ABSTRACTS TABLE OF CONTENTS ECONOMIC THEORY; HISTORY; SYSTEMS Goals of Oligopolistic Firms: An Empirical Test of Alternative Hypotheses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A. Koutsoyiannis The Revised Keynes' Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Carmine Gorga On the Intellectual Origin of Keynes' Liquidity Preference Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . George A. B. Kartsaktis The Limits of Reagonomics Growth . . . . . . . . . . . . . . . . . . . . . . . . . . Herman Z Liebling Reaganomics: Post-Keynesian or Neo-Darwinian? . . Robert Mason and Narayan Viswanathan Fiscal Policy and Reaganomics . . . . . . . . . . . . . . . . . . . . . . . . . . . Arnold X. Moskowitz Necessity of Interpersonal Cardinal Utilities in Distributional Judgements and SociaI Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yew-KwangNg Reflections on Simmel's Theory of Money . . . . . . . . . . . . . . . . . . . . . Stephan B. Boehm The 'Rationality' of Russian Government Borrowing, 1800-1914 . . . . . . L. Dwight Israelsen

52 52 53 53 53 54 54 55 55

ECONOMIC GROWTH; DEVELOPMENT; PLANNING; FLUCTUATIONS Economic Development and the Public Sector: An Evaluation . . . . . . . . . . Effects of Labor-Saving Technology on Unemployment and Income Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Distribution of Income in the Great Basin: 1855-1895 . . . . . . . . . .

P. C Afxentiou

56

Thomas P. Chert L. Dwight Israetsen

56 57

Some Ways Out for Underdeveloped Countries' Problem of Growth . . . . . . . Helen G. Moore Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thomas P. Chen Evolution of Social Assistance in Barbados During the 19th Century . . . . . . . L. P. Fletcher Defense Expenditures and Economic Growth: Some Further Empirical Evidence . . . . . . . . . . . . . . . . . . Peter C Frederiksen and Robert E. Looney Monetary Sources of Inflation: The Saudi Arabian Experience . . . . . . . . Donald M. Moliver Cable Television in the Caribbean: The Case of Jamaica . . . . . . . . . . . . . . . . . . . . . . . . . . . Donald Snyder and Deborah Love-Heilig Business Forecasts-The Layman Versus the Expert . . . . . . . . . . . . . . . . Charles H. Little

57 57 58 58 59 59 59

QUANTITATIVE ECONOMIC METHODS AND DATA Testing the Generalized Dogit Mode Choice Model-A Progress Report . . . . . . . . . . Marcel Dagenais, Marc ~J. 1. Gaudry, and Cong Liem Tran

60

MONETARY AND FISCAL THEORY AND INSTITUTIONS Bank Failures: 1962-1974 . . . . . . . . . . . . . . . . . . . . B. Batavia, N. A. Lash, and R. Boggs Money and the Production Function: A Varying Parameters Characterization . . . . . . . . . . . . . . . . . . . . . . . . . . Baldev Ra] and Muhammad Rashid The Cyclical Behavior of Credit and Money . . . . . . . . . . . . . . . . . Kathleen Moore Holness Inflation Watch: A New Way to Look at Inflation . . . . . . . . . . . . . . . . Geoffrey H. Moore The Equity and Efficiency Objectives in Federal Equalization ProgramsTrade-Offs or Joint Products . . . . . . . . . . . . . . Malcolm C. Brown and Delbert C. Ogden Tax Indexation and Economic Recovery . . . . . . . . . . . . . . . . . . . . . . Marcos F. Massoud

49

60 61 61 62 62 63

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INTERNATIONAL ECONOMICS U.S.-Canada Trade in Manufactured Products . . . . . . . . . . . . . . . . . . . . . . . . A Source of Profits in Foreign Exchange Trading . . . . . . . . . . . . . . . The Monetary Approach to the Balance of Payments: An Empirical Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International Investment and International Accounting . . . . . . . . . . . .

Petr Hanel

63

B. Katz and K. Finan

63

Carol 11. Lopilato Marcos F. Massoud

64 64

ADMINISTRATION; BUSINESS FINANCE; MARKETING; ACCOUNTING Aggregate Dividend Decision Making in Canadian Life Insurance Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gold Vs. U.S. Common Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Halim 1. Bishara Anthony F. Herbst

65 65

An Accounting Approach to Macroeconomics . . . . . . . . . . . . . . . . . . . Oscar B. Houmann Long Range Forecasts of the Real Estate Industry in the 1980's . . . . . . . . . . . . . . . . . Nicholas Ordway, Craig W. Slinkman, and Dennis S. Tosh A Decision Model to Control Capital Budgeting in Government . . . . . . . . . . . Philip C Parr Employment, Taxes, and Foreign Exchange Generation from Tax Haven Activity in the Turks and Caicos Island . . . . . . . . . . . . . . . . . . . . . . . . . . Christopher B. Spivey The Contributions of Concepts of Capital Maintenance to Financial Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . George O. Gamble The Contributions of Economic Thought to the Development of Accounting Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . William Z Schraeder Relevance of Fisher's Concept of Present Value to Financial Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Joe Z Cramer, Jr. Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mark A. CovaleskT" Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ladelle N. Hyman

66 66 66 67 67 68 68 68 68

INDUSTRIAL ORGANIZATION;TECHNOLOGICALCHANGE;INDUSTRY STUDIES The Competitive Fringe, Concentration and the Proclivity of Collusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J. C. Gallo and J. L. Craycraft Profits and Advertising in Canadian Manufacturing: A Simultaneous Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stanley 14/.Kardasz The Surrogate Wage Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cengiz Ozol

69 69 69

AGRICULTURE; NATURAL RESOURCES Farmers' Perceptions of Performance of Cooperative and Private Milk Buyers . . . . . . . . . . . . . . . . . . . . . . . . Robert D. Boynton and Emerson M. Babb Energy Consumption and Economic Growth . . . . . . . . . . . . . . . . . . . . The-Hiep Nguyen Energy Conservation: Myth and Economic Analysis . . . . . . . . . . . . . . . Jaroslav G. Polach

70 70 71

ABSTRACTS

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MANPOWER; LABOR; POPULATION The Duration of Unemployment: How Should It Be Viewed? . . . . . . . . . . . . . . . . . . . . . . . . . . . John A. Carlson and Michael W. Horrigan Wages in the People's Republic of China . . . . . . . . Edward C. Koziara and Chiou-Suang Yah

71 72

The Rising Cost of Children and Female Unemployment in Canada . . . . . . .

72

Z.M. Kubinski

Industry as a Predictor in Explaining Job Satisfaction . . . Robert S. Franz, Charles N. Weaver, and Heriberto GonzaIes de la Fuente Prospects of Change from Adversarial to Cooperative Labor-Management Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W. B. Nelson

73

Laura Stern and Myles Stern

73

Can Women Economists Have Both Children and Tenure? . . . .

