The best use depends upon tastes (be-
tween work and leisure, between present and future consumption) and upon returns (to investment, to productivity through changing hours worked). Achieving the best use may not be easy. If its possession of oil increases world demand for a country's currency and so tends to raise its exchange rate, it will be forced towards use (5) unless its government increases the currency supply or limits (net) capital inflows. If oil revenues are distributed to the population domestic demand may increase and may lead to more inflation and more imports rather than to any more domestic output.
ABSTRACTS
35
Information Structure of the General Theory and General Equilibrium Models CHRISTOPHERTORR* University of South Africa The information structure of the General Theory and general equilibrium models is examined by investigating the type of signals emitted and received. The analysis proceeds at the microlevel, so that a consideration of Keynes's microfoundations is required. The information structure of the General Theory is thereafter presented in a diagram. This is compared to a diagram representing the information structure of general equlibrium models. The latter cannot incorporate the quantity signals appearing in the General Theory. The generation of fixprice models allow quantity signals, but these are not the type occurring in
the General Theory. Although employing a different definition of equilibrium fixpfice models fall within the general equilibrium paradigm. The information structure of fixprice models can easily be investigated with the aid of the diagram depicting the flexprice information structure. Examination of the information structure of the General Theory and general equilibrium models reveals that the assumptions of profit and utility maximization are at home in both approaches. The type of signals appearing in the General Theory do not, however, enable firms and households to establish a coordinated solution. In general equilibrium models the only solution permitted is a *Grateful thanks are due to the Human Sciences coordinated one (as dictated by the definition Research Council for financial assistance. of equilibrium employed). Ramsey Economics: Some Inherent Problems RANJIT VOHRA University of Connecticut-Stamford
When Frank Ramsey published his famous 1928 paper that addressed the question of optimal saving in a simplified macroeconomic scenario, he effectively opened a Pandora's Box of issues that still seem to be disturbingly intractable half a century later. Given the essential Ramsey problem of maximizing the integral, f0°° V [C(t)] dt, subject to the constraint K = Y [K(t)] - C ( t ) , and the initial condition K(O) = Ko, along with the usual assumptions regarding well-behavedness and concavity as necessary, the unresolved issues are three: 1. How can a given Ramsey-problem optimand integral, especially if there is no positive timediscount factor? 2. What is the appropriate
transversality condition that is necessary at infinity? This issue has been especially prominent in the literature in the last decade, and several celebrated 'examples' have demonstrated that it is not, in general, possible to extend standard finite-time transversality conditions to the infinite time case by a limit process. Links between issues 1 and 2 are being investigated. 3. Since a non-continuous, essentially quantum process like technical progress cannot be incorporated into a typical question of Ramsey economics, how realistic are infinitehorizon optimal analyses that ignore this feature of technical progress completely?
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ATLANTIC ECONOMIC JOURNAL On the Synthesis of Theories of the Firm TSUNEAKI YOSHIOKA Senshu University-Japan
Comment
RANJIT VOHRA, University of Connecticut In regards to the 'Investment Model,' the as desired by optimizing managers vis-a-vis optianalysis presented could usefully be augmented mizing stockholders, in addition to the differby an explicit dynamic optimization demon- ences already noted by the author. It is suggested stration of the claimed results, because this that the method of 'Optimal Control' could be rigorous approach would underscore the need readily applied to the scenario described. for a specification of terminal-time conditions Right Thinking, the Corpus Callosum, and a Salute to Subjectivism An Arm's Length Look at the Invisible Hand WILL JOHNSTON University of Baltimore
The method by which a consumer evaluates alternative purchases is examined; specifically the purchase of carpeting of varying grades and prices. Simplifying the purchase decision by eliminating all variables other than price and expected life leaves the consumer with an equivalent annual expenditure problem (or capitalized cost) problem involving opportunity cost with arithmetic calculations as we know them well beyond the capability of the left (conscious) side of the brain. Consumers usually make decisions which are in their best interest possibly through a genetically inherited ability
to rank alternative prices and utilities in an ordinal rather than in a cardinal fashion. This suggests that man's left brain through which man processes his learned knowledge is able to transmit through the corpus callsoum data to the right side of the brain which operates as an analog computer and is able to transmit a buy or don't buy to the left brain. Man's innate ability to determine his best alternative may obviate the need for government intervention into consumer affairs at the consumer decision level except to insure adequate information disclosure to the consumer.
Economics for Social Decisions: Applications of Cost-Benefit Analyses in Social Programs
GALE ANZIANO AND ARIE RIMMERMAN Adelphi University
Economics for social decision-making has moved rapidly to an important place in the political arena. This trend is inevitable, in part, due to large and spiralling investments in human services that have a significant effect upon our lives. Until recently, program administrators and even policy makers concerned with human services have been generally negative about the
value of economic studies. The negativism stemmed from an attitude of suspicion and disbelief that the humanistic purposes of social programs could be rationally analyzed or quantified. A major difficulty has been the lack of a universally accepted arithmetic for converting social values into dollars. At the same time, other considerations such as stringent budgets,
ABSTRACTS competing program priorities, increase in awareness of accountability, the pressing need for evaluation studies, and advances in knowledge and research methodology have shifted the interest to the use and application of costbenefit, cost-effectiveness, and other related analytical tools of technologies. The paper reviews the advances that have been made in costbenefit analyses in selected areas of social pro-
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gramming, for example, child welfare, criminal justice, family planning, mental health, and mental retardation. The utility and potential of cost-benefit studies are illustrated with a view to suggest that the state-of-the-art, in spite of its limitations, facilitates more rational social program choices and decisions, especially under conditions of uncertainty, scarcity, and fiscal stringency.
Walras Versus Keynes A. MONROE MOORE AND CLARENCE C. MORRISON Rider College and lndiana University
Most economists consider micro-economics to be derived from Walras' general equilibrium theory. Similarly, most economists take macroeconomics to be derived from Keynes general theory. It is, therefore, of some considerable importance to determine the formal relationship between these two major branches of economic theory. It would appear that the relationship between micro- and macro-economics would be described by one or the other of the six following possibilities: (a) Micro-economics is valid but macro is not; (b) Macro-economics is valid but micro is not; (c) Micro and macro are both valid but independent of each other; (d) Micro and macro are both valid and macro
is derivable from micro; (e) Again both are valid and micro is derivable from macro; (f) Both are valid and each can be derived from the other. It seems that most economists consider (d) to be the most likely possibility. But in view of the fact that there has been no convincing demonstration of the equivalence of the two, this view as well as (e) and (0 would be difficult to defend. Clower and others have argued convincingly in a manner that would support possibility (c). We agree that this possibility is much more reasonable than (d), (e), or (f). But we have argued in this paper that from a methodological point of view a case can be made for possibility (a).
Leon Walras, the Pure Scientist Versus the Social Reformer ANGHEL N. RUGINA Northeastern University
In this paper the thesis is advanced that there are two Walrases-one the pure scientist and the other the social reformer. With Walras the pure scientist there are no problems for future development of economics; the law of general equilibrium, even though not complete, stands by itself. With regard to Walras the social reformer, there are some problems of interpretation. The solution seems to be in dividing his social work in two: one part which is consistent with the law of general equilibrium and
another part, the proposal of the nationalization of land, which is not. The consistent part refers to a masterful analysis of the Social Question and the development of the "superior law of solidarity" which can easily be converted into a law of social equilibrium. By linking the laws of social and economic equilibrium, the Walrasian heritage is united and social interest and social justice are fulfilled. Walras also succeeded to integrate the ideal of justice of equality with justice of inequality without
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creating a contradiction between the two. In view of these other possibilities (consistent with the rest of the Walrasian doctrine) the
proposal of the nationalization of land has to be abandoned and relegated to the field of history of economics.
Some Reflections on the Principles of Economics ROBERT E. EMMER Department of State/AID (Retired] The most conspicuous unifying device in economic theory is the law of supply and demand. In its most general formulation it simply states that, to analyze the price and quantity exchanged of any good or service, we should identify all the evidence relating to its production and to its consumption and then investigate the interaction of the two processes. Current theory consists in large part of equilibrium analysis based on an interpretation of the general law in the format or rigidly defined demand and supply schedules. The logical nature of the schedules, however, is that they present simultaneous alternatives and hence can refer only to the future. A practical consequence of this has been our inability to
develop a theoretical structure that meets the rule of scientific philosophy, nmnely, that analytic description must relate completely to observable data. Equilibrium analysis utilizing the demand and supply schedule concepts deviates from inductive summary of the economy because it neglects the ordering of economic events in real or chronological time. Fortunately there exists within the existing body of theory a concept that permits the monetary and physical flows of the economy to be expressed in real time. Its most elementary formulation is Schumpeter's circular flow in a two sector economy where each sector demands what the other supplies.
Sherlock Holmes as a Practical Student of Neoclassical Political Economy M. RAY PERRYMAN Baylor University Sherlock Holmes, in addition to being the first and best known consulting detective in the annals of criminal investigation, has been credited with an excellent knowledge of literature, philosophy, history, chemistry, anatomy, architecture, anthropology, ornithology, musicology, genetics, psychology, and graphology. The present paper seeks to add the discipline of economics to this list. Specifically, it is definitively shown that Holmes (1) studied the "dismal science" at Cambridge under the tutelage of Alfred Marshall between 1874 and 1877, (2) was acquainted with Karl Marx in London, (3) was profoundly influenced by Marshall in his writing ambitions, (4) possessed the skills in history and mathematics which are requisite
to the successful pursuit of economics, (5) exhibited an outstanding working knowledge of pragmatic economics, economic history, and contemporaneous economic issues, and (6) applied the basic tenets of economics on numerous occasions in his professional activites. Holmes is shown to have knowledge of neoclassical economics, international trade, and bimetalism. Moreover, this entire corpus is directly traced to his association with Marshall. In summary, his credentials, education, and knowledge left him thoroughly prepared to utilize economic concepts. His resultant pursuit of such ideas clearly justifies his ranking as one of the first important applied practitioners of the science of Political Economy.
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Progress and Poverty and Phitology FRANK C. GENOVESE Babson College Plutology, the science of wealth, is identified with positive economics and the neglect of normative considerations is decried. The general neglect of Henry George's contributions to economics and his dismissal as a crank on the grounds of the Single Tax is explored. His
kinder treatment by the Wisconsin School and its adoption of his animus is noted. Reasons for his rejection are mooted. One of them, the guilt feelings he inspired, and attempts to avoid this still influence our efforts as economists.
The Slave Trade, Williams' Thesis and Britain's Industrial Revolution ROY J. GROHS University of Minnesota This paper reports preliminary results of a larger project. In 1944 Eric Williams asserted that the Atlantic Slave Trade was an important element in generating a stimulus to the Industrial Revolution. The present paper posits the following counterfactual proposition: that Britain abandoned the slave trade at the beginning of the eighteenth century. Under those circumstances would the Industrial Revolution have been materially impaired? It is argued that Williams' thesis consists of three elements: First that the trade was "highly" profitable, second that it was triangular in nature and third that it was quantitatively significant in stimulat-
ing Britain's growth. Based on a review of others' work, it is concluded here that while individual voyages may have yielded "enormous" profits, overall the rate of return in the long run was probably on the order of 9 to 10 percent-considerably more modest than Williams implied. While Sheridan has touched off a debate by arguing that the trade was not truly triangular, in the sense that Williams' surely must have meant it, triangularity existed. Thus this paper addresses the quantitative significance of the trade. Anstey, Engerman, and others have demonstrated that the trade's contribution to capital formation was probably extremely small.
A Comparison of Wage Rates in 19th Century Manufacturing and Whaling MICHAEL J. MARAN St. John's University During the 19th century whalers were paid in lays-a predetermined fraction of the net receipts of the voyage-rather than in wages. If the vessel made a greasy (good) voyage, the whaler could receive a substantial sum. If the vessel made a clean voyage (little or no oil or bone taken) the whaler could receive virtually nothing for a voyage that might have lasted years. Were the wages received by whalemen competitive with wages received by men in similar occupations ashore? The question can
be tested by constructing a lay and current dollar monthly pay series by vessel and occupatonal category for 87 voyages that were made from New Bedford during the years 1930-1874 and comparing it with various wage series published in Lebergott's Manpower in Economic Growth. The whalemen's lays were obtained from manuscript ship's account books. The comparison showed that wages received by whalemen were competitive with wages received by men in similar occupations ashore.
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However, the data also indicated that seamen aboard whalers received wages that were below those paid to able-bodied seamen in the
merchant marine and the U.S. Navy. Whelemen received lower wages because their jobs required fewer skills than those of able-bodied seamen.
Poland-Prospects Through the 1980's BETTY F. FULTON Southeast Missouri State University
Some sources have attributed Poland's worsening economic conditions to external factors such as deteriorating relations between the Soviet Union and the United States. However, a careful look at the developments of the 1970's in the major sectors of Poland's economy indicate otherwise. Agriculture, domestic industry, and foreign trade all suffer from internal problems. This paper focuses on these problems and the current status of the three sectors. Agriculture received little attention in economic plans prior to 1975. Most of the current investment is in the state farms and land acquisition by the state. The highly productive private sector which holds 80 percent
of the arable land has little equipment or fertilizer. Several years of severe drought has forced the government to import large amounts of grain. This has worsened the hard currency problem which limits the continued modernization of the industrial base undertaken during the 1970's with credit from the West. Poor quality production makes it impossible for much of the country's industrial output to find Western markets. There appears to be little prospect for improvement during the 1980's. The country will undoubtedly experience low growth rates, possibly even below the four percent rate achieved in the 1960's.
Capitalistic Elements in the Yugoslavia Social Democratic System OSCAR KEELINGMOORE AND UMESHC. GULATI East Carolina University
The basic economic institutions of capitalism are similar to the features of the Yugoslav selfmanagement socialistic system as established under the 1974 Yugoslav constitution as the following summary indicates: 1)Private property, which allows each person to own property; to control the properties that they own; to enjoy the benefits deriving from such ownership; to enter into contracts involving the use of the owned properties; and, to dispose of them or bequeath them to others. Yugoslavia permits the private ownership of cultivable land in tracts of up to 20 hectares (49.42 acres); land that is not capable of being cultivated may be owned and operated if employment does not exceed six communes and 5,100 "sociallyowned" worker-managed factories. 2) Self-
interest, or the invisible hand operates in the Yugoslavian private sector; some might argue that it functions under the Yugoslavian workermanagement system as well. 3) Economic individualism or laissez-faire certainly operates vigorously in the Yugoslav private sector; some may hold that it plays a role under workermanagement. 4) Capitalism operates under conditions of competition or free markets. In the Yugoslav private sector and in its social sector competition prevailed and markets were free for several years in both until early in 1980 when price ceilings were placed on a number of goods in an effort to counter inflation. 5) The price system allocates resources in the capitalistic system.