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WELFARE PROGRAMS;CONSUMER ECONOMICS;URBAN AND REGIONALECONOMICS An Interdisciplinary Look at the Economic Theory of Crime Causation . . . . . . . . . . . . . . . . . . . . . . . . . . Vergil L. Williams and Velma A. Williams Hospital Nursing Production and Quality of Care Measures . . . . . . . . . . . . . Richard T. Fox Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Denyse L. Dagenais Deliberation in Buying and Use of Referents among Adolescents . . . . . . . . . . . . . . . . . . . . . . . . . . Karen S. Gamble and John 1). Scholl III Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annette D. Forti Advertising and Marketing Executives' Perceptions of Elderly Consumers: A Comparison . . . . . . . . . . . . . . . . . . . . . . Brackston Hinchey andR. Larry Johnson Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annette D. Forti Consumer Search Capital: Essential Component of the Appropriate Technology Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Robert R. Kerton Urban Consumers View of Sugar Regulation: Good, Bad or Indifferent? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kenneth L. Parkhurst A Micro Test for the Determinants of Agglomeration Economies . . . . . . . Michael BradfieM Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marcel G. Dagenais Anticipating a Major Earthquake Occurrence: Preliminary Exploration of Nationwide Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Christel Konang Human Migration: Interdisciplinary Methodological Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . Philip E. Graves and Robert L. Sexton

74 74 74 75 75 75 75 76 76 77 77 77 78

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ATLANTIC ECONOMIC JOURNAL Goals of Oligopolistic Firms: An Empirical Test of Alternative Hypotheses A. KOUTSOYIANNIS University of Waterloo-Ontario

Despite strong criticism of the profit maximization hypothesis over the past four decades, economic theory is still largely based on the assumption that firms strive to maximize profits. The theoretical literature on the goals of the firm is enormous, but the empirical studies are limited, controversial and inconclusive [A. Koutsoyiannis, Modern Mieroeeonomies, 2nd ed., Macmillan, England, 1979]. This paper reports the results of a test of three alternative hypotheses regarding the goals of firms in oligopolistic markets: profit maximization, sales maximization and entry prevention. Demand functions for 50 four-digit U.S. industries were estimated using time series data for the period 1958-80. The obtained price elasticities were tested against the null hypothesis of a unitary elasticity. Only in one industry the price elasticity was found

significantly greater than unity. Furthermore, 95 percent confidence intervals revealed that for 36 industries the price elasticity of demand is most likely smaller than unity, while for the remaining 14 industries, the information from the constructed confidence intervals was inconclusive. Assuming that the market share of the firms in each industry has remained fairly stable over the period under consideration, the results of our empirical investigation provide evidence against the profit-maximization and the sales-maximization hypotheses and in favor of the entry-forestalling hypothesis. Our findings reinforce Professor Bain's observation that oligopolistic firms produce over the inelastic part of their demand curve in order to prevent entry [Joe Bain, "Oligopoly and Entry-Prevention," American Economic Review, 1947].

The Revised Keynes' Model CARMINE GORGA Polis-tT"cs,Inc. The current crisis in economic affairs must be due to many factors. But in a fundamental sense it is due to structural and conceptual weaknesses contained in Keynes' model of the economic system. The proposition that S = I is not an equivalence, as it must for it to be forreally valid. The terms are neither reflexive nor symmetric nor transitive. Saving has the potential of assuming 100,000 meanings. And, by necessity, so does Investment. Consumption means spending; but in contemporary economics this meaning is arbitrarily cut off at spending on consumber goods. Keynes' model must be revised. Manipulating the original model, one obtains: Income = Saving + Consumption (1) Investment = Income - Saving (2)

Investment = Consumption.

(3)

The meaning of terms is different in this model. SAVING means all nonproductive wealth. This term becomes dearer if it is substituted with the word "Hoarding." INVESTMENT means all produetive wealth. And CONSUMPTION means any expenditure of money (or other wealth). The relationship between Saving (or better, Hoarding) and Investment is changed from equality to inverse proportionality. Equation (3) becomes a formally valid equivalence by inserting in it the theory of Distribution and substituting the word Investment with its old meaning of Production. One thus obtains: Production = Distribution = Consumption

ABSTRACTS

53

On the Intellectual Origin of Keynes' Liquidity Preference Function GEORGE A. B. KARTSAKLIS Dalhousie University Contemporarily, two main interpretations of the true relation between Keynes' liquidity preference equation and the Neoclassics' quantity equation are in academic circulation. One of them is carried by Ronald Teigen who asserts that " . . . K e y n e s . . . a d d e d . . , the specu l a t i v e . . , demand for m o n e y . . , to the transactions demand and precautionary demand." The other may be attributed to Gardner Ackley who recently insists: "This very phenomenon of speculation, which Keynes developed to explain the behavior of nonbank lenders actually provides the most cogent rationale for a kind of behavior that Wicksell described for the commercial banks." For the reason that these explanations from a strictly macroeconomic point of view are obscuring rather than en-

lightening the matter, an attempt has been made in the present paper to introduce a new one. It is argued exclusively on the macroeconomic level that Keynes did neither add a speculative amount to the transactive cash, nor broaden Wicksell's theory of banks' financial speculation to include nonbank financial speculation. He has simply formalized Wicksetl's proposition. The formalization happened by means of converting mutatis mutandis his own quantity equation, which as an expression logically equivalent to Pigou's equation of exchange was brought in the Tract on Monetary Reform to the fore and critically discussed in the Treatise on Money, to a liquidity preference equation.

The Limits of Reagonomics Growth HERMAN I. LIEBLING Lafayette College An important distinction must be made in supply-side responses to tax incentives for the short- and long-runs. The "supply-siders" model follows the classical tradition of minimizing speeds of adjustment, nonhomogeneity of labor and capital, search costs, and other rigidities that limit economic growth rates. In the short run, those responses would almost inevitably be small, and the 1981-82 record of low economic growth supports this (as it does the rejection of the rational expectation view of quick turnaround in real interest rates and growth). Longer-run gains might be expected only after the following difficulties which now characterize the U.S. economy have been over-

come: (1) the small margin in the labor force of skilled persons at moderately high employment levels; (2) the cyclically adjusted high rates of capacity utilization; (3) the ravages of recession on capital goods spending and the capital stock; (4) the high-cost and internationally noncompetitive status of some basic industries, of which the automobile sector is an outstanding example. These problems are either "structural or time-demanding in consummation and are not particularly susceptible to solution by supply-side tax incentives. Accordingly, supply-side inspired growth rates for the economy tend to be overstated.

Reaganomics: Post-Keynesian or Neo.Darwinian? ROBERT MASON AND NARAYANVISWANATHAN Adelphi University Reaganomicsis a hybrid of (1) an incomplete and unproven theory of economics (supply-

side stimulation coupled with budget cuts) together with a particular orientation to (2)

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monetarism ("tight money"), (3) regulatory and redistributive policies (least government principle), and (4) social ideology (neo-sociat Darwinism). Reagan's economic recovery program embodies supply-side fiscal policies in the form of tax rate reductions. Tax breaks to rich individuals and corporations, it is believed, will stimulate investments, thereby regenerating the economy. The benefits of such economic growth will "trickle down" to all workers. Based upon an analysis of the Laffer Curve and the trickle down notion, the authors question whether such tax breaks will benefit the poor who are involuntarily unemployed, especially those who are structurally unemployed. Reagan's determination to bring about a new order of federalthe national government in all areas except defense constitutes a conservative counterrevo-

state relations and thus a radical reduction of lution. The new federalism amounts to an attack on the entire relationship between the American people and their government. This represents a resurgence of a social Darwinian approach to complex, multi-layered social choices. The paper assesses the four elements of Reaganomics from the perspective of fundamental questions of social choice as reflected in Lasswelt's celebrated maxim, "Who Gets What?" Reaganomics is an innovative departure from traditional to new paradigms of Post-Keynesian thought. Even so, the administration's policy agenda is misdirected as it overlooks the significance of major social, economic and demographic forces affecting American society. It also nurtures a retrograde social climate ripe for the rekindling of neoSocial Darwinian sentiments.

Fiscal Policy and Reaganomies ARNOLD X. MOSKOWITZ Dean Witter Reynolds, Inc.

Reaganomics has called itself supply-side economics, but the critical investment supplyside factor is corporate profitability. Corporate profitability has declined over the past three decades, and if there is going to be any favorable push from supply side economics, one area in which change must come is in tax incentives for investment. We believe that the business tax cut of the Reagan program moves in that direction, and that's too be viewed favorably. Furthermore, a capital gains tax reduction will occur in fiscal 1982-a very important supply side variable for increased savings, which is necessary to support the corporate equity financing. Next, if Reaganomics is to work, we would expect a fairly sharp reduction in the federal government financing demands in the

capital market. On this score, the present Reagan proposals don't fit the bill for 1983-84, and either the personal tax cuts will have to be deferred or the spending cuts must be $164 billion by 1984--in short, the administration will have to cut $41 billion every year for the next four years. Restrictive monetary policy will lead to high real interest rates, which will put a lid on the interest rate-sensitive sectors of the economy-housing autos, inventories, and capital spending. Therefore, tax incentives for capital investment are imperative to offset the effects of tight money and this will occur only if the federal budget takes a significantly smaller portion of the credit markets. At this point, we remain skeptical.

Necessity of Interpersonal Cardinal Utilities in Distributional Judgements and Social Choice YEW-KWANGNG Monash University

Distributional judgements that ignore individual preferences and that take account of individual utilities "abstractly" (irrespective of

the social situation) are both inconsistent with the weak Pareto principle. Interpersonal cornparisons of cardinal utility are necessary for

ABSTRACTS distributional judgements and for social choice in general even assuming conventional economic restrictions on preferences. Mishan's proposed resolution of the paradox of welfare criteria is unacceptable as it is based on "abstract" distributional judgements and may lead

55

to everyone being in hell. Recently proposed concepts of fairness that avoid interpersonal cardinal utilities are all shown to be inconsistent with the weak Pareto principle. Level comparability implies some form of unit comparability.

Reflections on Simmel's Theory of Money STEPHAN B. BOEHM

University of Graz-Austria Georg Simmet (1858-1918) is generally regarded as one of the masters of sociological thought to emerge in Germany around the turn of the century. His classic work The Philosophy of Money, originally published in German in 1900, has only been translated into English in 1978. Although it is, of course, tempting to ask whether modern monetary theory has lost anything by neglecting Simmel's treatise, as Laidler and Rowe have done in their review article [Journal of Economic Literature, Vol XVIII, March 1980], it is important to point out that Simmel is, first of all, a philosopher and sociologist, who is at pains to emphasize that his views on money have nothing to do with economics. To Simmel, money represents not merely a convenient means to facilitate ex-

change, it is also viewed as a symbol of trust and communication whereby the uncertainty and complexity of the social world are reduced; the social institution of money is the perfect mediator between a diversity of individuals, intentions and expectations. Although Simmel is very much concerned with the drastic transformation of human relationships brought about by the money economy, it is one of the most striking features of The Philosophy of Money that Simmel makes no attempt to locate the money economy within a historical context with reference to a specific mode of production-on the contrary, the nature of the exchange relation is taken to be essentially the same under capitalism and a subsistence economy.

The 'Rationality' of Russian Government Borrowing, 1800-1914 L. DWIGHTISRAELSEN

Utah State University A model of determinants of Russian government borrowing is constructed, based on wellknown theories of Russian industrialization and borrowing, and on an alternative theory of Russian fiscal policy as power-maximizing behavior. Independent variables include exogeneous shocks (war, crop failures), the trend of industrialization, railroad construction, domestic price level, export grain price, ordinary revenue and borrowing cost. Alternative measures of borrowing cost include nominal, effective and real interest rates. Real interest rates are calculated using alternative price level and exchange rate assumptions: the naive "Fisherian" assumption and the "rational" perfect foresight assumption. The perfect foresight as-

sumption yields the "true" (ex post) real interest rate.Models of total, foreign and domestic borrowing are tested econometrically for the entire 1800-1914 period. Econometric results indicate that interest cost was an important determinant of government borrowing, and that regressions utilizing the real interest rate based on rational expectations provide clearly superior explanatory power in all periods. Among the, alternative theories tested, the power-maximization hypothesis is found to be most consistent with econometric results. Russian government borrowing, it is concluded, appears to have been "rational" over the period studies.

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ATLANTIC ECONOMIC JOURNAL Economic Development and the Public Sector: An Evaluation P. C. AFXENTIOU University of Calgary

In the process of economic development the spectrum of government responsibilities has been widened and has resulted in a relative expansion of the public sector. The determination of the forces which underlie this expansion has been the subject of numerous studies. Their results however are tentative at best as they emanate from largely unrealistic premises such as an imaginary statistical homogeneity of countries covered and the implicit view that all countries are destined to follow the same evolutionary path of development. The Wagner's "Law" and the displacement effect have provided the theoretical basis of some empirical work in this area. However because both hypotheses are beset by generalities, which allow

a large degree of freedom in defining fundamental concepts, they eventually retrograde into operationally unworkable propositions. Similarly other empirical studies, which attempt to measure taxable capacity and establish tax effort as an indicator of successful developmental policies, suffer from serious theoretical defects particularly in the selection of explanatory variables, and their contribution to policy is thus severely undermined. Because of their manifold weaknesses these studies can hardly provide theoretically dependable guidance to development strategy, but should instead be merely considered as constituting rough instruments in the formulation of policy.

Effects of Labor-Saving Technology on Unemployment and Income Distr~ution THOMASP. CHEN St. John's University This paper analyzes the unemployment and income distribution problems solely from the production technology point of view. The model assumes that the market is competitive and the production function is a purely factoraugmenting type with constant elasticity of substitution and constant return to scales. Labor and capital are the two factor inputs. The technological biases are classified according to the Hicksian neutrality concept. The paper finds the following: 1) Unemployment problem may become worse if labor-saving technology prevails in the economy, for the demand for labor decreases relatively to the demand for capital. 2) An improvement in factor efficiency will increase that factor's relative share only if the magnitude of the elasticity of factor substitution is greater than one.

3) The aggregate effects of changes in labor's and capital's efficiency rates on the factor share depend on the magnitude of the elasticity of factor substitution and the relative sizes of the changes in the efficiency rates of the factors. Specifically, with a prevailing labor-saving technology which results from less than unit elasticity of factor substitution and the labor efficiency growing faster than capital not only in absolute rate but also in relative size, labor's factor share will decrease. 4) Under the conditions that the elasticity of factor substitution is less than one and that capital efficiency is growing faster than labor in relative size, not necessarily in absolute rate, labor's factor share will increase, regardless of type of technological bias prevailing in the economy.