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Comment DANIEL R. HALL, Trenton State College The authors address elements of some tenets the nation's work force are in the private of economic capitalism which exist in varying sector which received nearly 37 percent of the degrees in the Yugoslavian system. They ap- primary income and possessed one-fifth of the pear to over-estimate the role of the price gross fixed investment in 1977. Individual system in allocation of resources and under- farmers now own about 85 percent of Yugoestimate the effects and role of workers at the slavia's arable land; the agriculture sector has lowest levels as members of associated labor had to secure three recent loans from the groups in influencing management decisions World Bank since funds were not available and flexibility necessary for efficiency in the domestically. "socially-owned" companies. Two percent of William F. Ogburn and the Process of Economic Development JUNE E. BRINKMANAND RICHARD L. BRINKMAN Portland State University
The purpose of the paper is to demonstrate the relevancy of Ogburn's theory of social evoolution to a general theory of economic development. Ogburn's theory of social evolution in the context of culture evolution, in the opinion of many, constitutes his major contribution to sociology. Similarly, Thorstein B. Veblen and Clarence E. Ayres, in the formulation of their general theory of economic development, also focused on culture evolution in order to explain, by comparison, economic evolution. And while their respective theories differ they also contain many similarities, especially in the area of the dynamics of culture evolution. The paper attempts to demonstrate how. Ogburn's theory
of social evolution and culture cumulation and transformation could modity and advance the Veblen-Ayres general theory. Exponential culture evolution in the paradigm of logistic surges, it is argued, not only reaffirms the principle of similitude but also is integral to any general theory of economic development. If the economic process concerns the core of culture and its evolution, fed by the dynamics of technological change, then sociological theory, in general, and the specific contributions of William Fielding Ogburn, in particular, are relevant and should not be avoided in the formulation of a general theory of economic development.
The Limits to Growth Hypothesis: Some Empirical Evidence SUBRAMANYAM GANTIAND BHARATR. KOLLURI State University o f New York-Buffalo and University of Hartford
Based on some statistical evidence, this study concludes that a society seemingly follows a cyclical pattern of growth with rise and fall of growth alternating each other. A number of economists, sociologists, political scientists and others have suggested that the world is rapidly approaching the limits to growth set
by exhaustion of non-renewable resources, population explosion, pollution and other problems. The "Limits to Growth Hypothesis" generated considerable interest as evidenced by the recent empirical and theoretical literature on growth with exhaustible resources. In this study we made an attempt to examine the
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issue presenting some empirical evidence. We argue that a society capable of generating and sustaining productivity increases through investment in the production of knowledge can escape the limits to growth. The predictions of the doomsday models that the world is rapidly approaching the limits to growth are
not reliable as these models lack power scientific statistical analysis. A cross-section model of cyclical growth represented by a third degree polynomial is estimated in four different forms using data on 120 countries. The results do not seem to reject the hypothesis of the rise and fall of growth.
Canadian Transportation Regulation: Trends and Issues z. J. HARITOS Strategic Policy Transport-Canada The long-term evolution of transportation regulation in Canada has been in response to national, regional, economic and social objectives. Transportation had been regulated by modal boards until the National Transportation Act (NTA) was passed in 1967 which created a single federal regulatory agency, the Canadian Transport Commission (CTC), provided pricing freedom to the railways and allowed them to rationalize their services in the face of evolving market conditions and trucking competition. This has lead to a reasonably viable and adequate railway system. Currently, the domestic marine system is practically deregulated and the trucking mode is under the control of the provinces with varied degrees of
rate and entry regulations across Canada. The regulation of air transport paralleled that to the U.S. inter-state until the mid-1970's. Recently the CTC with government encouragement, lessened gradually the degree of air regulation and allowed more price competition. The current major regulatory issues in trucking is the diversity of regulations across Canada and the conduct of tariff bureau which may violate the anti-combines legislation; in air, it is the establishment of an optimum degree of entry; in rail, it is the improvement in the appeals process for rate disputes between shippers and carriers; and in marine, it is the exemption of the liner conferences from the anticombines legislation.
Third World Labor Force: Transformation, Technological Transfer and Development H. GEORGEHENRY Colgate University Improvement in the quality of the labor force, reflected in the variety and efficiency of skills is what is meant by transformation. The aim is to transform the labor force from one in which the very few are skilled, to one in which the majority are skilled. The transformation of the labor force represents one-half of the introductory step in the chain of structural changes that constitute the technological transfer necessary for development. The other half involves the acquisition of machinery, tools and equipment which the labor force is trained to operate.
These two complementary changes satisfy the conditions of technological transfer at the primary level. Progress along the path to development requires two further developments, namely, the creation of capital goods industries with inputs of foreign technology, or with the use of local resources, and the transmission of scientific knowledge used in the designing of capital goods and their operation. This paper deals mainly with the transformation process at the primary level, that is, with the acquiring of what we will call intermediate skills, and
ABSTRACTS with the ability to operate machines, tools and equipment which might be imported. The significance and urgency of the need for skill-
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training is highlighted by the paradox of high unemployment coexisting with unfilled job vacancies requiring skills.
Sectoral Performance: International Competitiveness in the Canadian Context DONALD J. MCCULLA Trade and Commerce-Canada
Concern over declining relative manufacturing productivity has led to the propogation of multilateral aggregate indices of competitiveness. This paper demonstrates that taking into account the relative performance of individual manufacturing sectors renders the aggregate analysis meaningless. It is not that the aggregate measures make the understanding of particular sectors difficult, rather, the competitiveness of particular sectors in terms of prices, costs and trade performance renders the aggregate measure meaningless. A multilateral index of competitiveness based upon unit labor costs is presented, which while similar in many ways to other indices in common usage, incorporates some improvements. The average annual growth
rates of unit labor costs for the 20 Canadian manufacturing sectors are presented, along with several measures of trade performance. It is demonstrated that the industrial sector with the highest average increases in unit labor costs, which would negatively influence the aggregate index, displayed increased international competitiveness. The sector with the lowest average increase displays no increase in competitiveness. The need for even further disaggregation is demonstrated when the great differences in performance between the industries of one sector is demonstrated. The conclusion drawn is that if an aggregate measure is to be employed it must incorporate the effects of each country's comparative advantages.
The Structure of American Industry in the 1980's K. PETER WAGNER U.S. Department of Commerce
Projections of the American economy during the 1980's show continuing growth in GNP, production and employment, although under most assumptions the projected growth rates are lower than might be desirable. Demographic factors will cause a reduction in the number of new entrants into the labor force, resulting in a more experienced total labor force whichwould have positive implications for an increase in productivity. Manufacturing is projected to maintain its relative importance in the American economy while government-connected activities and agriculture are expected to decline in importance in favor of the non-manufacturing part of the private sector. Among major industries,
prospects for those connected with electrical and non-electrical machinery, instruments and chemicals are viewed very favorably, while declines are projected for the leather products and a number of food product industries. After the transportation equipment group will have adjusted to changing consumer demand, brought about by energy price developments, its growth will resume, although it is unlikely to reach the growth rates experienced in previous decades. For other industry groups, energy costs amount to a relatively small portion of total sales and energy price developments alone would not induce radical changes in production and marketing patterns in most cases.
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ATLANTIC ECONOMIC JOURNAL Theories of Inflation: Evidence from a Developing Country, Turkey H. SONMEZATESOGLU Ctarkson College
Comment FRIEDA REITMAN, University of Connecticut This is an interesting and clearly presented data. (3) Two empirical relations, one to meapaper. The conclusion that the quantity theory sure "normal real output" and one to measure offers the best explanation for Turkey is in con- "expected rate of inflation" are described and trast to Atesoglu's finding that in the U.S. the used in the testing of the hypotheses. How cost-push explanation of inflation appears best. good are these relationships? What are the sumSome additional details should be included. (1) mary statistics? (4) When the data becomes What is the range of inflation during the study available it will be interesting to see how well period 1960-1977? Include the mean and stan- the quantity theory was able to forecast for dard deviation. (2) Evaluate the quality of the 1978. The "Green Revolution" in a Village in Indonesia Revisited PAUL R. DEUSTER Ohio University
This case study concentrates on two critical issues of the Green Revolution: is it an on-going phenomenon, or not, in terms of increases in the production and incomes of the farmers; and, what is its impact on overall village, relative income distribution. It analyzes field data, including a random sample of almost 100 households, collected in a village in West Sumatra, Indonesia, in 1972/73 and 1978/79. In the initial period of adoption of high-yielding rice varieties, chemical fertilizers and pesticides, there were substantial increases in production and net rice income through both higher yields per cropping and movement to double cropping,
without changing the village, relative income distribution. This last was due to the divisible nature of the innovations, availability of credit and wise access to land because of land use inheritance by all female descendents. Since the initial gains, however, total production has stagnated, despite continuing adoption of newer rice varieties. Net income has sharply declined because of depressed relative rice price at the revisit time due to government policies to restrain inflation. Relative income distribution has worsened slightly due to one household's gain from a non-Green Revolution development.
Defense Expenditures and Economic Growth in Developing Countries P. C. FREDERIKSENAND ROBERT E. LOONEY Naval Postgraduate School
This paper reexamines the effect of defense spending on growth in developing countries. In an earlier paper, Benoit [Emile Benoit, "Growth and Defense in Developing Countries," Economic
Development and Cultural
Change,
January 1978] found the effect to be statistically insignificant for a sample of 44 countries between 1950 and 1965. The current paper hypothesizes that the effect of defense spending should be positive (and statistically signifl-
ABSTRACTS cant) for relatively resource abundant countries but negative for relatively poor countries. Using Benoit's sample, the countries were divided into two groups by means of cluster analysis. The regression equation estimated by Benoit was reestimated for each group. The results support our hypothesis and suggest that the richer countries are less likely to abandon develop-
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merit expenditures given a constant level of defense preparedness. The poorer countries, which cannot afford the high growth development and defense expenditures at the same time, prefer to cut the former while maintaining the latter. Finally a two-stage procedure was employed to show that defense spending contributes to growth, rather than vice versa.
Comment
ROY J. GROHS, University of Minnesota It is always interesting to see old myths remain. Are there spurious correlations due to punctured. Benoit not only called an old myth the peculiar apparent connections between into question but may have laid the foundation Group I countries and U.S. foreign policy? for a new one: that defense expenditures not Secondly, the cluster analysis seems quite senonly are not harmful to economic growth but sitive to the choice of variables used in the might indeed have a salutary effect upon that clustering process. The succeeding regressions process. A weakness of the Benoit study is seem, in turn, sensitive to the country breakwhat leads to a familiar problem: correlation down resulting from the clustering. Attention does nto imply causation. Hence his unexpected should turn to this problem. Third, collinearity results required some ex post rationalization. might be suspected in the data. Fourth, since But this is not preferred econometric technique. GDP per capita is often of more interest to Frederiksen and Looney have made a very use- development economists, regressions should be ful contribution by taking care to specify a run on this as well. In future work, one would priori a testable hypothesis about the relation hope that the authors can begin to unravel between defense and growth. Their regression causal paths, for example, via investment, to results indicate that there are differences be- explain their results and can improve the rotween resource-constrained and less constrained bustness of their provocative conclusions. countries in this regard. Yet, some questions The Economics of Expropriation: Chile, A Case Study L. T. GEIGER Eastern College
The expropriation of direct foreign investment by developing countries has become a major problem for the United States as the value of U.S. multinational firms which have been expropriated is well in excess of five billion dollars. In 1955 Martin Bronfenbrenner wrote one of the few articles concerning the economics of expropriation in which he concluded that uncompensated expropriation was economically advantageous for the host country because income is shifted from "capitalistic
consumption" (profits or dividends, interest, royalties, management fees, etc.) to development investment. The U.S. State Department takes an opposite view pointing out that expropriation may be unwise because there will be a significant decline in external capital flows which will more than offset the assumed increase in internal capital flows. Chile was selected for a case study because of the large number of uncompensated expropriations during the Allende period. The results contradict
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both views. While there was a significant decline in U.S. foreign investment, U.S. bilateral assistance and multilateral assistance, substantial loans were forthcoming from socialistic countries and there was a large increase in short
term credits from Latin countries and Western European nations. There was a decrease in internal capital flows because of the loss of technological, organizational and managerial expertise in the copper mining industry.
Comment HUGH N. DAWES,City Univo'sity of New York In part, the study reinforces the United the author's implied hypothesis. MethodologiStates' position that expropriation is unwise be- cally, it would be more illustrious if this hycause the reduction in external capital from the pothesis were explicitly stated early in the traditional sources like foreign investment and analysis. Interestingly, Bronfenbrenner's hythe World Bank more than offset profit remit- pothesis claiming that profits will increase intances to the expropriated country. The study ternal capital formation and development after indicates, however, that for Chile, external capi- expropriation is refuted since government mistal from the less traditional sources of Latin management usually causes profit decline. A America, Europe and socialist countries yielded logical extension of this study is the the cause more over all after expropriation-contrary to and prevention of expropriations. Human Capital Formation in Developing Countries YOUN-SUKKIM Kean College of New Jersey Human capital is broadly identified as labor performances, and entrepreneurial abilities. To increase worker productivity in the processes of industrialization, each developing country must motivate labor to implement human capital formation. Besides traditional approach of human capital formation, motivation and incentives could be logistic variables since most LDC's are lacking capital and have various socio-cultural factors unfavorable to industrial work. There is an X-efficiency of incentives and motivations within the purview of human capital. Economic development deals with the utilization of endowed resources and one important resource in LDC is labor. Through motivation and incentives properly introduced,
the enhancement of worker productivities and performances will be realized by creating cooperative working inducing spill-over among workers, learning curve, and by reducing absenteeism and turnover. The number of workers represents only one of various aspects. Quality, effort, behavior, willingness, and coordination must be taken into account in undertaking industrialization of developing countries under the consideration of internal economies, in long run operation. The X-efficiency has a greater effect on productivity in LDC, and that a productivity advance raises more benefits in LDC because of producer's monopsony power.