ABSTRACTS

57

The Distribution of Income in the Great Basin: 1855-1895 L. DWIGHTISRAELSEN Utah State University

An analysis of the distribution of income in the Great Basin region for the 1855-1900 period is presented, utilizing estimates of full income by individual based on information reported to ecclesiastical authorities and contained in the General Economic Records of the Church of Jesus Christ of Latter-day Saints. Data has been collected for thirteen years between 1855 and 1895. Sample sizes range from 4,800 to 25,700 income earners, representing from one-third to two-thirds of all workers in Utah Territory. Gini concentration ratios are calculated by community and for the entire region. Cross-sectional and time series econometric analyses are then used to identify

the effects on community and regional Gini ratios of mean income, population, urbanization, grasshopper infestation, and fraction of the population born in non-English-speaking countries. It is found that increases in mean income (until 1880) and grasshopper destruction of crops reduced inequality within communities, while urbanization worked to increase inequality. For the region as a whole, population growth reduced income inequality, while urbanization, grasshopper destruction of crops, increases in mean income and increases in the fraction of the population born in nonEnglish-speaking countries led to increased income inequality.

Some Ways Out for Underdeveloped Countries' Problem of Growth HELEN G. MOORE H G M Publicat~'ons L td.

My contention is help other than handouts from industrialized nations is necessary. Durable progress for developing countries requires selfhelp. Attributes of economic man are NOT homogeneous, but probably follow the "bellshaped" curve. The key to higher local income is PRODUCTIVITY, increases throughout the "curve"-more sales, domestic and foreign. Self-interest, as used in China helps. Workers, by getting to keep any excess over prescribed quotas, strive for higher output. The temptation for developing countries is to export their non-renewable metals. With engineering know-how through education by advanced countries, they can gain the value-added in processing metals, making diverse goods for

home and abroad, instead of gains going to advanced nations. Putting-out industries, similar to pre-industrialized Europe, enables maintaining their life-style and using native raw materials. Marketing Agencies are necessary to ensure high quality goods, and high wages for human capital and natural skills, both increasingly scarce in our mechanized world. Secondary industry, local or imported, with greater division of labor and specialization increases productivity and thus income and tax base. Soil analysis can help Primary Industry determine best crops for available export markets. Tourism, a growing industry, could increase revenues by importing construction expertise, building and owning hotels focally.

Comment THOMASP. CHEN,St. John ~s University out of poverty for the third world countries. Whenever social scientists face economic The success of such projects depends mainly development problems, very often they emon the support of the populace rather than phasize reducing population growth and inoutside assistance. Therefore, it is important creasing capital formation as the cures. The to determine whether the three strategies paper suggests that investments in health, are acceptable to the people of the third education and tourism are alternative ways

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world countries, especially the item of tourism. Furthermore, without unlimited resources, some fundamental questions still need to be answered before launching these development efforts. They include: What are the priorities of these policies in the national setting? How

efficiently and effectively can they be implemented? Are the needed resources, manpower and capital, available? Do the people of the third world have the confidence and patience to wait for the benefits of development, especially those resulting from education?

Evolution of Social Assistance in Barbados During the 19th Century L. P. FLETCHER University of Waterloo After the end of slavery in Barbados in 1838, demographic and economic conditions created considerable pressures for public measures of social assistance. This paper traces the development of the relevant public policy from the 1840's to the end of the 19th century, and identifies the major forces that influenced that development. The years following emancipation were characterized by widespread oppression and increased distress of the laboring classes. The local legislature, insulated from the popular will by a highly restrictive franchise, was unresponsive to the demands for ameliorative action. Many were the conflicts between the local plantocracy and the colonial governors

who, with the support of the clergy, drew attention to the deplorable condition of the poorer classes. These conflicts came to a head in 1876 largely because of Governor Hennessy's attack on the root causes of insecurity and poverty. As a consequence of the crisis, the imperial government exerted effective pressure on the local legislature to take remedial action to relieve poverty. Thus, from 1880, considerable progress was made in programs of social assistance. Although the system that evolved had serious limitations, depressed economic conditions in the 1890's put a stop to further progress early in the decade.

Defense Expenditures and Economic Growth: Some Further Empirical Evidence PETER C. FREDERIKSEN AND ROBERT E. LOONEY Naval Postgraduate School This paper examines the relationship between defense expenditures and economic growth since previous studies have arrived at contradictory results. It is hypothesized that the relationship will be positive for countries that are relatively resource unconstrained and negative for countries that are relatively resource constrained. A model is developed with the average annual growth rate of per capita GNP as the dependent variable and the average annual growth rate of investment and defense spending as a percent of GNP as the independent variables. A cluster analysis is used to group ninety countries into two groups on the basis

of resource constraints. Regression equations were estimated for each group. The coefficient of the defense variable was positive and staffstically significant at the 99 percent level for the richer group. The coefficient was negative for the poorer group but not statistically different from zero. The coefficients on investment were significant for the poorer countries supporting the thesis that an important source of growth for these countries in any change in capital investment. For the other group, only one coefficient of investment growth was significant indicating alternative sources of growth are important for these countries.

ABSTRACTS

59

Monetary Sources of Inflation: The Saudi Arabian Experience DONALD M. MOLIVER

Radford University

In two recent papers by H. R. Heller, it was asserted that increases in the growth of international reserves precipitated the ensuing global inflation of the 1970's. A closer examination of whether or not Heller's "global theory of inflation" was supportable in the Saudi Arabian case provides valuable insights into the relationship between the kingdom's rapid inflation and the growth of its international reserves. The unorthodox situation in Saudi Arabia, where the central monetary authority, the commercial banks and the oil industry are all owned by the government, makes this a particularly interesting inquiry. Test results established that the excessive expansion of the Saudi Arabian money supply during the period 1969 to 1977 was the

major determinant of the kingdom's inflation. This result conforms to the quantity theory of money. However, H. R. Heller's hypothesis suggested that the growth of a country's international revenues is the original cause of a country's inflation. This hypothesis was tested for Saudi Arabia and rejected. Test results from various specified models indicated that there was not significant systematic relationship between growth in international reserves and the monetary base. In fact, the lack of asignificant systematic relationship centers around the uniqueness of the kingdom's monetary institutions and Aramco-the Saudi's largest source of international reserves.

Cable Television in the Caribbean: The Case of Jamaica DONALD C. SNYDER AND DEBORAH LOVE-HEILIG

Howard University and Cable Television Information Center

Jamaica proposes to construct a state-owned Television system in Kingston, Montego Bay and Ocho Rios. While small and limited in its technological capacity, this system can provide first run movies, sports and other attractive entertainment programming to the tourists and residents of the island. Most cities in the U.S. look forward to the construction of a cable television system in their communities because of the direct revenues they receive in the form of franchise fees. The overall economic impact of cable on an open economy, such as Jamaica, is not so clear, however. To determine the economic benefits and costs of cane, a model of cable financing commonly used in the U.S. is adapted to the special case of Jamaica. This model estimates the cost of

constructing a system and the revenue the system might generate under different assumptions. The sensititivy of these estimates to assumptions about the rate structure, penetration, institutional uses, construction schedule and financing costs is examined. A sizable currency drain wilt also accompany cable. In addition, "crowding out" of touris~ expenditures on noncabte entertainment and other business may result. The analysis raises several questions about the appropriate cable system to maximize net benefits for the citizens of Jamaica. The study concludes that cable may best serve Jamaica by concentrating on the public communication benefits and by capturing spin-off linkages to other business.