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Economic Development in the People's Republic of China: 1949-1977 SIDNEY KLEIN California State University-Fullerton
For 28 years, from 1949 to 1977, the People's Republic of China experienced vicissitudes of almost every conceivable type: a rift with other nations on which it was heavily dependent for economic assistance (e.g., the USSR and its Eastern European allies); extremely large scale natural disasters-earthquakes, floods, and droughts; inept political and economic organization-as, for example, the "Great Leap Forward"; internal political and economic dissension and warfare-as, for example, the "Cultural Revolution"; etc. China has many problems and made many serious mistakes. In spite of these problems and mistakes, the PRC demonstrated a remarkable ability to survive. It
developed an oil production and export capability together with a heavy industry production base in a fashion which suggests that by the 1990's China will be a much more economically and hence politically powerful entity on this planet than at present. By the 1990's, China may have the same kind of economic leverage with other countires now enjoyed by the oil producing nations of the Middle East. In addition, it may have at that time a military position on the world scene which will exceed anything the OPEC countries have now or seem likely to develop over the next decade or two.
Comment ROY J. GROHS, University of Minnesota Professor Klein has given us a very interesting, and often insightful, account of the major currents in the economic development of Mainland China. He lists five reasons why an understanding of China's economic development is important. In addition to the list of macropolitical reasons he suggests, I would suggest another. That is the symbolic role of China as a m o d e l - o r experiment-watched closely, and imitated, by a number of other developing nations. It would be helpful to have Professor Klein's assessment of how China's recent
moves away from its model may affect its role vis-a-vis other LDC's. Secondly, KMn's discussion runs along traditional developmental lines: GNP, growth rates, levels of production and so on. One would hope for more discussion from the recently more popular Basic Human Needs perspective on development, the growth versus development controversy and particularly in this case, one wishes for more analysis of income distribution questions and of the attempts to reshape "economic man."
The Nationalization of Bolivian Tin: Conflict over the Economic Surplus of an LDC ROBERT D. LEY Bemidji State University
Comment SIDNEY KLEIN, California State University-Fullerton Ley's study reaffirms that there are no easy answers to the economic problems of LDC. If a policy is both too politically popular and eco-
nomically good to be true, it usually isn't. As Ley documents, the politcally popular nationalization of Bolivia's tin sector did not result in
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a less important domestic role for foreign interests; did not increase Bolivia's earnings from the tin sector; and did little or nothing to enhance the economic well being of most Bolivians. It did transfer income from the mine owners to the mine workers. This resulted
in losses by the tin firms, and declining tin exports and foreign exchange earnings by Bolivia. The moral: Nationalization can be worse than the status quo. Well done, Professor Ley.
Effects of Alternative Monetary and Fiscal Policy Packages During Recessions WILLY SELLEKAERTS Mary Baldwin College
Monetary policy was highly restrictive and fiscal policy expansionary, leading to recordhigh interest rates during the last two recessions. Automobile production and residential construction suffered particularly from high interest rates and tight credit. This policy mix slowed capital formation and hindered longrun labor productivity growth, and bred longrun stagflation. This paper demonstrates that expansionary monetary and restrictive fiscal policies have major advantages in the course of a recession. The trade-off between inflation and unemployment improves significantly in the
first four quarters of the recession. Interest rates are at least 200 to 300 basis points lower at the onset of the recovery, fostering capital formation, spending on consumer durables and on residential structures. Not only the car industry, but also small builders benefit enormously from this policy mix. Strong growth of capital formation, induced by lower cost of capital, raises the capital-labor ratio, boosts long-run labor productivity and generates employment. Accordingly, this policy mix guards against long-run stagflation by reducing inflation and unemployment simultaneously.
Selected Commercial Water Demand Elasticities ROBERT C. CAMP Concord College
The paramount objective of this study was to generate price elasticity coefficients for selected commercial users. The hypothesis was that the elasticity coefficients are relatively inelastic, not absolutely (perfectly) inelastic. The study area included ten Mississippi cities ranging in size from about 5,000 to 21,000. Data were collected on four easily segregated types of commerical water users: service stations, food service outlets, commercial laundries, and car wash facilities. The degree to which a business may react to a given resource price depends on the availability of alternative inputs as well as the firm's bargaining strength in the
resource market. Another consideration is the extent to which a business may be able to economize in the use of a particular input by developing and implementing conservation policies. The implicit hypothesis was that commercial water users are motivated by these considerations. Sufficient evidence was generated to suggest the validity of the same hypothesis that price elasticity is relatively but not perfectly inelastic for service stations and car wash facilities within the study area. Ample but not sufficient evidence was generated to suggest the validity of the same hypotliesis with regard to food service outlets and commercial laundries.
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A Model for Forecasting U.S. General Imports CHARLES DALE, GARY KEYNON, VICTOR BAILEY, AND TIMOTHYBAXTER U.S. Department o f Commerce
This paper describes a model which was constructed to predict short-run changes in U.S. merchandise imports. The model has proved useful both as a research tool and as a device for providing information to policy level officials. The authors had several reasons for constructing their own forecasting model. First, they used data which, although it is not confidential, is not generally available. Second, they paid particular attention to changes in the
data series that have occurred in the last few years. Third, they are interested in forecasting, rather than explanation. As a result, the model was selected on the basis of its predictive ability, rather than the more traditional criterion of best in-sample statistical fit. The model has thus far proved to be very easy to use, and has produced results that are quite competitive with models that are far more complex.
Labor Market Models and Reinforcers of Cyclical Fluctuations: Empirical Note JAMES J. DOYLE AND JAMES J. CLARKE JA CA Corporation and Villanova University
According to the Friedman-Phelps labor expectations model, changes in the real wage reinforce expansions and contractions. Thus, one would expect that changes in the real wage would exert a more powerful influence on real GNP than real GNP exerts on it. In contrast to this view, the Internal Labor Market model considers the marginal cost of labor as the reinforcer, suggesting that the marginal cost of labor affects real GNP to a greater extent than real GNP affects it. The purpose of this paper
was to subject these propositions concerning directional influence to an empirical test using the Future F-test. The models were tested using quarterly data for the 1948-78 period. The results reveal that, while no directional influence is detectable between real wages and real GNP, labor cost per unit of output tends to register a greater impact on real GNP than the other way around-a result which is consistent with the Internal Labor Market Model.
Development of Weather Simulated Price-Modelling Techniques LAWRENCE J. HEITKEMPERAND JOHN W. WYSONG Earth Satellite Corporation and University of Maryland
Water shortages and droughts in the U.S. and other agricultural areas in recent years have increased domestic and international agricultural commodity price fluctuations through time and different geographical regions. A Monte Carlo simulation technique has been developed which integrates daily weather inputs in the price model discussed and analyzed. The weather data utilized increased the accuracy of forecasts of commodity supply, demand and price
changes, as had been anticipated relative to static climatological data representing seasonal averages. A commodity scorecard is presented to show the possible earnings from commodity investments. Profits during 1979 were 14.2 percent in a 45 day period. 1980 profits were 10.5 percent for a third day period. The technique presented is apphcable to other weather sensitive industries. Some industries that are particularly sensitive are: energy, outdoor con-
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struction and ski industries. A typical Monte Carlo simulation output is presented for
planning purposes and implementation in weather sensitive industries.
Contributions of Disequilibrium Theory to Commodity Market Dynamics WALTER C. LABYS West Virgnia University
Comment HUGH N. DAWES,City University of New York The study reminds us that the problem of the testing of some of the hypotheses based on market disequilibrium is a very elusive one and variables like "uncertainty" and "expectation." more so when it is concerned with the question Indeed, these "subjective" variables usually of dynamic modelling. While the analysis has introduce a net addition of errors. Considering promise as an academic exercise, its practical the time constraint under which these papers rewards appear less so, giving rise, perhaps, to are often discussed, the first section dealing the "extraordinary neglect" of this area, to use with disequilibrium theories could, probably, the author's phrase. One of the pervasive prob- be condensed and the time invested in the lern's is the specification, collection of data, and modelling aspect. Productivity Growth in a Simulation Model with Endogenous Technical Change DAVID M. CHEREB McCulloch CorporaHon
This simulation model confirms the belief that the average long-run rate of U.S. productivity growth can be significantly increased during the next several years. The model is a macroeconomic growth model with endogenous technical change. Productivity growth is a macroeconomic growth model with endogenous technical change. Productivity growth is enhanced through a combination of short and long-term factors which provide the necessary stimulus for augmenting the quality of productive inputs.Specifically, it shows several different scenarios which can bring our average rate of productivity growth from the low 1.3
percent per year (1969-79) rate to a 3+ percent per year rate in the next several years. The return to a 3 percent per year rate of improvement in output per unit of labor input will significantly aid the battle against inflation. The shortterm productivity factor is a change in capacity utilization, while the longer term productivity factors are new investment in plant and equipment, research and development investment and human capital investment in education, economies of scale and experience curve gains. These factors increase productivity by augmenting the quality of labor and capital in the production process.
Impact of Minimum Wage Increases on Wage Inflation BRIGITTEH. SELLEKAERTS Minimum WageStudy Commission
The total impact of minimum wage increases on average hourly compensation is estimated in
a time-series framework for the U.S. economy. A direct impact results from the legislated in-
ABSTRACTS crease in hourly earnings of subject employees who were previously paid less than the new minimum. A wage comparison of "ripple" effect is caused via adjustments in hourly wage payments of those workers who already were paid at a rate in excess of the new minimum wage level prior to its enactment, because of specific contract clauses contingent on the minimum wage, or because of employers' wage policies designed to maintain a relative wage hierarchy. Economy-wide spillover effects are triggered and result in new equilibrium values of wholesale and consumer prices, productivity and the unemployment rate, will in
51
time again influence average hourly compensation rates. Empirical wage/price relationships were incorporated in the 1978 MIT-Penn-SSRC Econometric Model. The first-quarter impact of a 10 percent minimum wage increase contributed .26 percent to wage inflation during the most current complete business cycle, while the wage comparison effect increased the effect to .65 percent after four quarters. Dynamic spillover effects raised the impact to .76 percent, owing to a .05 percentage points rise in the unemployment rate and a modest gain in productivity that mitigated price inflation while entering positively in wage determination.
The Impact of Inflation on Functional and Personal Income Distributions KILMAN SHIN Western Carolina University
There are three theories on the effects of inflation on functional and personal income distributions. The first is the wage lag hypothesis which argues that money wage rates tend to lag behind the price level. The second is the employment effect hypothesis. Accepting the wage lag hypothesis, when the price level rises, the real wage rate falls. The regression results of the research suggest the following conclusions: (1) During the period of inflation, the relative wage share tends to fall. (2) As the relative wage share falls, the Gini ratio tends to rise. (3) However, the negative effects of
inflation on the relative wage share and thus the Gini ratio tend to be offset by indexed social security and welfare programs. (4) In terms of elasticity, the regression results suggest that the elasticity of the relative wage share with respect to the price level tends to be less than unity. In other words, it supports the first hypothesis and rejects the second and the third hypotheses. According to the second hypothesis, the elasticity should be greater than unity, and according to the third hypothesis, the elasticity should be equal to unity.
The Lead-Lag Relationship Between Unemployment and Inflation Rate: A New Look at the Phillips Curve CHRISTOPHERB. SPIVEY The Citadel
While earlier patterns in the relationship between inflation and unemployment tended to confirm the theory that there was a tradeoff between these two grim statistics, when the U.S. consumer price index for each of the last 20 years is compared to the unemployment
rate this pattern seems to disintegrate. If, however, we accept the idea that causal factors act more quickly upon unemployment than upon inflation and we compare the unemployment rate for each year to the following years consumer price index, we find that in the short
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run we still have this tradeoff pattern although it shifts over time to higher levels. This give
us progressively more unpleasant short run choices between inflation and unemployment.
Price Determination During Price Controls MICHAELM. TANSEY University of Texas-Arlington Although price controls may prevent prices from reaching equilibrium levels, prices may respond to market forces if they are held in a constant relationship to the equilibrium market price. The self administration permitted in recent U.S. price control programs makes such an assumption plausible. It also may validate the widely used market models to test for the effect of price controls. Dummy variables have been used with embarrassment in studies measuring the effects of price controls. This and other commonly used approaches assume that market forces have the same effects with and without controls. This paper showed that a
model of price control behavior can be used to derive equations that are quite similar to those for an uncontrolled market. In this paper a price control agency was assumed to be a leader in a Stackelberg model of its interaction with a firm. The agency maximized consumers' surplus with respect to the price control level. Reaction functions to price controls were derived for the profit maximizing firm. From this model an explicit time series equation could be developed to measure the effect of price controls using a dummy variable or simulation approach.
Linear Discriminant Analysis with Discrete Data: A Case Study R. BHARATHAND B. G. GNAUCK Northern Michigan University The aim of the paper was to test the robustness of the linear discriminant function when applied to non-normal data, in particular, to discrete data. The data used consisted of Yes and No responses to questions in a questionnaire. These were coded as zero and one. Since the distribution in discrete [Bernoulli], strictly speaking the linear discriminant function is not apphcable, because the condition of multivariate normality is not satisfied. However, when the degree of correct classification achieved using the linear discriminant function
was compared with that obtained by using the pattern probability model (which does not require continuous data or normality assumptions) the results were found to be practically the same: 75.9 percent and 76.4 percent respectively. The finding lends support to the viability of linear discriminant analysis when used for discrete data, an issue which is discussed at various places in the literature [e.g. Peter A. Lachenbruch, DiscriminantAnalysis, New York: Hafner Press, 1975].
A Bayesian Alternative to the Chow Test: A Labor Supply Application ANDREW W. BRAUNSTEIN Iona College This paper applies a Bayesian procedure to test equality between sets of coefficients in two
regression equations when disturbance variances are unequal. The robustness of the Chow test
ABSTRACTS under heteroscedasticity has been examined by Toyoda and Schmidt and Sickles. Jayatissa, Goldfeld and Quandt, and Gupta and Kadiyala have proposed alternative tests from a sampling theory framework. To derive a testable criterion within a sampling theory framework, one needs to know the ratio of the two variances. The Bayesian procedure integrates out that ratio and thus gives an exact testing procedure, given a prior probability density function. The Bayesian solution to the Chow test is applied to examine whether or not important labor supply parameters differ between individuals who have free choice over hours worked and those who do not. A linear labor supply equation, based
53
upon the classical theory of consumer choice, is estimated for the mixed sample and for each group separately. The results presented in this paper indicate that one must be cautious in choosing a sample for use in the estimation of a classical labor supply model. The Bayesian test finds that estimates of labor supply parameters are significantly different between the "equilibrium" and "non-equilibrium" groups. Furthermore, while the estimated income and substitution effects for the equilibrium group have the signs suggested by the classical theory, just the opposite holds for the non-equilibrium group.