Business Forecasts-The Layman Versus the Expert CHARLES H. LITTLE

St. John "g University

The forecasting record from 1975 to 1981 of the average businessman is compared to the

record for the expert business forecaster. The forecasts examined are annual rates of eco-

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nomic growth, inflation and unemployment. The average businessman keeps abreast of current business activity and trends and plans for the future. He does not admit to preparing any formal forecasts of future conditions. The expert makes his living by regularly forecasting and planning for the future. The average businessman is represented by samples of students who work full time and are returning to college to get the MBA degree. The expert forecasts are taken from the ASA/NBER quarterly survey of business economists. The average businessman is considered the lay forecaster, Given the same economic information and

awareness, he should be able to forecast aggregate business activity as well as the expert. Business conditions data are readily available to him in the press, and he must be aware of events to survive in business. The conclusion of the paper is that the layman does forecast economic growth and unemployment as well as the expert, but not inflation. The expert inflation forecasts are closer to the actual changes over time, but they do not forecast inflation as well as they do economic growth and unemployment. Both the experts and the laymen find it difficult to forecast inflation.

Testing the Generalized Dogit Mode Choice Model-A Progress Report MARCEL G. DAGENAIS, MARC J. I. GAUDRY AND CONG LIEM TRAN

Universitd de Montreal

The purpose of this communication is to present preliminary empirical results obtained from a generalized version of the Dogit model [Gaudry and Dagenais, Transportation Research, 1979]. The Generalized Dogit model may be expressed as: N

N (eVh +;=I ~ OhjeVj ) Pi= (eVi ", +jN "=~IOi;eVJ)/h~--1 ( i : 1 , . . . ,N) where

Pl = probability of choosing the i th of N alternatives; K

V i = k~__l flikX~k =

a linear function of K independent attributes , K) associated with the ith alternative; the ~'s and O's are parameters. Preliminary empirical results obtained from share data on intercity transportation by four modes

Xik(k = 1 . . . .

(air, bus, train and car) suggest that the Generalized Dogit model may be more appropriate than some of its constrained variants such as the standard Dogit or the Logit. It is well known that the Logit has the IIA (independence from irrelevant alternatives) property which implies that a(Pi/Pj)/~Xh k = O, (i, L h = 1,... N; i ~ ] g=h, i @ h ; k = 1 , . . . ,K);this property is not imposed on the Dogit and the Generalized Dogit models. In this respect, it turned out, in the experiment performed, that the results obtained with the Dogit were very similar to those obtained with the Logit: they contained values of 3(pi/pj)/OXhk close to zero. By contrast, some of the results obtained with the Generalized Dogit were markedly different. Further work is being done on the Generalized Dogit model a) to obtain a better characterization of the theoretical properties of the model; b) to assess the usefulness of the model to represent and analyze actual situations.

Bank Failures: 1962-1974 B. BATAVIA, N. A. LASH AND R. BOGGS

DePaul University, Loyola University and A. G. Becket Securities

The purpose of this study is to construct, using financial ratios, an ex post empirical model for predicting bank failures one and two

years prior to the actual occurrence. Our study applies both probit and logit analysis to investigate the factors explaining bank insolvency

ABSTRACTS for the period 1962 to 1974. Among those ratios predicting bank failure one year before occurrence were other expenses, the operating ratio, and asset risk ratios such as loss provisions and loans/assets. When the models were applied two years before failure, the chi-square statistic values declined substantially for three of the four equations. However, the t value of the operating ratio increased and the loan/deposit and loan/asset ratios remained statistically significant. This may suggest that those banks

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heavily loaned up and experiencing operating inefficiencies two years prior to failure, may react by making riskier loans (hence the increase in loss provisions). Also, such banks increase other expenses. Our results with logit analysis were similar to those for probit analysis, suggesting that the differences in the assumptions of the Weibutl distribution and the multivariate normal distribution of the error terms for the two models may be unimportant for our analysis of bank failures.

Money and the Production Function: A Varying Parameters Characterization BALDEV RAJ AND MUHAMMADRASHID Wilfrid Laurier University and Coneordia University

The supply effects of real balances are generally supported by empirical studies of Sinai and Stokes [t972, 1975] and Yon [198I] among others. But the most suitable way of modelling these effects, employing the aggregate production function, is debatable. The purpose of this paper is two-fold:0) to outline a simple way of modelling money as a technological change, which Moroney [1972] has termed a more suitable way to incorporate money in the production function, and (ii) to provide a varying parameters characterization for some of the other ways of modelling money in the production function as discussed

in the literature, see Fischer [1974]. The varying parameters approach has two potential advantages. First, it enables a convenient formulation of an econometric test (say, the liklihood ratio test) for distinguishing among alternative approaches. Moreover, such a test is based on one model, as opposed to a test based on multiplicity of models. Secondly, if randomly varying parameters production functions are specified at the micro level by adding error terms, then a corresponding aggregate macro production function will be free from aggregation bias, as shown by Zellner [1966].

The Cyclical Behavior of Credit and Money KATHLEENMOORE HOLNESS American Telephone and Telegraph Company

The role of credit in the economy is receiving increased attention, in part due to growing problems in defining and interpreting the behavior of the monetary aggregates. However, a major stumbling block limiting the practicality of monitoring credit for current business conditions analysis is the lack of timely information about the aggregate volume of nonfinancial borrowing. This paper presents a monthly proxy for total nonfinancial debt (public and private), whose changes closely match those of the Federal Reserve's quarterly Flow of Funds

measure. This proxy is a weighted sum of six promptly available series measuring debt outstanding in five sectors: publicly held Federal debt, mortgage debt, consumer debt, bank loans, and open market paper. As a cyclical indicator, monthly changes in the growth of this credit proxy are shown to have a leading relationship to economic activity and to inflation, as do changes in the growth of M1 and M2. However, cycles in the credit proxy are more pronounced and therefore easier to discern than those of the money flows.

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Inflation Watch: A New Way to Look at Inflation GEOFFREY H, MOORE

Rutgers University The first issue of Inflation Watch, an eightpage leaflet, appeared in January 1982. It is a bi-monthly report designed to promote an understanding of inflation, its connection with other forces in the economy, and the outlook for its future course. It is published by the American Enterprise Institute on behalf of the Committee to Fight Inflation. The Center for International Business Cycle Research at Rutgers University prepares and ana!yzes the materials used in the report. This paper considers some problems involved in designing it. In order to attract a wide readership among those who follow economic news, we are

striving for brevity, clarity, variety and validity. Each issue covers the current situation and outlook as well as longer-term trends and relationships. These objectives impose constraints but also provide research opportunities. For example, we have looked into the properties of various methods of measuring the inflation rate and into the differences among price indexes. In time we hope to learn how to deal graphically and succinctly with a wide range of topics: labor costs and profits, productivity and real wages, the impact of recession, international comparisons, inflation forecasts, interest rates, credit and money, and Federal deficits.