A Complete Causal Examination of the Monetary Reaction Function Problem M. RAY PERRYMAN Baylor University
This paper systematically examines the reverse causation problem as evidenced in the literature surrounding the specification of Federal Reserve reaction functions. Specifically, the analysis corrects for the presence of mutual causation by (1) utilizing dependent variables which are exogenous to the economy and reflect only the stance of monetary policy and (2) pretesting the structural relationships by recently developed causality techniques. Both time series and econometric procedures are employed. The study basically integrates the existing literatures on unbiased monetary indicators, policy reaction functions, and causal processes to provide a more complete understanding of Federal Reserve policy. Initially,
the indicators employed within the study are briefly described. These variables include the neutralized money stock and two noncyclical indicators, Mt * and M2 *, which were previously derived by the author from a multi-equation model of the monetary sector. This discussion is followed by a survey of the statistical procedures utilized in the analysis. The empirical results are then presented and assessed. Finally, the overall implications for the conduct of monetary policy are summarized, The essential conclusions of the paper are that (1) unbiased reaction functions may be developed and estimated and (2) noncyclical indicators may be constructed which are exogenous to policy goals.
Financial Asset Acquisition by Personal Sector in U,K. SALAHUDDIN AHMAD Quinnipiae College
The purpose of this study is to describe and explain the pattern of financial asset acquisition by the personal sector in U.K. The study uses a stock adjustment model which incorporates the
flow constraint of the type ~xAi/~Ai = B(r) Xi A i - 1 / ~ A i + 7 ~ z ~ A i / ~ A i where A i is ita asset, r is tile rate on the asset, A -1 is the lagged value of the i th asset. While ~AAi-the sum of
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all flows (i.e., investment in assets) is the flow constraint. The model was estimated both with and without the balance sheet constraints Eri = 1 and EBif = 0 and symmetry constraints Bij = B/i, i :/= f seasonally adjusted quarterly data for 1963-72 were used to estimate the asset demand equations for the following: Notes and coins, bank deposit, building society deposits, unit trust, national savings, gilt edged securities, savings bank investment account and other deposit assets. According to the regression estimmates (both constrained and unconstrained)
building society deposits, national and trustee savings bank special investment accounts and national savings are substitutes of bank deposits. The flow constraints appear with sizeable significant coefficients emphasizing the importance of flow constraints and are in accordance with Hendershott's argument ["A Flow of Funds Model: Estimates for the non Bank Finance Sector," JMCB, Nov. 1971]. The estimates also confirm the extrapolative hypothesis in asset acquisition.
Is the Interest Rate Real or Imaginary? JOHN TELUK AND JOSEPH PARKER
University of New Haven
The purpose of this paper is to argue that inflation has negated the role that economists have ascribed to the rate of interest to where the rate of interest carries a new value that is arbitrary and a result of general expectations. Today, we are finding people are shunning the traditional investment opportunities, namely savings-both passbook and times, and instead are using their money for current consumption. With the current high level of inflation, coupled with a high marginal tax rate, the traditional function of the interest rate as an attraction of idle cash balance has become ineffective. The opportunity costs of savings have made savings an anachronism. Basically, the paper has tried
to show that the saver is trying to be as rationale as possible in an irrational situation. In order for real savings to take place which would yield the saver a true, not an imaginary gain, the prevailing rates of interest would need to be significantly increased. On the other hand, the reduction of loanable funds have not yet proven to be a problem to the banking institutions. Banks ostensibly lend money for two basic purposes: one is to make money, the other is to pay a rate of return to their savers. But today with variable interest rates being charged borrowers, even with a reduction in loans, banks are able to generate substantial gains vish-vis higher rates charged to existing loans.
Comment
VINCENT R. DRISCOLL, Quinnipiac College wise the higher level of planned spending cannot be executed. Such a rise in the level of planned spending places additional pressure on the interest rate to rise at any given level of income and suggests that empirical evidence existing on the velocity-interest rate association may in large part be attributed to a third common causal factor, a change in the level of extant spending.
In this paper Dr. Parker and Dr. Teluk argue that the rate of interest has not performed its role as a significant determinant of saving. Although this assumption is debatable, this paper raises an interesting point; that being that in economic analysis a change along a given liquidity preference function is sometimes confused with a shift in the schedule itself. A general increase in the level of extant spending must be first financed, other-
ABSTRACTS
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The Effectiveness of the Monetary Control Act of 1980 JOAN G. WALTERS Fairfield University The paper hypothesizes that the new Monetary Control Act of 1980 is unlikely to improve control of the money supply. Any gain in equity among financial institutions may be outweighed by a loss in efficiency (effectiveness) in controlling the monetary aggregates. 'New universal reserve requirements, applying to all commercial banks and thrifts, are meant to decrease instability in the money multiplier. This is unlikely to come about, however, because: more deposit classifications were prescribed (transactions, savings, consumer time, nonpersonal time); differentials between reserve ratio levels of the different classes in some cases are greater than under the previous system; many liquid money
substitutes still have no reserve requirements, such as money market funds; continued innovation by financial institutions in creating nonreservable liabilities will add an additional transaction class subject to a zero reserve ratio; removal of the Reg. Q. interest ceiling probably will lead to greater interest rate fluctuations on alternative assets causing greater shifts of funds among classifications and, hence, greater fluctuations in the money multiplier; lower reserve ratio levels mean lower total dollar reserves are required than at present; future mandated reserve ratio levels eliminate the Fed's power to vary the ratio levels.
Comment
SALAHUDDINAHMAD, Quinnipiac College The paper by Professor Waiters is interesting enterprise take its course (a la Friedman). Proinsofar as it gives a detailed description of the fessor Waiters agrees that "changes in reserve monetary control act of 1980. She speculates ratios are unwieldy and not suitable for fine about the reduction in control by the Federal tuning." But then she argues against transferReserve. What she fails to notice is that within ring this tool away from Federal Reserve (which the folds of the Fed's control mechanism is a is famous for its flexibility) to Congress whose commendable act. It is true that there are many actions are quite inflexible. It is true that noncovered institutions but then argument widening the ratio differentials between classes should be for extending the act to more insti- of deposits might increase the instability in tutions rather than arguing that the act is a money multiplier, but this instability may be bad idea. She speculates about the financial insignificant if rate of substitution across deinnovations, which would try to get around posits is small. Hence, the benefit accruing from the act. But then the arguments should be to such widening might outweigh the cost of small deregulate the banks completely and let free increase in instability. Bank Portfolio Composition and Economic Activity NICHOLAS A. LASH AND BALA BATAVIA DePaul University Comment WILLIAMJACKSON, Congressional Research Service This study concludes that "policymakers should focus on monetary aggregates without
concerning themselves with the compositon of bank loans." If so, the Federal Reserve's 1980
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credit controls-apparently aggravating the recession-were unnecessary. If the central bank wanted to trim GNP to reduce inflation, it had only to follow through its announced policy of controlling monetary aggregates. Methodologically, although two-and-three stage least squares are on the right track, they can be derailed by
the common obstacle, multicollinearity. Relying on interrelationships among dependent variables, these techniques are sensitive to singularity among explanatory variables. The nature of the exogenous variables, plus the wrong loan rate sign in the loan demand equation, thus may raise warning flags.
Public's Perception of Women as Loan Officers in Commercial Banks JERRY M. HOOD Northeast Louisiana University
The primary purpose of this study was to examine the public's attitude toward women as bank loan officers. An instrument was designed to ascertain the relative rating of attitudes of the public toward women loan officers in four areas: 1) Sex discrimination; 2) Sex-role stereotypes; 3) Management attributes; and, 4) Business versus consumer loans. In sex discrimination, the survey indicated the 76 percent of respondents felt both women and men would be appropriate as loan officers. It was found however, that only 43 percent of the respondents felt the business community would accept women as equally as men as loan officers. The purpose of the sex-role stereotype section
was to determine if the respondents had preconceived attitudes toward male and females in a business role. It was found that the respondents were more likely to stereotype psychological stability than objectivity in evaluating men and women as loan officers. Several management attributes were selected for this study which were considered important for a loan officer to possess. A majority of respondents thought women possessed these managerial attributes at least as well as men. In the business versus consumer loans section, however, it was found that women were more acceptable to the public for handling consumer loans rather than business loans.
Comment BARBARA F. MASTRO,First National Bank of Boston With the basic objective of determining if the banking consumer is willing to conduct business with women loan officers, this paper has attempted to tackle a question more complex than its simplicity of definition and methodology will permit. Untested assumptions were made concerning the charactersitics of loan officers relevant to the public's attitude formation and the attitudes of "the general
public" revealed in this case by 189 self-selected respondents from Monroe, Louisiana, are used as a proxy for the attitudes of the actual consumers of banking services. The term banking consumer is itself inadequately defined and further detracts from the conclusion which is not convincingly supported by the research presented.
Transfer Payments and the Cyclical Behavior of Personal Income MORRIS BECK Rutgers University
In each of the seven recession since 1948
government transfer payments have moderated
ABSTRACTS
the decline of personal income. For example, in the severe recession of November 1973 to November 1975 factor income fell 5.8 percent; but total personal income, including transfer payments, fell 2.9 percent. In the mild recessions that began in April 1960 and December 1969 transfer payments converted the slight decline of factor income into a modest increase of total personal income. Similarly, in eight of the nine growth-cycle slowdowns since World War II transfer payments either moderated a
57
decline, or reinforced the growth, of factor income. During cyclical expansions and the highgrowth phase of growth cycles since 1949 transfer payments have also behaved countercyclically in most instances. Social security and public employee retirement benefits dominate the total of transfer payments. Apparently, the rise in these two components of the total is more than offset by the decline in unemployment compensation, welfare, and similar programs.
The Net Cost Per Job of Alternative Countercyclical Programs IVY E. BRODER The American University
The net cost per job of three different countercyclical programs are evaluated-public service employment, public works and revenue sharing. Other studies have used a variety of techniques and methods to analyze these programs. However, in this paper a consistent methodology is used for each program so that the net costs can be directly compared. The following evaluation technique was used: 1) direct employment in person years (per billion dollars) was estimated (onsite jobs in a project); 2) secondary employment was estimated (the number of offsite jobs in supplying industries and multiplier effects); 3) displacement of local funds by Federal funds were estimated. This percentage
was used to adjust downward the total number of jobs derived in the previous steps; 4) the uses of displaced funds was determined, since some of these uses have job creating effects; 5) the number of jobs created by displaced funds was estimated and added to the number obtained in the third step above; 6) the amount oPmoney recaptured by the Treasury was estimated (increased tax collections and reduced unemployment compensation and welfare expenditures); 7) the net cost per job was obtained by dividing the net cost (after recaptures) by the total number of jobs created by displaced and non-displaced funds.
Comment
ANNETTE MEYER, Trenton State College As the author suggests, net cost per job is a cost of job creation programs might have been limited view of the value of a countercyclical suggested, perhaps other transfer subsidy proprogram. Therefore, it would have been of grams. J~rrett and Barocci in a similar study interest to consider cost per job as a function of included, along with their calculations of net time . . . how long does the job last? . . . how cost per dollar expended, information on the long does the worker stay on the job? Fur- duration of employment, evaluation of the thermore, it would have been of interest to countercyclical aspects, comparison of employee have included some measure of value of output prior and present occupational categories and or its content. Alternatively, an opportunity long term impacts.
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ATLANTIC ECONOMIC JOURNAL The Incidence of the Property Tax: A Case Study of New Jersey OSKAR R. HARMON Bentley College
Recent literature has criticized the theory and empirical analysis of the tax incidence studies which support the conventional wisdom that the property tax is regressive. Aaron has shown that when these criticisms are incorporated in the analysis and incidence is measured at the nation-wide level the property tax is progressive. This study analyzes property tax in-
cidence in a state where effective property tax rates are above the national average and positive excise tax effects dominate. Results indicate that in this type of state the property tax is slightly regressive. Also, it is shown that a shift to full market valuation of property increases the regressivity of the property tax.
Trade Policy Towards China's Textile Exports ROCKWOOD Q. P. CHIN University of Connecticut
Endowed with raw cotton, skilled labor, and textile machinery, the PRC is accelarating textile production and trade in cotton and manmade fiber manufacturers. Textile and clothing earned over one-fourth of her foreign exchange from exports. Textile duties under GATT's Tokyo Round were cut less than average. China enjoys most-favored-nation treatment under various trade agreements and benefits from the Generalized System of Preferences. However, quotas, slightly larger than unilateral ones and growing by small percentages each agreement year, were imposed on sensitive items by Canada (1978), the European Community (1979), and the United States (1980)
under the 1974 Multifiber Arrangement (extended 1977 to 1981) despite views of importers, consumers, and exporters opposing protectionism. Japan, however, having made earlier structural adjustments in her industries, avoided quotas though taking about 20 percent of the PRC's textile and clothing exports. The 1978 China-Japan trade treaty resulted in $5 billion of two-way trade in 1978 and $6.5 billion in 1979. Liberalizing textile quotas would improve the allocation of resources and international division of labor according to international trade theories based upon comparative advantage, factor endowment, and the product cycle.
On Specific Factors in the Non-Traded Goods Sector and Some Propositions in the Pure Theory of International Trade BHARAT R. HAZARI University of South Pacific-Fifi
Comment WILLIAMM. HOLROYD, U. S. Department of Commerce The outcomes are logically interesting to Hazari's country and the rest of the world, and reach from the initial premises of the model, virtually renders the model as a closed one In this ostensibly open model, the balance of country world. Suppose, a la Meade, Hazari's payments is always in equilibrium. The effect country is in external deficit, a second country is to shut-off all possible disequilibria between is in surplus, and both countries are in a reces-
ABSTRACTS sion internally. Hazari's increase in labor supply and income will help the deficit country internally. But added income can increase imports and maybe worsen the deficit. Would the
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welfare benefit be "unambiguous?" We need solutions to " n " country problems-hardly touched as yet.
Import Relief Measures: Cost and Benefits on the Firing Line JAMES I. WALSH United States Trade Representative's Office
This paper reviews the theory and practice of estimating import relief welfare costs and benefits in the context of a political environment, an imperfect economy and uncertainty. After briefly reviewing what import relief is and what it is intended to do, the theory and mechanics of import relief costs and benefits were discussed. Economists working on import relief cases must compartmentize their economic and political selves as they examine each import relief option on a case by case basis. The economic side views a competitive industry as one which changes product lines, changes production lines or methods of production to meet competition. The political side sees import relief as preserving the status quo,
at the minimum. The basic question for import relief cost and benefit calculations is "What action will best benefit the domestic industry impacted by imports." In this context, costs and benefits are only two of severn considerations which must be taken into account. Other considerations such as national defense, may completely outweigh costs and benefits. The relative weights of the severn considerations vary with each situation. The conclusion was that if the relief measures ordered by the President were not serving their purpose-to allow an impacted industry to adjust to imports - t h e impacted industry would make this fact known to their President and their Congressional representatives.
Comment WILLIAMM. HOLROYD, U. S. Department of Commerce This paper is an excellent review of the inflation; the effect of proposed action on our framework, difficulties, and constraints that trading partners; . . . etc." Which of these face the International Trade Commission, task factors are competing against each other and forces, and the President in making recom- which are complementary? Could some of these mendations and decisions on import relief pe- factors be competing in one industry and comtitions. The author notes that "the Trade Act plementary in another? Given that an "industry" of 1974 directs the President to take into ac- is identified narrowly according to the peticount the impact of import relief actions on tioner, do demand cross-elasticities enter into labor, industry and agriculture; the impact on the evaluations? Floating Exchange Rates and Purchasing Power Parity 1973-79 YOU-KENGCHIANG Rochester Institute o f Technology
In the monetary approach to the balance of payments, there is a crucial expression, namely,
P* = eP where P, P* denote the domestic and foreign price level, and e, the exchange rate de-
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fined as the units of foreign currency per unit of domestic currency. This is essentially the theory of purchasing power parity of foreign exchange rates. Since early 1973 all the major currencies of the industrial world have been floating. We have now about seven years of experience with the system of floating exchange rates: it is time to test the theory of purchasing power pariety with this experience. The theory of purchasing power parity in its absolute version may be stated in a mathematical expression using logarithm as follows:
lnet = a + b*lnP*t - blnP
The regression results show that all variables have expected signs in all equations. The extremely higher value of F-statistics indicates that the regressions are highly significant, and the lower values of standard errors of regression coefficients call for the rejection of the null hypothesis of these coefficients. However, the lower values of Durbin-Watson statistics indicate that there are positive autocorrelations which cannot be ignored.
Comment CAROL LOPILATO,California State University Dr. Chiang's paper discusses both the mone- supported. My investigation of the relationship tary approach to the balance of payments and between changes in the Chilean price level and the monetary approach to exchange rates. Both changes in the exchange rate from 1973 to hypotheses assume that a country's exchange 1979 indicates that the rate of change in the rate reflects the ratio of the domestic price level Chilean price level approximated very closely to the foreign price level: the theory of pur- the sum of the rate of change of the U.S. price chasing power parity. Chiang's preliminary level and the rate of change in the Chilean/U.S. work on purchasing power parity from 1973 to exchange rate. 1979 indicates that the theory is empirically The Economic Cost of Correcting External Imbalances R. STAFFORDJOHNSON AND RICHARD A. ZUBER University of North Carolina-Charlotte
An inherent difficulty germane to measuring reserve adequacy, determining appropriate policies for correcting external disequilibriums, and specifying correct reserve distribution methods is the delineation of an adjustment cost. That is, the cost to a country of correcting its external imbalances. For expedience, most writers have used one over the Marginal Propensity to Import (I/m) to measure such cost. Critics have challenged this measure primarily
on the grounds that expenditure-switching and capital account items are missing. In addition to these shortcomings, the sole use of 1 / m also fails to include the explicit impact of prices and interest rates when expenditure-changing policies are used. In general, the inclusion of these variables will cause the adjustment cost to be smaller the greater the level of employment and the greater the use of monetary policy.
Export Share Relationships to Output, Employment, and the Payments Balance WILLIAMM. HOLROYD U. S. Department o f Commerce
Export share should be placed in perspective
in respect to its logical connections to such
ABSTRACTS policy sensitive macro-variables as exports, output, employment, and the balance of payments. A country's export value is equal to the export share times the world export value. Thus, export share can be viewed as a slope of a ray from the origin to the coordinate point of world export value and home country export value. Define the elasticity, "g," as the ratio of percent change in home country exports to
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the percent change in world exports. An increase, no change, or decline in export share requires "g" to be greater than unity, equal to unity, or less than unity, respectively. It is shown by diagrams and equations that the direction of export share change is not necessarily the same as the direction of change in exports, output, employment, or the balance of payments.
Distributive Income Effects of Foreign Direct Investment BEAT BURGENMEIER University of Geneva-Switzerland
Two theoretical models analyze revenues of foreign direct investment using graphical tools. In the first modelwhere two goods are exchanged internationally, the introduction of a net capital outflow producing a corresponding net revenues inflow leads to a higher exchange rate than the terms of trade. If direct investment is increased, a loss of real income due to a lower specialization may be compensated by an increase of net capital revenues. If the terms of trade deteriorate, foreign direct investment may be intensified in order to maintain the level of real income. However, the loss of real income can only be compensated under an additional condition: marginal productivity of capital must raise in the foreign industries which welcomed direct
investment. If commercial poiicy is tightened, the model shows that this can be upset by changing international capital flows. The consequences of these changes, translated also by different degrees of specialization, are analyzed in respect to income distribution in specifying the conditions under which the proportion of labor income remains constant. In the second model, where only one good is traded internationally, the increased capital revenues, repatriated from abroad, do not compensate the loss of real income. Moreover, the relative price of the export good increases. The new level o f consumption is definitely lower than before the increase of foreign direct investment.
The Role of International Banking in Recycling of Petrodollars UMESH GULATIAND OSCAR MOORE East Carolina University
The focus of this study is on the role o f the international banks on the recycling of the surplus OPEC funds originally invested in Eurocurrency market to their final disposition to non-oil exporting LDC's. By 1979, the international banks increased their claims on LDC's to $157 billion from only $44 billion in 1974. During the same period the OPEC invested between $100 and $120 billion of its surplus in the form of bank deposits in the U.S. and
Europe. The reason for this successful recycling is the result of a major innovation in international banking in the form of bank syndications. A feature of lending to LDC's is that both the lending and borrowing activities are highly concentrated among a few large banks, and a few more developed LDC's, respectively. The former concentration results from a general lack of knowledge about most LDC's. Indeed, the large banks depend more on their qualita-
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tive judgment rather than on any systematic evaluation in approving loans to any particular country. The concentration among LDC's results from the preference of most of them for cheaper loans from international agencies. The paper concludes that so far because of this con-
centration, much feared crisis in the international markets has been avoided. But this situation may change with continued increases in oil prices by the OPEC since the beginning of 1980. An expanded role for the IMF is suggested.
Foreign Acquisitions in the United States: A Performance Analysis JACOBUS T. SEVERIENS Cleveland State University
The widely held monopolistic competition theory of foreign investment asserts that overseas firms bring some advantage to the domestic economy that they do not share with local competitors. The edge typically lies in technology, patents, capital access, or in superior production, marketing, or management strategies. It follows that such an influx of resources should generate enhanced returns. The current study examines the extent to which the theory is empirically justified. Specifically, it evaluates the financial performance of a sample of U.S. companies acquired by foreign firms. The methodological approach is longitudinal. It seeks to
find statistically significant shifts in a variety of financial ratios over periods before and after controlling interest is attained. The analysis suggests that the foreign resource advantages, if they exist, have not been manifested in operations in this country. In fact, profit margins for the sample group have significantly declined in the post-acquisition period. Of course, a few foreign-acquired companies have fared well in recent years. But their success can be attributed more to favorable industry experience and to the financial health of the company ex ante than to any alleged benefits accruing from foreign ownership.
Product/Service Demand Analysis for Marketability by the Minority Entrepreneur CARL M. COLONNAAND ROBERTC. COKER Christopher Newport College
Metropolitan industrial bases and minorities have been hard hit by the economic disorders confronting our society. In an effort to revitalize the economic prospects for these two groups, a product/service demand analysis was conducted for the Newport News-Hampton (Va.) SMSA to determine what products/services could be supplied by minority businesses thus broadening the scope of secondary resource supply. A survey of local industries was conducted to determine products/services currently purchased from outside supply sources and to determine the preference criteria used in the decisionmaking process to arrive at quantity purchased. Those secondary resources offering the greatest
potential for success for minority entrepreneurs were identified, as well as the levels of human skills needed to generate these resources. Regarding the preference criteria, it was determined through the use of a Pearson correlation that the quantity of secondary resources will expand as the mean average price drops. Through the use of a partial correlation it was determined that the quantity of secondary resources will expand as the difference between the mean average price and the mean average cost savings (attributed to supply reliability and dependability) increases. In conclusion, firms would prefer reliable local suppliers with competitive pricing.
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Financial Management and Local Development JOHN EUGENE PIERCE
Augusta College Financial management of the firm often involves decisions calling for analysis of the local economy. For the individual firm to prepare an interindustry analysis for each location which it might consider for new operations would be so costly as to preclude bringing indirect local effects into account. The answer, then, is for the local economy to be analyzed so as to reveal interindustry effects for consideration by any firm seeking optimal locations. The inputoutput type of study is not adequate for capital budgeting if it applies to but a single time. The need is for longitudinal analysis revealing for each industry category a time series disclosing
local fluctuations. Survey data are mandatory, but a wealth of other statistics are also available in time series. Maximum advantage is achieved by inter-censal analysis permitting bench-mark checks of numerous variables. Such analysis is significant not only to the localities studied. The overall workings of the national economy depend upon efficient locational decisions. There is a tendency, involving agglomerative influences, toward over-concentration of economic activity in areas which have highly capitalintensive operations at the expense of those currently capital deficient which may yield higher real returns in the long run.
A Going Concern Theory of Profits FRANK C. GENOVESE
Babson College This profit theory has proven useful in giving form to Managerial Economics courses. In an attempt to be useful and realistic the theory aimed at describing the factors contributing to business success or failure and the longterm persistence of-accounting profits for corporate, multi-product firms in situations ranging from relatively pure competition through monopolistic competition, oligopoly and monopoly. Legal organizations, firms as corporations were held to be risk creators more than risk bearers. The impediments to the successful entry of new firms and the intro-
duction of new products, and other Schumpeterian innovations by old and new firms are explored insofar as they affect risk. They are examined on the basis of three interactive determinants of entry: Desire, Ability, and Liberty. An "iron law of enterprise" is suggested in determining a limit to the number or firms that can exist through time in many lines of endeavor, such that the number of entries equals the number of failures under reasonably static conditions. Risk is seen as differentiated between firms and related particularly to the size of the available capital.
Black-Owned Businesses: Black Capitalism in Transition JOE W. LEE AND SRIPRINYA RAMAKOMUD
Howard University This paper analyzes black-owned businesses, as reported in the 1972 and 1977 Surveys of Minority-Owned Business Enterprises. It analyzes first the changing patterns of black busi-
nesses in relation to the overall national economic activities, and then their redistributional patterns among different regions. While total number of black businesses grew as fast as over-
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all U.S. business population, black businesses with paid employees grew much faster. Previously one-man businesses developed into businesses with paid employees, thus gradually putting their roots deeper. The structural changes in black business population followed the trend of total U.S. businesses, with an exception of service industry, whose share grew faster than the total U.S. service sector. Black service industry seems to require relatively less capital to start with, and its market is growing in the
black communities. Black businesses "shifted" to the rapidly growing regions of Southeast, Southwest and Far West. They have better chance of growth in the regions, particularly Southeast, where black population is larger. The relatively slow growth in more industrialized, racially integrated regions, is due partly to high income leakage from black community to outside economy. Here lies a dilemma and challenge for black business development.
Comment SHIMSHONKINORY, BESA Lee and Ramakomud's paper presents a gen- on the bankruptcy ratio as well as by disagreeral survey of black-owned businesses. The sur- gating the industry data down to four S. I. C. vey makes for interesting reading and is a neces- Code Levels. Such disagregation may provide sary first step in the process of formulating a more meaningful way of comparing blacksome testable hypotheses. Additional clarifica- owned establishments to the total industry. tions could be obtained by providing some data Regressions on Corporate Data, Demonstrating Narrowing Range of Plausible Strategies EDMUND J. LUKSUSAND JAMES B. RUBY San Jose Police Department and Mathematica Policy Research
The problem is to narrow the broad, numerous range of alternative budget strategies facing management attempting translation of plan into action. The paper demonstrates a system using multivariate time series regressions. Data are for a U.S. corporation, supporting a high quality regression encompassing three strategic policy areas: (1) personnel, (2) market share, and (3) capital equipment. A menu, length Ni, of plausible alternative actions applies to each area. Alternative strategies number N1N2N3. The paper concentrates on the third area. It demonstrates how additional regressions can cull the plausible strategies. The idea is simple: alterna-
tive regressions have differing sets of plausible strategies. These sets' intersection tends to diminish when the number of regressions increases. The greatest practical problem is that management's strategic tools and problems do not lend to regressions unbiased in the absolute sense. The approach therefore emphasizes statistical control of degree and type of multicollinearity. As presented, it uses only public data. Corporate economists, privy to more data, largely designed for management control, can extend the approach in principle to very fine distinctions between strategies.
Comment SHIMSON KINORY,BESA Luksus and Ruby presented us with an inter- esting method for narrowing the range of alter-
ATLANTIC ECONOMIC JOURNAL native strategies associated with a given policy. Several comments may, however, be in order. As the applied example demonstrates altenative strategies may involve substantially different amounts of capital. Moreover each strategy generally labelled as capital expenditure may have a different effect on the non policy variable. Luksus' model however eliminates strategies according to the direction of the effect
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and not its magnitude. The two criteria may not always generate identical solutions. The Luksus and Ruby method is applicable however, when the two criteria do generate identical results. Notwithstanding the above comments and this discussant's obvious bias towards multiple equation models, Luksus and Ruby should be complimented for their contribution.
A Declaration on Independence with a Revolutionary Proposal EDWARD O. LUTZ Brooklyn College
Users of financial statements look for the independent CPA's attestation that the finn's data are fairly presented before relying on them. However there is conflict of interest inherent in the client-accountant relationship as the very under audit is selecting and paying the auditor. Alarmed by a series of scandals, Congress has put the accounting profession on notice that it must improve its performance or the government will impose its own controls. The profession has imposed Peer Evaluation; an independent FASB and a Public Oversight Board; and backed corporate audit committees composed of outside directors, etc. While these are improvements, accountants cannot escape
the inference that they will bend their principles to satisfy client's demands, untiI the economic link is broken. The solution suggested is that independent "leagues"-such as Stock Exchanges, credit associations etc.-select, assign, pay and discipline certified public accountants on behalf of their memberships. If a committee of such a league were to assign the auditor, the appearance of conflict of interest would vanish. Now the auditor's loyalty would be to the league and not to the firm he was examining, as his hope of future emolument would lie in how the league evaluated his performance.