The Equity and Efficiency Objectives in Federal Equalization ProgramsTrade-offs or Joint Products MALCOLMC. BROWN AND DELBERT C. OGDEN

University of Calgary The objective of this paper is to examine the efficiency and equity implications of full equalization programs in federal countries. The approach adopted involves application of a trade theory model, as opposed to the more traditional approach of emphasizing public finance considerations. The model analyzes the labor migration effects of equalization grants in a two state country, where one state is richer than the other because of a larger endowment of a fixed factor, or resource. The implications are worked out on the realization that, while production efficiency requires labor to be regionally distributed such that marginal productivities are equal, equilibrium requires real income (the wage rate plus public goods less taxes) to be the same. The efficiency and equilibrium conditions are not compatible

under all public finance arrangements. For example, they are not compatible with the two states attempting to maintain equal per capita amounts of public services, and financing these services independently of each other. On the other hand, they are compatible under a full equalization system, confirming the early views of economists like Buchanan on this matter. The model, besides representing a more rigorous approach to the issues of production efficiency and horizontal equity in relation to equalization, suggests clearly that allocation efficiency and vertical equity issues are involved in defining optimal federal financial relationships. Consideration of these additional issues makes the case for equalization in a federal state even more compelling than has traditionally thought to be the case.

ABSTRACTS

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Tax Indexation and Economic Recovery MARCOS F. MASSOUD California State Polytechnic University On August 4, 1981, the U.S. Congress passed the most comprehensive revision of the Internal Revenue Code since it was amended in 1954. The purpose of the Economic Recovery Tax Act of 1982 (the Act) is to reduce the federal income tax burdens on individuals and businesses, thereby putting more dollars into the private sector in the hope that capital will be reinvested in business enterprises and the American economy revitalized. For individuals, the Act provides across-the-board income tax rate reductions phased-in over the next four years. After 1984, the individual tax schedules will be adjusted annually for inflation. Beginning January 1, 1985, indexing of personal

income tax brackets, the zero bracket amount, and personal exemption amounts will be adjusted annually by the percentage increase in the consumer price index for a period of 12 months ending on September 30 of the preceding year. For businesses, the present system of tax depreciation is eliminated and a completely new simplified system is adopted but no indexation provisions were included. The author discusses the advantages and disadvantages of indexation and concludes that economic considerations and the need for fairness in our tax laws mandate adoption of indexation at both levels (business and individuals) at the earliest possible dates.

U.S.-Canada Trade in Manufactured Products PETR HANEL University of Sherbrooke-Canada This paper attempts to identify determinants of the bilateral trade in eighty-one three and four digit SIC manufacturing industries between Canada and the United States. The main findings are: (1) About one half of Canadian manufacturing industries engage in intra-industry rather than inter-industry specialization and the comparative costs (productivity) explain only a small proportion of the latter. The comparative costs advantage of the U.S. industries helps to explain the import penetration of the Canadian market and the level of intra-industry trade. The latter is also correlated with the R&D intensity of the Canadian industry but not at all

with that of the U.S. industry. Both export propensity and import penetration of Canadian industries are strongly correlated with R&D intensity. The U.S. control does not contribute to their export intensity but it increases their import penetration. Export industries in Canada have larger establishments and employ a larger proportion of production workers than other industries. No evidence was found regarding any impact on trade of diversification of production, of multiplant operation and of barriers to entry. Tariffs play their restraining role but their level does not influence intra-industry trade; their similarity encourages it.

A Source of Profits in Foreign Exchange Trading B. KATZ AND K. FINAN Lafayette College Due to the dynamics and intensity of the inter-bank foreign exchange market, banks have set up an intermediary between commercial foreign exchange orders and the foreign ex-

change traders. Some banks have established a foreign exchange advisory section to perform this, as well as other services. This advisory group, can and do, generate their own profits.

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This paper will attempt to determine when and under what conditions this advisory group can add to bank foreign exchange earnings. The source of these earnings are then assumed to stem from the absence of perfect information among market participants, and tested accordingly. Data on corporate trades supplied by a major New York international bank representing a monthly dollar volume of over $650 million permits a test of the following specified model;

e=f(c, A, L L),

where P is profit on each trade, C is the currency traded, A is the dollar value of the transaction, I is the corporate client, and L is the credit limit the bank has placed on the corportate client. Under OLS regression our results show that the bank's corporate advisory section will generate revenues from those commercial customers with the least bargaining power (i.e., information). Implicitly, the imperfections of the perfect knowledge requirement for efficient markets permits the existence of revenues to be generated by the bank intermediary.

The Monetary Approach to the Balance of Payments: An Empirical Study CAROL V. LOPILATO California State University The monetary approach to the balance of payments views a country's balance of payments as a monetary phenomenon. Under a fixed exchange rate regime, a balance-of-payments deficit (surplus) indicates that a country's money stock exceeds (is less than) its demand for money balances. The monetary approach to the sum of the rate of change of its exchange rate and the world rate of inflation. If a country maintains a fixed exchange rate, its rate of inflation will be equal to the world rate. My paper attempts to test the monetary approach to the balance of payments hypothesis. The country chosen is Chile. After a tong

history of record high rates of inflation, the Chilean wholesale price index rose by more than 1000 percent in 1973-the highest inflation rate in the world. The Chilean monetary authorities maintained a forward fLxed rate from 1976 to 1979, money growth fell from 194 percent to 18 percent, and inflation fell from 211.9 percent to 33 percent. Since June 1979, the peso has remained fixed to the U.S. dollar (zero devaluation). When the U.S. dollar soared on foreign exchange markets, Chile's wholesale price index fell .4 percent-the lowest inflation rate in the world.

International Investment and International Accounting MARCOS F. MASSOUD California State Polytechnic University A great deal has been written and spoken in recent years on the value of achieving common international standards principles and auditing practice. The reasons are obvious. In a world economy that is becoming closer knit, and with the growing international character of business and the desirability of investment in the underdeveloped countries, there is a need for a reliable means of international financial communi-

cation. To the extent that accounting principles, as commonly applied, differ from country to country, so financial statements prepared according to local concepts will fail to convey the proper message to the overseas investor. The growing competition for domestic and international funds has forced a certain amount of accounting harmonization to take place because the suppliers of funds have required it.

ABSTRACTS However, harmonization has some obstacles because of the legal, political and economic differences among the different countries. Mutual awareness of the need for international accounting is the essential step. This awareness

65

will develop as more and more nations move along the continuum from dependency, to nationalism, to interdependency, and ultimately, to internationalism.

Aggregate Dividend Decision Making in Canadian Life Insurance Companies HALIM I. BISHARA University of Saskatchewan cant; investment income was not important; This study involves testing the impact of companies were reluctant to discontinue divisize, legal form, dividend changes, or stability dends even if income was low. When applied on dividend decisions for 1965-1979 period. to different sizes, the model showed that Thirty-three insurance companies, with 98 per"size" was significant. When applied to mutual cent of total assets of all companies were selecand stock companies, it showed that mutuals ted. Variable reduction, factor analysis, and a had much higher dividend payments. Concludividend model were used. Seven contrived sions are that "size," long-term before tax incomponents explained 75 percent of total varcome, and current year's revenues were statisiability in the data. The most statistically sigtically significant in dividend decisions. Canadian nificant component was "size," then "strength," life insurance companies are reluctant to disand thirdly, "surplus," Cluster analysis revealed that "size" was the most important variable. continue dividends even when income changes. When the dividend model was applied to all The policyholders, rather than stockholders, firms the following results were obtained: receive the lion's share of dividends. Mutual Long-term income had the major influence on companies tend to pay more in dividends dividends; current year's revenues were signifithan stock companies.

Gold Vs. U.S. Common Stocks ANTHONY F. HERBST University of Texas-Arlington the long run, gold is superior to U.S. common This paper examines the long-term relationstocks as an inflation hedge. Quite the contrary ship between the price of gold and the stock if we extrapolate the rising trend that has permarket in the United States. Data for gold and sisted in common stock prices since the year for a market index extending back to the year 1800. No trend whatsoever is present in the real 1800 are converted to real, purchasing power price of gold. However, the data do suggest that values, and spectral analysis is applied. Low investment strategies based on switching befrequency cycles are evident in both time tween gold and common stocks may be worth series, with a Kondratieff wave in gold appearing to lag a similar wave in common stocks by pursuing. Such strategies would be based on 7.4 to 10.0 years. Results suggest that at recent selling gold and buying stocks when gold is near its upper range of real price and stocks levels gold may be inferior to the stock market are near their extreme low range, and viceas investment and inflation hedge, even when versa. dividends are excluded. Trend analysis provides no evidence to support the assertion that, over

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ATLANTIC ECONOMIC JOURNAL An Accounting Approach to Macroeconomics

OSCAR B. HOUMANN Ret#ed California State Auditor An accounting approach is used to analyse wages, and the withdrawal effect of too much the transactions of a closed macroeconomics money being absorbed in purely exchange society. Economic acts are classified as to transactions such as occur on the stock exproductive, distributive, dispositive and ex. changes. Exchange transactions among housechange transactions. Of special note is the holds, or among firms, perform the important creation of interest income by things (capital) function of determining the relative values of because it is not accompanied by any simul- all things, but have no effect on the level of taneous expenditure as in the case of labor. aggregate income (production), or on the disThe distributive expenditure necessary to tribution and disposition of the income protransfer the income to households come later, duced. In the pure exchange economies of if at all, by means of a dividend. Since capital Smith, Say, Walras and many neoctassicists, produces consumption as well as more capital any increase in the value of one commodity goods, the failure of adequate dividends is a merely means a decrease in the value of others strong contributing factor in demand failure with no change in the aggregate involved. along with the consumption function, too low

Long Range Forecasts of the Real Estate Industry in the 1980's NICHOLAS ORDWAY, CRAIG W. SLINKMAN,AND DENNIS S. TOSH University of Texas and University of Mississippi The paper is in two parts. Part one is a dis. cussion of the institutional characteristics of real estate markets in the United States. Consideration is given to the changing framework and the trends likely to take place over the next decade. Included is a discussion of the increasing securitization of mortgage financing, the changing scale of firms operating in the industry, resource constraints, and shifting demo-

graphics. Part two is a taxonomy of forecasting methods. Models are evaluated within the context of four dimensions: (1) the forecast time horizon; (2) subjective-objective; (3) ad hoc-causal; and (4) qualitative-quantitative. Discussion is also given to objective criteria suggested for evaluating forecasting model feasibility.

A Decision Model to Control Capital Budgeting in Government PHILIPC. PARR University of Calgary that a firm's cost of capital determines both The cost of capital in the public sector atthe level and allocation of capital spending. The though receiving a great deal of attention in purpose of this paper is to present and defend the past few years has failed to operationally an operationally feasible parameter which can control the allocation of scarce resources in government investment decision making. The rationally hold government spending consistent cost of capital in the public sector not only alover time without the direct use of any measure locates capital to projects but also sets the level of cost of capital. This model is not meant to of spending because of the special position of absolutely limit government investment spendgovernment. In the private sector assuming a ing but to make clear that if the barrier is to be breached the government must argue the specific perfect capital market and over time and unlimited management resources could one hold case or cases on specific grounds.

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Employment, Taxes, and Foreign Exchange Generation from Tax Haven Activity in the Turks and Caicos Islands CHRISTOPHERB. SPIVEY The Citadel

In modern industrialized economies taxes in almost every feasible form have been imposed and increased by governments in an attempt to gather revenues to fund the growing services that a modern government is expected to provide. In response to such taxes, some wealth has been taken out of such high-tax areas and deposited in countries whose taws are specifically designed these taxes in order to attract funds for the local economy. Low capital requirements and other comparatively lax tax laws in such countries make the organization of corporations, trusts, or banks much cheaper and easier than in major countries, although these organizations are usually prohibited from doing business locally. This study investigated the formation of charters for these companies in the Turks and Caicos Islands,

in which data have been gathered from attorneys, government officials, and others on the islands. This was done in order to analyze the impact of tax haven activity on employment, tax collections, and foreign exchange generation. It was found that for the period 1978June 1981, employment in tax haven related areas increased from 17 to 39 (60 percent annual increase), tax collection for company fees increased from $94,700to $285,000(projected), and foreign exchange generated from tax haven activity increased from $344,200 to $850,000 (projected), If measured by the goals of increased employment, increased government revenue, and increased foreign exchange generation, the development of the Turks and Caicos Islands as a tax haven appears to have been successful in its early stages.

The Contributions of Concepts of Capital Maintenance to Financial Accounting GEORGE O. GAMBLE University o f Houston

In Accounting, capital maintenance appears to have been elevated in recent years to the status of an accounting basic concept because of factors such as changes in the general level of prices, and specific price changes brought about by market conditions and technological change. Hence, capital maintenance is an important concept because earnings result only after capital has been maintained or costs have been recovered. Thus, the concept of capital maintenance used divides return on capital (earnings) from return of capital (capital recovery). The objective of this paper is to identify the capital maintenance concepts that have been developed; to explain in detail their underlying development, theory, salient

attributes, and the particular basis used to assign a value to the capital each seeks to maintain; and to discuss the major strengths and weaknesses of each concept presented. The capital maintenance concepts that have been developed are: financial, purchasing power, time value, physical, and prospective income. A common weakness of all the concepts, except for general purchasing power, is the standard of measurement employed. Furthermore, it was concluded that the general purchasing power capital maintenance concept is not a distinctive concept of capital, but a technique (which could be used by the other concepts) employed for expressing financial information in terms of the same unit of measurement.

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The Contributions of Economic Thought to the Development of Accounting Theory WILLIAMJ. SCHRAEDER Pennsylvania State University Relevance of Fisher's Concept of Present Value to Financial Accounting JOE J. CRAMER, JR. Iioward University

Comment MARK A. COVALESKI, University of Wisconsin The three papers presented at this session to take a more holistic view and relax the ashave provided thorough insights as to the more sumption of the given social/economic order, contemporary relationships between economic e.g., economic thought and social class relaand accounting thought. However, their exam- tions prior to and during the emergence of inations commence at relatively recent histori- marginalist economic theory, to more criticalcal periods, i.e., marginalist economic theory ly appraise the interrelationships of social class and Fisher's notion of income. Thus, the relations, economic thought, and accounting three papers address the economic/accounting theory and practice. Marxist literature can conrelationship within a given social/economic tribute to the examination of such interrelaorder. It would be interesting and meaningful tionships.