Determinants of Corporate Debt and the Rate of Return on Common Stocks KILMAN SHIN Western Carolina University
In testing the Modigliani-Miller model (1958, 1963), previous empirical studies, such as Modigliani-Miller (1958, 1966), Barge (1963), Weston (1963), and Melnyk (1970), selected firms of the single industries such as electric utility, oil, railroad and department stores. Assuming that finns of the single industries have the same buiness risk, they calculated regression equations in which the dependent variable is the cost of equity capital or the average cost of capital, and the independent
variables include the financial leverage, the growth rate of 'earnings, and the firm size variable, and ignored the business risk variable to include in their regression equations. However, Wippern (1966) and Gonedes (1969) showed empirical results that business risk measured in various ways is significantly different within industries as much as among industries. In such a situation, a proper regression analysis should include the business risk variable as another independent variable in the
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regression equations to reduce specification errors. The author of this study argues that the coefficient of variation of earnings is a proper measure of business risk and shows a large number of regression equations with various combinations of variables to measure the net
effects of independent variables including the business risk, the financial leverage, and the growth rate of earnings with the U.S. cross sectional data of 36 corporations of various industries (1976-1978 average data).
Profitability, Why Do Some Mutual Savings Banks Perform Better? DAVID J. WALKERAND FRIEDA REITMAN People's Savings Bank and University o f Connecticut
This study, using data acquired from the FDIC for the years 1977, 1978 and 1979 discovers two extremes in profitability (net income divided by average assets) that exist within mutual savings banking. These extremes are identified as either High Performing Mutual Savings Banks (HPM's) or Low Performing Mutual Savings Banks (LPM's). These two groups are separated by an earnings differential of over 80 basis points. The determinants that led to this amazing spread between the profitability of the HPM's and LPM's included the following: A s s e t M i x - HPM's concentrated far more assets in mortgages, consumer loans, and
corporate stock. L i a b i l i t y M i x - HPM's have far more of their liabilities in regular savings deposits. R a t e s o f G r o w t h - Regardless of asset size, HPM's always grew faster. O p e r a t i n g E x p e n s e s - HPM's had substantially lower operating expenses-due mainly to far fewer loan losses. Cost o f M o n e y - The HPM's cost of money was considerably lower. Geographic L o c a t i o n - New York State, which had a restrictive usury ceiling accounted for nearly 75 percent of all LPM's. Capital A d e q u a c y ttPM's enjoyed an amazing differential in the two capital adequacy ratios-surplus and return on net worth.
Predatory Pricing: Recent Developments under the Robinson-Patman Act JOHN HOULIHAN University o f Southern Maine
This paper analyzes the recent developments in the analysis of predatory pricing. In the past five years there have been a spate of economic models developed in attempts to quantify the concept of "predatory pricing," a concept which had previously been measured by very subjective, hard-to-apply "intent" standards. Philip Areeda and Donald Turner offered the initial quantitative model in a Harvard L a w R e v i e w article which advocated the use of a marginal cost-average variable cost analysis in order to determine when predatory pricing occurred. Their model simply labeled as "predatory" all pricing which was below marginal cost or average variable cost over a significant
short-run period of time. The Areeda-Tumer MC-AVC model has been adopted by most law courts as the test of predatory pricing because it is easy-to-apply and seems to be well developed, Numerous commentators have advanced other theories on "predatory pricing." Oliver Williamson opts for an output limitation approach; F. M. Scherer opts for a long-run, welfare analysis model; William Baumol would allow any price reduction but would prohibit any re-raising of price for a specified period of time; Robert Bork states that predatory pricing does not exist. This author feels that the best model proposed so far is the two-tiered analysis of Paul Joskow and Alan Klevorick which concen-
ABSTRACTS trates on the assessment of "false positives" and "false negatives" in making a determination on
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whether a given price cut is predatory.
The Impact of Government Regulation on Productivity in the Post War American Economy JAMES J. DOYLE AND EDWARD J. MATHIS
Villanova University
Comment HAROLD HOTELLING,JR., University of Kentucky The authors' conclusion that regulation has refinement, if data were available, to disto some extent been associated with increased tinguish desirable regulation, such as that which productivity in the steel industry tends to con- improves air quality in a cost-effective manner, firm the long-standing view that regulation of from the undesirable sort whose main function external costs will increase_ real social returns is to make work. Some work-safety and antifrom an enterprise. It would be a desirable pollution rules fall into the latter category. The Demand for and Supply of Firms for Merger PAULINE WEBER
Southeast Missouri State University
Comment CELIA THOMAS, Charles River Associates
Professor Weber's paper is unclear on several important points. First, it is not obvious how the two stage least squares procedure is employed. The treatment of stock prices as endogenous to the model needs to be justified, and the estimation procedure explained. Based on the information presented, it appears that the demand model, where demand for mergers is expressed as a function of "some measure of
stock price variables," "some measure of the price of internal expansion," and "the difference between [them]" exhibits multicollinearity, and that the 2SLS method used allows the estimation, but leaves a problem of interpretation of coefficients. Also, the use of a real dependent variable (number of mergers) and nominal explanatory variables (GNP, price indices, interest rate) must be questioned.
Connecting Arrangements as a Barrier to Entry in the Terminal Equipment Market JOSEPH P. FUHR, JR.
Widener University
In 1968, the FCC in the landmark Carterfone decision, permitted competition in the terminal equipment market. The telephone companies, were not in favor of this competition. They had lost one of the barriers to entry into the terminal equipment market. They fought back and constructed more barriers to
entry. The connecting arrangement requirement created many artificial barriers to entry. A connecting arrangement was required for non-telephone company provided equipment but not for telephone company provided equipment. The telephone companies were the sole suppliers of connecting arrangements. One
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barrier to entry was the unavailability of some connecting arrangements. The telephone companies had little incentive to provide connecting arrangements to their competitors. The charging of a competitive price for connecting arrangements puts the non-telephone companies at a competitive disadvantage. This competitive disadvantage becomes greater if the telephone companies charged a monopoly price for connecting arrangements. There have also
been questions concerning the quality of connecting arrangements. Due to connecting arrangements the telephone companies had a list of all interconnect customers, this made reciprocity, if desired, easier. Finally, connecting arrangements were designed to connect with an electrical outlet. This made customer provided equipment inoperable during electrical power outages.
Graduating Business Taxes to Increase Competition and Productivity BILL PARKS University of Idaho
It's time to drop the tired traditional corporate tax policy discussions. Ignore the calls for neutrality, reject the pleas for taxless dividends, and bury the incidence evidence. We need practical incentives to support productivity and innovation. Graduated Business Taxes offer an important avenue for encouraging the competition that produces desirable economic and social benefits. This paper explores the consequences of tilting the corporate tax structure
to favor dynamic small business. It uses simple models to illustrate the increased business growth rates possible with graduation. Healthy small business growth is further encouraged if the proposed value added tax is graduated and substituted for certain payroll taxes. Graduating business taxes may provide a major deterrent to mergers that have little or no scale economics but still encourage those which do offer substantial savings.
The Bank Holding Company Act: A Cost-Benefit Analysis HARVEY ROSENBLUM Federal Reserve Bank of Chicago
The Bank Holding Company Act sought to control the formation and expansion of bank holding companies by requiring that the Federal Reserve Board deny transactions having serious anticompetitive effects after giving consideration to other factors such as bank safety and soundness of the community's convenience and needs. During the 1956-79 period, the Federal Reserve acted on more than 8,500 applications by bank holding companies for prior approval to undertake a wide variety of transactions. In addition to the costs of filing applications, the nation's more than 2,000 bank holding companies are also subject to significant costs of being supervised. Fairly
accurate estimates of direct compliance costs and regulatory enforcement costs are presented for each year of the 1956-79 period. Together these costs were estimated to have been about $458 million. The dollar value of the public benefits resulting from the Federal Reserve's denial of anticompefitive horizontal acquisitions was estimated to have totaled about $383 million. Estimates of the indirect benefits stemming from the deterrent effects from previously denied applications were presented. Based on the evidence on costs and benefits, it was concluded that Congress had proper justification for regulating bank holding companies.
ABSTRACTS
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Regulation of Monopolies: Proper Pricing as a Substitute for Protection MICHAEL THOMPSON New York Public Service Commission
This paper discusses the proper regulatory policy towards competitive entry into the landhne telephone market. It examines the applicability of the classical natural monopoly concept to private line telephone service and questions whether the total cost of supplying a given level of output with one unified system is lower than it would be if several competing systems were allowed to operate. The paper ultimately concludes that the existence of a natural monopoly should be irrelevant to the formulation of an entry policy by an administrative agency that regulates an enfranchised monopolist. The paper argues that public officials should never proscribe competitive entry by fiat but, rather, should merely insure that
government regulation does not induce competitive pressure to meet a demand for service that existing facilities could accommodate more efficiently. In the case of private line telephone service, the paper concludes that the existing regulatory practice of setting the monopoly's price at average cost does not create artificial competitive pressure except in a situation where excess capacity allows the monopolist to supply service at a small incremental cost. Regulatory authorities should then permit the regulated company to reduce its price toward incremental cost in order to deter the construction of unneeded telephone facilities.
Comment HARRIET HINCK, Trenton State College
Because the telecommunication industry is characterized by rapid changes in technology with changes in both the level and composition of demand, competitive entry by the specialized common carrier is being considered by state public service commissions. The issue is important, and Thompson offers a closely reasoned analysis of the three possible outcomes of a competitive bid. To suggest, however, that the
franchised carrier be permitted to lower rates below average costs for the outcome in which the economies associated with natural monopoly do not obtain, challenges the present rate structure. At present, there is little correlation between rates and costs. The first step in introducing competition, its attendant advantages notwithstanding, is a radical restructure of the basic telephone service.
Technological Development in the Manganese Nodule Industry JAMES B. MARSH University of Hawaii
In the controversy surrounding future mineral availability, ocean floor nodule deposits have become increasingly significant. The nodule mining industry is only potential; huge R and D expenditure, significant technological improvement and a growing body of literature are all that are actual. This study is an economic documentation of that development. Economic, en-
gineering and scientific information are integrated into a model, out of which two rates of technological change are computed. In particular, during the 1970's, the estimated real costs of mining at optimal output levels fell by 55 percent, while those of transport and processing fell by 29 percent and 43 percent, respectively. In another estimate, productivity grew in min-
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ing by 37 percent, in transport by 26 percent and in processing by 25 percent. Because these estimates are based on technological forecasts rather than hard eocnomic data generated by an ongoing industry, they are subject to more than the usual margin of error. However, they demonstrate an impressive general order of
magnitude. The paper closes with a graphical presentation of the estimated cost curves. The various estimated curves are found to fit neatly into envelope curves which indicate a general decreasing cost trend over time and with increasing output.
Michigan Transit Performance Evaluation Process: Application to a U.S. Sample SHIRLEY COFFER ANDERSON University of California
Several theories have been advanced to predict differences in behavior of governmentowned versus private finns, such as theories of bureaucratic growth, inefficiency, and concentration on vote-maximizing service with neglect of other important characteristics of service. This study tests the above theories in a declining industry, the U.S. urban bus transit industry of 1960-75. The analysis bridges the period before and during the major federal grant program which was initiated under the Urban Mass Transportation Act of 1964. The empirical resuits indicate that subsidy at the federal level is
associaed with higher costs and lower real price, and a redistribution of service toward an expanded area, served less frequently. Local and state subsidy is associated with smaller increases in costs and larger increases in service levels. The form of public ownership does affect performance, but the unknown size of inter-agency cross-subsidation and tax benefits makes comparison tenuous without case-level investigation. The conclusion is reached that although the bureaucratic growth are associated with passive sponsorship and large size of firm, rather than with public ownership, per se.
The Need for R & D in Developing Countries A. R. MONTAZEMIAND M. AHMADI Concordia University and University of Windsor-Canada
For technology to flourish and to ensure continued interest in it which ultimately effects development of a technological society, it is vital to recognize that We cannot have technology without science, and the practice of science is not confined to a specific group of elites. Popularization of science on a mass level, is one of the first steps to be taken by developing countries, and it must cover all ages and levels of the society. This can be done through museums, simple technical magazines, exhibitions by companies and universities, inventors' exhibitions, simplified seminars given
by scientists and engineers, etc. In promoting and controlling R & D, there are different models such as agency model, centralized government model, chief scientist model, etc., used by industrialized countries. However, the agency model and centralized government model have a tendency to turn simply into bureaucratic department. On the other hand, taking all the considerations into account, it seems to us that chief scientist model to be the most appropriate model to follow in a developing country.
ABSTRACTS
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Evaluating the Benefits of Protecting Aquifers Framework and Problems FRIEDA REITMAN University of Connecticut
It has been proposed that communities prohibit certain activities on land over aquifers. The purposes of this paper are (1) to set up a framework for measuring the benefits of such action, (2) to identify the problems, and (3) to assess the value of such measurements. (1) The damages that will occur without protection must be assessed. First one must relate the prohibition to its effect on water quality, then relate change in quality to chane in use. If these indicate the need for alternative sources of water-another aquifer, treatment, conservation-estimates of costs for each are needed. The lowest cost is the "benefit" of protection. Nine other benefits can be identified. (2) Quan-
tification is difficult; assumptions simplify the task. "Drinking water quality" is used as a standard. Considering only public water supplies leads to a need for alternatives when quality falls below standard. Costs vary. Conservation may be the lowest; alternative supplies may cost less than treatment. Most of the other benefits are not easily measurable. (3) If the technical estimates can be provided, and if the assumptions are acceptable, it appears reasonable to measure the major benefit of protecting aquifers-the cost of replacing polluted water supplies. This would be a minimum estimate of benefits.
Probable Effect of a Successful Grain Embargo Upon a Nation Having a Centralized Agricultural Planning System WILL JOHNSTON AND JOHN WYSONG University of Baltimore and University o f Maryland
The grain embargo imposed upon the Soviet Union by President Carter in January 1980 as a result of the invasion of Afghanistan has not been a success by most accounts. In the paper a program was presented which simulated the animal feed-animal population-Soviety diet -Soviet population variation to be expected as a result of the grain embargo. The computer program was a 55 active variable interactive input multiple predator-multiple prey two level hourly simulation model written in BASIC for a 32K TRS-80 microcomputer. According to the
simulation model, the U.S.S.R. population could be adequately fed with the expected internal grain population. The Soviety diet may be less than desired, particularly in fats. Had the embargo been successful, the Soviets would have had to slaughter hogs earlier than planned, forcing the people to increase the proportion of meat in their diet. The rapid rise in the price of pork bellies in the U.S. may be a result of the Soviets buying animal fats on the world market to replace the fats which would have been produced by American grains.
Economics and a Solution to the World Hunger Problem RAPHAEL SHEN University of Detroit
The world hunger problem is not rooted in the world's inability to increase food production. It stems from social, political and eco-
nomic institutions incompatible with yield increasing initiatives. The long term solution to the problem lies neither with sustained inter-
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governmental food grants, nor in "eating one hamburger less," not in increased aggregate production as in more equitable distribution of produce, and not in capital intensive agricultural projects but in the efficient use of the underemployed and disguised unemployed. The basic ingredient to success lies in the reordering of national priorities, especially in the effective provision of economic incentives by respective LDC's. In an era of political sovereignty, the hungry primarily are the charge of their respective governments. The solution needs to come from within. The potential for
yield/consumption increases basically reside with human resources and resourcefulness. Only through the interaction of humans with the natural environment are less valuable/ useful factors of production transformed into more valuable final products: food. Such desired accelerated interaction process would not materialize unless the prospect of personal economic gains is present. Economic incentives need to be provided and disincentives removed. Realizable economic gains by the masses holds the key to world food adequacy.
Property Tax Incidents: New Examination DAVID E. MILLS University of Virginia
Comment SANDRA R. BAUM, Wellesley College Dr. Mills' mathematical proof of the non- sentation of tax burdens and efficiency loss than does the present one. While the validity neutrality of the land value tax with respect to development projects with differently distrib- of Mills' premise is not disputed, there is a uted incomes streams is clear and convincing. question as to whether or not the case he His graphical exposition is, however, ambiguous. discusses would fall into the category of land i suggest an alternative graph, depicting net value taxes advocated by Henry George, who stipulates that the tax may not exceed rent. present value of developed land to landowners. This graph allows a more conventonal repreEnergy in Twenty Oil-Importing Countries S. K. KAUSHIKAND R. K. BHATIA Babson College and Harvard University
The real cost of net oil imports (in 1980 dollars) to the developing countries has increased from $5.4 billion in 1970 to $49.3 billion in 1980. This has had a significant impact on the oil importing countries and the adjustments they had to make to the OPEC oil price increases. This paper investigates the structure of energy demand and supply-present and future-in 20 oil importing countries. These countries account for about 75 percent of the total energy consumption in the developing
countries. This analysis is done in terms of fuel type and sectoral demand and supply. Domestic sources as well as the imports of energy and their impact on the financial flows are analyzed. A section is devoted to the significance of potential nonconventional sources of energy in developing countries. The paper also makes specific recommendations regarding the establishment of an oil facility the feasibility of which is being studied by the World Bank currently. The long-range supply prospects are reasonably
ABSTRACTS bright provided appropriate technologies and investment strategies are put in place by the developing countries. The developing countries have to pursue energy alternatives that are
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abundant in their specific geographical areas. As long as there is heavy dependence on oil or fossil fuels in general, there will remain an energy problem for the developing countries.
Market Response and Natural Resource Adequacy RAPHAEL SHEN University of Detroit
Concern over seeming scarcity of a given resource arises mostly due to rapid increases in its consumption as reflected in its correspondingly rapid rises in price. Some have magnified this concern into depletion scares. Resource adequacy and resource scarcity can be properly understood only if market forces and the workings of the market mechanism are taken into account. The demand for a resource determines its price/profit and therefore its rate of production. Consequently, it is the resources's current market price that determines its production/ reserve ratio today and its reserves years hence. With no prospect of increased rate of returns,
it is not economically sound to further invest in explorative ventures when the productionreserve ratios of a resource can assure smooth supply for years to come. High opportunity cost is incurred when unnecessary explorative activities are undertaken. In light of this, the dwindling reserves of given resources may be seen as the logical consequence of events shaped by prevailing market forces. Temporary resource shortage is not to be equated with physical depletion. When predicting/analyzing future resource availability/adequacy, the workings of economic forces must be given due consideration.
Impact of Wages on Labor Turnover in Textiles SLOAN CRAYTON AND RALPH D. ELLIOTT Clemson University
This study has two purposes: (A) to develop a model of voluntary labor turnover in the textile industry, and (B) to determine how important the relative wage rate of the textile industry has been in determining the high relative turnover rates within the industry. To accomplish these objectives~ the quit rate in textiles relative to that in manufacturing was used as the dependent variable in the constructed model. Initially, a model with eight independent, explanatory variables was specified to explain why labor turnover has been higher in the textile industry than in the manufacturing sector. The initial regression indicated that there were
four significant variables, but multicollinearity problems persisted. The model which offered the "best" fit was a three-variable model with three significant variables: the relative textile wage, the accession rate in the manufacturing sector, and the percentage of the labor force under 25 years of age. Once the final model was constructed, mean values from the regression data were used to determine the elasticity of wages with respect to relative quits in textiles. An elasticity of 1.87 indicates that quit behavior in the textile industry is indeed quite sensitive to wage adjustments.
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Comment ROBERT B. HARRIS, University of Connecticut As an attempt to measure the firm's tradeoff causing the wrong signs for some variables between wage rates and labor turnover, the (even in the three-variable model, the accession paper by Elliott and Crayton represents an am- rate has the wrong sign, according to the original bitious, worthwhile project. Only a few aspects hypothesis). (3) Use of confidence levels other of the paper are troublesome: (1) Perhaps the than the traditional (albeit arbitrary) 1 percent admitted multicoUinearity problem could have or 5 percent levels leaves one open to the (often been reduced by avoiding redundant variables incorrect) charge that the levels were chosen ex in the initial specification of the model. (2) The, post, rather than ex ante. multicollinearity problem could be a factor
Training, Experience and the Earnings of Men and Women Scientists MICHAEL G. FINN Oak Ridge Associated Universities
Comment EUGENE B. GENDEL,Lafayette College This paper, which is an analysis of the re- dummy variables which only show whether there turns to post-school investment in training and was or was not training. These variables do not work experience, is quite good, in general. reflect the quality of the training, which would However, there still remain some particular be difficult to measure, nor the quantity of areas that need improvement or at least further training. Third, in Model 2, the coefficient for explanation. First, the author states that pre- the potential experience variable is not signifiPh.D. scientists, the group being analyzed, are cantly different from zero. The paper explains a "fairly homogeneous group." As this group that, as expected, " . . . years spent in activities includes mathematicians, chemists, geologists, other than professional employment do not ineconomists, psychologists, and others, the crease scientists' salaries." Yet in Model 4, an degree of homogeneity is debatable. Second, expanded version of Model 2, this same variable one of the paper's conclusions concerns the is significantly different from zero. No explanareturns to four different categories of training. tion is offered nor is there even a mention of The variables used to represent the training are this change.
Labor Market Policy-Swedish Style ERIC E. PEDERSEN St. John's University
In Sweden, unemployment is taken much more seriously, politically, than in the U.S. Fiscal and monetary policy do not have the reputation there of being very effective in reducing unemployment, and unemployment insuralone is considered quite inadequate. Thus, a number of interventions in the labor market
are made that collectively are called "labor market policy." A special governmental body, the National Labor Market Board, has been formed to implement this. This paper explains how this is done. Briefly, some of the instruments are: a) re-training, b) re-location, c) subsidizing companies for hiring or retaining work-
ABSTRACTS ers, d) the "Investment Funds," e) public sector employment, and f) regional development. Some of this is already being done in the U.S., but the theory and practice is far more
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advanced in Sweden. It appears the U.S. will probably be moving further in this direction in the years to come, so it is of interest to learn as much as possible now of Sweden's experience.
Convict Rehabilitation Through Manpower Training: A Cost Benefit Analysis of a Pilot Program CURTIS ADAMS University of Missouri
Comment HERBERT N. KESSEL,St. Michael's College Professor Adams presents an estimate of the limitations vitiate the empirical findings: 1) short run impact of a CETA sponsored voaca- no control group was employed, 2) all post tional training program for inmates in the program hourly earnings were attributed to Missouri Correctional System. Cost-benefit CETA; no adjustments were made for preanalysis provided the analytical framework. The program earnings, 3) all terminees were aspaper is difficult to evaluate because of its sumed to be employed 40 hours per week, 50 lack of description. No information is provided, weeks per year, 4) the potential bias resulting for instance, on sample characteristics or selec- from a 25 percent response rate, and 5) social tion and follow-up procedures. On a more costs and social benefits are not well identified. fundamental level, the paper's methodological Free Agents' Impact on the Labor Market for Baseball Players HENRY J. RAIMONDO Rutgers University
Comment LIBBY T. RITTENBERG,Lafayette College The paper presents a clear and concise pic- rates, rather than use of equations developed in ture of certain aspects of the impact of free previous studies, in order to eliminate the difagents on the labor market for baseball players. ficulty of converting dollar amounts to real It provides an updated account of early work in terms and to test for possible structural shifts the area and largely supports what one would in the market; and 2) consideration of aspects have expected to happen under the new ruling. of possible racial discrimination other than Possible improvements might include: 1) re- salary differences, such as entry barriers to estimation of the regression equations used to certain positions and differential performance estimate current monopsonistic exploitation requirements by race.
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ATLANTIC ECONOMIC JOURNAL Impact of Labor-Management Relations on Productivity: U.S. versus Japan K. K. SEO UniversiO~ of Hawaii
Comment c. TIMOTHYKOELLER,Stevens lnstitute of Technology In his paper, Professor Seo has provided a for the productivity-enhancing effects which very interesting narrative of the Japanese system unionism may generate, as suggested in recent of industrial relations vis avis certain character- studies employing Hirschmann's "exit-voice" istics of American trade unionism, particularly perspective on unionism. Secondly, the circumwith regard to the potential for productivity en- stances surrounding the particular industrial rehancement under a system that is more like the lations experience upon which Seo bases his Japanese experience. However, there are certain inferences may not support all of his general conclusions drawn by Seo which prompt evalua- conclusions. For example, emergency bonus tion and comment. First, his paper clearly em- payments to "scab" workers, which offer a braces the so-called "monopoly" view of unions, clear short-term work incentive, often bear which leads him to recommend actions which little resemblance to firms' standard compenare consistent with a more perfectly competitive sation practices. labor market. However, Seo fails to account Human Resources Development in Saudi Arabia: Problems and Policies MEHMETE. TAHIR University o f Petroleum and Minerals-Saudi Arabia
The development and utilization of human resources have emerged as one of the most important tasks for policy makers in Saudi Arabia during the implementation of Development Plans. The problems and policies associated with human resources, however, are very unique and distinct when compared with other developing countries. The on-going structural changes in the Sandi economy have caused dramatic shortages in the labor market, and thus resulted in the growing number of foreign workers (40 percent of the total labor force) in the Kingdom. The Saudi government, in order to reduce the country's dependence on foreign workers, placed special emphasis on the education and training of Saudis and the First and Second Plan periods
(1970-1980). This period was marked by a phenomenal expansion of the education system at all levels. Investments in human resources are expected to be over $30 billion during the Third Plan (1980-1985). Greater participation of Saudi women, within the framework of the Islamic law, is considered a partial solution for critical manpower shortages. However, this will not ease the pressure on technical and vocational manpower requirements for the new industrial cities of Jubail and Yanbu. In summary, human resources policies undertaken in the past decade, simply, reflect the Kingdom's determined efforts to transform its off-wealth into a self-sufficient, diversified economy with maximum Saudi participation.
ABSTRACTS
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The Impact of Inflation on Student Work Hours and Study Efforts MICHAEL T. DOYLE AND KEITH K. TURNER University o f Nebraska
This study was designed to examine the adjustments that employed students make in work load and academic endeavors which occur as a result of inflation. A sample of 242 undergraduate students in principles of economics at the University of Nebraska at Omaha was analyzed. Inflation has had an impact on work load. Of the 25.6 percent of the students who worked more hours per week at their job, inflation was cited as the primary reason by 44.6 percent.
Other reasons for working more were of less importance. The central hypothesis was also concerned with adjustments in hours studied as a result of inflation. The results indicated that students generally do not reduce study time as might be expected but to the contrary. 66.7 percent maintained or increased their hours of study per week while working more hours per week due to inflation.
Impact of Technology on the Laboratory: Year 2000 ROYAL A. CRYSTAL AND JEROME A. G. RUSSELL Health Standards and Quality Bureau
Comment LADDISLAV J. SULA,Boise State Univeristy Crystal's and Russell's paper focuses upon tion or other job security measures impede the technological change and its concomitant cost rapidity of technological change? Will we exsavings in the laboratory. Using the best available perience lagged effects between job losses and data, they suggest that the labor market impact reduced supply from formal schooling programs will be felt predominantly by highly-trained (cobweb model)? Will job training shift to the technologists. While providing valuable insights job sight? As always, we are left with the issue it raises other interesting questions: How will of whether it is tecimology or our response to it the government, if at all, constrain the growth which is the real Mephistopheles incarnate. of laboratory technology? How might unionlzaJury Awards and the Assignment of Costs to Pain and Suffering CHESTER G. FENTON AND ROBERT F. STONE Technology and Economics, Inc.
This paper has its genesis in a study sponsored by the Consumer Product Safety Commission to develop a model for estimating injury costs, the costs of pain and suffering being one of its components. Pain and suffering refers to the physical and emotional trauma associated with an injury. Pain and suffering costs are the assignment of an imputed monetized value for the effects endured by the injured party. Jury awards represent perhaps the only instance
where direct observation of the societal valuation of pain and suffering is possible. Accordingly, the authors use data from a sample of over 100 jury awards to obtain empirical estimates of pain and suffering costs. The magnitude of the jury award for pain and suffering is found to be an exponential function of the severity of the injury and statistically independent of the age and sex of the victim and the negligence of the plaintiff. The use of a
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severity index provides a common metric for comparing pain and suffering across injuries
and is believed to reduce much of the potential sample bias in the jury award data.
Health Manpower Planning: Essential Component of Social Progress HAROLD M. GOLDSTEINAND MORRIS A, HOROWITZ Northeastern University
With a growing realization that health care is a basic human right and a primary aim of social development, there is now a need for a scientific, equitable, and reliable basis for decision making. Manpower planning, in such a labor-intensive industry as health care, is integral to rational policy making and change, but the task is as complex as it is salient. Manpower estimates must account for such diverse factors as population growth, the population's awareness of needs, income of the population, service demand, insurance, awareness of social needs, patterns of services, long standing pro-
fessional dominance of the physician, present supply, legal restraints, acceptance by the public of alternative methods of health delivery, and the present health of the population. One cannot merely consider numbers, since a change in the mix, type, or level of personnel can have a profound impact on access, equity, costs, and quality of health care. Health manpower planning can assist in expanding the coverage of the health services and improve their relevance to the health needs of the people by effecting changes in the supply, distribution, productivity, motivation, and utilization of health labor.
Utilizing Women and Minority Practitioners to Solve Maldistribution Problems in Dentistry ROBERT A. HANKIN Urban Systems Research and Engineering, Inc.
Because of the growth in dental school enrollments and graduates during the past 15 years, the aggregate number of dentists is considered to be sufficient. Serious problems continue to exist, however, because of geographic and demographic maldistribution. The dentist to population ratio varies considerably between and within regions, and only 1.7 percent and 3.5 percent of practitioners are females or minorities respectively. Certain federal programs may have the potential to reduce both maldistribution problems simultaneously. The National Health Service Corps (NHSC) and Health Professions Student Loan Program (HPSLP) provide students with the opportunity
to repay educational debt by serving in "need" areas. Furthermore, existing evidence indicates that because minorities are more likely to have been raised in low income areas, they may be more likely to serve in them. Because women are subjected to direct or indirect forms of discrimination by male dentists, they, too, may be more likely to serve in need areas, because fewer dentists may imply lower barriers to successful practice development. The author is conducting research for the Health Resources Administration to test whether the NHSC and HPSLP could simultaneously reduce geographic and demographic maldistribution if focused on women and minority dental students.
ABSTRACTS
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A Model of Injury Costs ROBERT D. KURTZ AND ROBERT F. STONE Technology and Economics, Inc.
As a result of its legislative mandate the Consumer Product Safety Commission (CPSC) has been given regulatory authority and enforcement powers over a wide range of consumer products. The principal source of data available to CPSC for use in carrying out its mission is the National Electronic Injury Surveillance System (NEISS). NEISS a national sample of product-related injuries collected from hospital emergency rooms, permits estimation of injury frequencies on the basis of type of injury and body part injured, the age and sex of the victim, and the consumer product associated with the injury. The authors had major responsibility for the development of a model to estimate the cost of a consumer product-related injury as a
function of the various dimensions of the NEISS sample. When integrated with the NEISS database, the Injury Cost Model provides national estimates of injury costs disaggregated by consumer product. The model consists of twelve mutually exclusive and exhaustive injury cost components: hospital costs, retreatment costs, foregone earnings, health insurance costs, product liability insurance costs, litigation costs, transportation costs, visitor foregone earnings, visitor transportation costs, pain and suffering costs, disability costs, and valuation of loss of life. Each injury cost component is estimated separately, given available data and functional relationships applicable to that cost component.
Marginal versus Incremental Pricing of Ancillary Services: University Health Centers CELIA MORGAN Southwest Texas State University
Fee setting for ancillary services in university health centers which provide these services on a fee-for-service basis often is done on an ad hoc basis or as some mark-up over the cost of supplies. This paper compares a marginal cost pricing technique with an incremental cost pricing technique based on Edna Loehman and Andrew Winston, "A New Theory of Pricing and Decision Making for Public Investment," The Bell Journal o f Economics, 2, 1971 for pricing ancillary services. The models are applied to a university health center which provides ancillary services on a fee-for-service basis. The results suggest that the incremental cost technique has
the following advantages. The use of a marginal cost pricing technique, if decreasing costs are present, implies ancillary services must be subsidized whereas the incremental cost technique will cover total cost. The incremental cost technique eliminatescross subsidization between procedures which may exist when a mark-up over cost technique is used. The incremental cost technique allows systematic adjustment of prices as costs change because the technique is homogeneous of degree one in incremental costs. Finally, the technique can be implemented with data already available to university health center administrators.
A Methodology for Assessing the Effects of National Health Insurance on Health Employment GUSTAV SCHACHTER Northeastern University
This study projects demand for a selective
number of key health care personnel based on
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alternative health insurance coverage. A historical assessment is made on the relationship between demand for health care and payment (out-of-pocket, private insurance coverage and government payment). Then, the results are simulated for a 1985 projection. The historical models for health manpower assess the relationship between the trend in hospital admissions, by income and age group, and health manpower utilization. Models are implemented for the 48 categories for which data are available. Computations were carried at five levels for historical data: (1) a log-linear regression model, and (2) a linear regression model to estimate change in hospital admissions as a response to source of
price changes by income and age groups, (3) a linear model to assess health manpower demand by profession as a response to fitted health care demand in (2) by income and age group, (4) a simulation model to predict hospital admissions for the next ten years as a response to change in origin of pay for health care by income and age group, and (5) a simulation model predicting to 1985, a change in demand for each health profession as a response to predicted health care demand changes in (4). Projections are based on single dimension correlation models that do not capture structural changes in the health delivery system.
Complementarity and Substitution in Hospital Services DAVID J. WEINSCHROTT Indiana University-Purdue University
Hospital Planning Agencies are charged with regulating the construction of new health facilities so as to contain cost increases. The rationale for the typical approach is based upon three assumptions: (a) average cost functions for the proposed facilities decline for a fairly wide interval of utilization. For example, denial of half of proposed facilities is expected to produce per unit cost savings out to twice the originally proposed level of utilization of facility; (b) Utilization of a facility at a hospital must vary inversely with the use of the same type of facility at nearby hospitals-the substitution effect. Thus with economies of scale, reduction of "duplication" leads to reductions in per unit cost. (c) Within hospital compli-
mentarity effects are expected to be negligible. That is, utilization of existing facilities in the hospital would not be increased as a result of introduction and utilization of the proposed facilities. If there are economies of scale then addition of new facilities may lead to increased utilization of existing facilities and thus to lower per unit costs. In the absence of cost data utilization changes due to (b) or (c) above will allow inferences as to the effect of capital restrictions since increases or decreases in per unit costs depend upon changes in utilization. Data was collected on utilization of radiology services in Indiana hospitals for the years 19761978.
Employment and Earnings of Pediatric Nurse Practitioners MEHMET E. TAHIR University of Petroleum and Minerals-Saudi Arabia
The dramatic increase of health care costs and growing demand for primary care in recent years have led to changing patterns in the utilization of allied health manpower, par-
ticularly pediatric nurse practitioners (PNP's). This paper develops an earnings function for PNP's, and then determines, empirically, the factors that influence their earnings in different
ABSTRACTS modes of practice. Statistical results, based on data obtained from the follow-up questionnaires of 216 graduates of the Pediatric Nurse Associate Program at Northeastern University between 1968 and 1973, indicate that the earnings of PNP's are closely related with the amount and nature of task delegation and utilization patterns. The positive correlation between earnings and task delegation support our hypothesis that increased employment of PNP's
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is an effective solution to meet the rising demand for pediatric services. An important finding is that PNP's employed in public practices, on the average, earn $0.85 more per hour than those in private practices. This indicates that PNP's may be utilized more efficiently in public practices than private ones. It should be noted that the results strengthen the concept of task delegation and indicate their recognition by policy makers, physicians and the public.
Can Black-Owned Business Attain Parity? DON MARKWALDER Augusta College The sharp recession of 1980 as well as the release of the new Census statistics on black business are casting serious doubts upon the views of authors such as Timothy Bates, who believed that the sales of black firms would continue to grow more rapidly than the overall economy. The new evidence clearly leads one toward the views of Andrew Brimmer who contended that the potential of "black capitalism" was limited. Not only has it been estimated that the percentage of minority businesses wiped-out by the recession could be as high as 20 percent; but also the just-released Census statistics reveal
that the original data for 1972 were in error and a large and unexplained downward adjustment has been made. The new 1972 data show only 2.3 percent real growth between 1969 and 1972 as compared to 40.4 percent real growth shown by the original 1972 data. It is when the new 1977 data are compared with the old 1972 data that the true magnitude of the data revision is revealed. After adjusting the 1977 data both for additional coverage and inflation, the 1977 sales of black firms are 21.8 percent below the level revealed by the original 1972 data!
Comment BETH T. NIEMI,Rutgers University This paper raises serious doubts as to whether it is reasonable to expect the sales of black businesses to grow more rapidly than, or even as rapidly as, the economy as a whole. The fact that the customers of black businesses have traditionally themselves been black might lead to the expectation that increased opportunities and rising relative incomes for blacks would
help black businesses to prosper. However, it is also conceivable that integration could create drains on both the demand for, and the supply of talent to, black businesses, at least in the short run. This may occur as white firms aggressively seek out both newly-prosperous black customers on the one hand and qualified black employees on the other.
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ATLANTIC ECONOMIC JOURNAL Political Pressure and Wage Discrimination L. H. ZINCONE AND R. L. KERNS East Carolina University
Analysis of wage discrimination has typically been in the form of cross-section analysis, and generally has not considered the industry for which individuals under study work. As a result, two aspects of political pressure are lost. First. by not considering industries, the differential impact of the political market on firms which are regulated or heavily financed by government is lost. Second, by not looking at several years of data simultaneously, the effect of changing political attitudes over time is lost. This paper seeks to remedy these deficiencies by analyzing the years 1971, 74, and 78 of the
Panel Study of Income Dynamics. The results show no clear pattern through time to indicate that industries most subject to political pressure have remedied wage discrimination more quickly than those which are not so subject. What the results do show, however, is a marked increase in the difference between black and white wages from 71 to 74 and a marked decrease in those differences between 74 and 78. Since 71 and 78 were relatively good years in terms of the business cycle, our conclusiion is that the resuits reflect the business cycle rather than political pressure.
Utilizing the Employment Beta as a Measure of Industry Employment Volatility SAM G. BERRY Virginia Commonwealth University
Comment PETER M. ALLAMAN,CharlesRiver A ssociates, Inc. My comments fall in two areas. As to func- force variations may make good development tional form, there are three: 1) highly autocor- candidates (nationally) poor risks in certain related time series suggest using Durbin-Watson areas; the converse is also true. 2)Non-manutests, autoregressive transformations, ARIMA facturing sectors-the tertiary and quaternary models, etc, 2) there is probably a lag structure sectors-can be important components of the to the reactions, 3) response may vary in rising "export base." For example, Boston "exports" versus declining periods. As to the needs of finance, insurance, business, educational, and development planning: 1) at the local level, medical services as well as high-technology other things besides U.S. employment must be manufactured goods. considered. Spatial supply, demand and labor Local Taxes and Personal Income: An Impact Analysis JACO]~ DE ROOY Pennsylvania State University
Comment RUDOLPH E. DE PASS, U.S. Department of Commerce The author does a commendable job of de- nia. The model results are meaningfully supplesigning a model to estimate impacts from re- mented with several statistical procedures which ducing local taxes in 64 counties in Pennsylva- further refine the analysis and conclusions. Be-
ABSTRACTS cause county level data are limited, the model has several limitations, among which are: it treats only one time-period; lacks inter-county linkages of capital, labor, migration and export earnings; the use of outstanding debt of local governments as a surrogate of the stock of infra-
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structure. A disaggregation of most of the equations in the model would be useful; e.g. ruraloriented versus urban counties; and a nexus between the results of the model and their implications for the varied segments of the county would enhance their utility.
Employment Relationships within the Supply Side of Regional Econometric Models STEVEN L. GREEN AND M. RAY PERRYMAN Brown University and Baylor University
This paper develops the theoretical rationale for the specification and estimation of sectoral employment demand relationships within the context of the State of Texas Econometric Model. These expressions are derived from supply side production functions which permit both short-run gradual adjustments to factor price movements and long-run responses to technical progress. A relatively unrestricted strategy for measuring the impact of interregional cost fluctuations on labor demand is also suggested. The procedures described within the paper may be readily generalized to a number of alternative production technologies. Initially, a brief overview of the structure of the Texas model is provided. The discussion then
proceeds to a detailed discussion of both sectoral and aggregate expressions to be generated within the employment sector. The model for detecting responses to changes in regional cost patterns is then given and evaluated. Following this analysis, a synopsis of some preliminary empirical investigations is presented. A concluding section summarizes the paper and offers several exploratory observations regarding the future course of regional employment modeling. The methods suggested herein are quite general and systematically account for significant constraints in data availability. Hence, they should be widely applicable across alternative state and regional structures.
Comment ELIZABETHJ. LOTT,New Jersey Council on Economic Education This paper is a preliminary report of develop- derived in varying the Cobb-Douglas producments in the employment sector of the large- tion to accommodate non-constant returns to scale econometric model of the state of Texas scale between the relative prices of the factor that is being constructed at Baylor University. of production. Under these varied conditions, The merits of such an undertaking cannot be the regression coefficients used to measure the overrated, and the authors have presented a response of labor to technological changes in thoughtful and detailed assessment of their several Texan industries do not vary significantinitial findings. While admitting to the usual ly from zero, leading to the rather precarious data and theoretical constraints extant upon a conclusion that technological progress does not regional model of this magnitude, the authors' impact upon the relative factor cost ratios in attempt to explore in some detail the appropri- the region. It is hoped that further refinement ate theoretical relationships and their transla- will resolve such structural difficulties in the tion into an empirical form for estimation. model. Somewhat dubious empirical results have been
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The Income Equity of Two Transit Funding Sources STEVEN M. ROCK Illinois Institute of Technology
Currently, there are a number of funding sources used to subsidize public transit. These originate at all levels of government, and their mix differs greatly among regions. Each source or combination has implications for equity (which are often overlooked0 since each has a unique incidence. This paper examines the incidence of two commonly used sources: a sales tax and a motor fuel tax. Previous studies of the incidence of these taxes are not comparable; what is necessary is a single source of data on which to examine them. Suitable data is available from the 1972-3 Consumer Expenditure Survey of the Bureau of Labor Statistics. This
survey contains a comprehensive source of information on consumption expenditures by detailed items and income for 40,000 U.S. families. This allows the relative percentage of income paid as sales or motor fuel tax to be calculated. The results indicate that both sources are regressive. Using the "S index" of progressivity for comparison suggests little short run difference in equity between the two (although exactly what items are subject to the sales tax can affect the results). The study points out the equity impact of potential funding sources should be understood, available and part of the decision making process.