The Contributions of Economic Thought to the Development of Accounting Theory WILLIAMJ. SCHRAEDER Pennsylvania State University

Comment LADELLE N. HYMAN, Texas Southern University areas of common interest to both economics The purpose of the Schraeder paper is to list the common interest areas of economics and accounting. One wonders why Schraeder and accounting. It was designed to be global chose six, and specifically these six, areas. If he had selected six accounting events and in scope, general rather than specific, and to matched .them with their counterparts in indicate a direction for further study by scholars economics, he might have included Dean's economics and/or accounting. Using personal discounted cash flow rate of return which is bias, Schraeder chose six areas of economics analogous to the return on investment concept and matched them with their accounting in accounting. He has indicated many directions counterparts. These six items did not purport for further study. One of these directions is an to be exhaustive but rather they were meant exhaustive listing of areas of common interest to provide "some initial evidence that the erring on the side of specificity within the interests of economists and accountants are framework which he has designed. increasingly overlapping." The author accomplished his goals in every respect. He enumerated

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The Competitive Fringe, Concentration and the Proclivity of Collusion J. C. GALLO AND J, L. CRAYCRAFT University of Cincinnati The paper commences with the premise that firms will not participate in a price-fixing conspiracy unless the gains from the conspiracy are positive. Gains are defined as the difference between the large profits resulting from the increase in price and the loss in preconspiracy profit due to a reduction in output. A basic model is developed relating market variables such as the market price elasticity of demand, the monopoly price mark-up, and the preconspiracy profits to the gains from the conspiracy. The basic model is analyzed with respect to these variables and threshold conditions for

proclivity of collusion are established. The basic model is expanded to include the Herfindahl concentration coefficient, size distribution of firms, number of firms, elasticity of supply of the competitive fringe and market shares. The expanded model is analyzed with respect to these variables to establish additional threshold conditions for the proclivity of collusion. Market structure conditions conducive for a inelastic demand, low concentration, low preconspiracy profits, high conspiracy market share and low supply response from the competitive fring.

Profits and Advertising in Canadian Manufacturing: A Simultaneous Model STANLEYW. KARDASZ University of Waterloo The paper examines the determinants of the gross profit margin and advertising-sales ratio within the context of a simultaneous model. The model is estimated using the 2SLS technique for a sample of 53 Canadian manufacturing industries and for the consumer-goods and producer-goods subsamples. The determinants of profitability which are robust with respect to sample are the advertising-sales ratio, concentration in a U-shaped fashion, a regional dummy variable and capital industry. The factors influencing advertising intensity

differ between consumer and producer industries. For the former set of industries, adverrising intensity depends on profitability, concentration in an inverted U-shaped fashion and a dummy variable which assumes a vlue of unity for those convenience-goods industries where new products are introduced rapidly. In the case of producer industries, advertising intensity increases with profitability and the extent to which domestic production (excluding exports) goes to final consumers.

The Surrogate Wage Function CENGIZ OZOL University of Calgary The purpose of this paper is to show that, in order to carry out empirical analysis of technological evolution within the logical framework of production theory, it is necessary and sufficient to investigate the historical pattern of shifts in surrogate wage functions of technology in use. The surrogate wage function is

defined by a simple transformation of the wage function with the labor value of the numbraire commodity of a base year technique. The Leontief technology matrix together with the associated vector of labor input coefficients describe a particular technique. For every technique the Sraffa solution for the equilibrium

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prices of commodities simultaneously give the associated solution of the wage function. The wage function describes a relationship between the real wage and the rate of interest. The class of all techniques, forming a technology set, can be analysed in terms of a family of wage functions. Since, unbiased estimates of wage functions cannot be obtained directly, a surrogate wage function is proposed. The surrogate wage function describes a relationship between the

labor time necessary to produce real wage and the rate of interest. The unbiased estimates of the surrogate wage functions are obtainable, as i f the input-output data were available in physical units of measurements. An application of this approach to the input-output data of the U.S., shows that technological evolution is not always progresssive, but strongly labor saving.

Farmers' Perceptions of Performance of Cooperative and Private Milk Buyers ROBERT D. BOYNTONAND EMERSON M. BABB Purdue University

Grade A dairymen in 29 federal marketing orders and California evaluated favorably the performance of their milk buyers. The survey, conducted in early 1981, also revealed that cooperatives' performance was perceived to be at least as good as that of private buyers on almost all aspects examined. Responding farmers gave favorable ratings to their milk buyers in all areas-guarantee of market and payment, accurate weights and tests, level of milk price, reduction in farmers' costs, field services, and voice in marketing decisions. Northeast buyers received the lowest ratings while south central and upper midwest buyers were most favorably

evaluated. Cooperatives were rated as good as or better than private handlers on 18 of 19 statements related to the areas mentioned above. Only on the prices paid for milk did farmers feel private buyers were outperforming cooperatives. Farmers indicated that the most important service/function privided by a buyer was the guarantee of a market and payment, followed by the assurance of accurate weights and tests, and increased milk prices. Those who recently switched to cooperatives listed market and payment guarantees as their motive, but those switching to private handlers said they did so primarily to get a higher price.

Energy Consumption and Economic Growth THE-HIEPNGUYEN Universite Laval-Canada

In 1968, Adams and Miovic (A&M) discovered what they considered as a paradox: in most industriahzed countries the output elasticity of energy consumption (e) is less than one, even though economic growth seems to be energy intensive. While other studies tried to rationalize an e below unity, A&M pointed out that the "true" e is likely being underestimated. According to them, if energy figures were being adjusted in order to take account of the different effieiencies of different fuels, the resulting adjusted e woutd be different. Brookes (t972) and Girod (1977) among others, using the measurement of useful e proposed by A&M, showed that, for several countries, the useful

e is indeed greater than unity. We show in this paper that the methodological approach used by these authors is quite unacceptable. We then propose alternative methods of estimation which result in better formulation of the problem. We also stress that, since the marginal rate of interfuel substitution depends on the GDP functional form, the simultaneous use of several functional forms of GDP in energy studies leads obviously to misleading interpretations. Using technical efficiency coefficients and OECD countries figures for the 1959-73 period, we finally found that e did steadily fall from high values tending asymptotically to one.

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Energy Conservation: Myth and Economic Analysis JAROSLAV G. POLACH U.S. Department of the Treasury

Conservation has become a favorite explanatory variable in current economic analyses of changes in energy resource flows, as well as a general palliative in often mutually incompatible economic policies. This is possible because the concept of energy eonsevation is ill-defined and confusing. Moreoever, it greatly depends on one's approach to the time preferences in consumption, integration transfer of benefits, and efficiency of the market mechanism in this respect. The paper examines first the meaning of basic concepts of energy in economics. It then turns to the ideas of resource conservation and how they interface with those on energy. Hotelling's inquiry into economics of nonrenewable resources is considered next. A few thoughts on how to make energy conservation a logically more consistent and thus more useful tool in economic analyses concludes the paper. Among major reasons for confusion was found to be a simplistic identification of energy - t h a t is, capacity to perform work over distance and time-with consumption of primary energy resources, as is petroleum coal, etc. Another prevailing error is to associate the substitution

of one energy source with another, reflected in statistics on energy consumption in the U.S. since 1840, with energy conservation. Differences in statistical methods and deficiencies in data bases are other causes of confusion and exagerated claims in internaional comparisons of energy conservation. A synoptical analysis traces energy conservation concepts from a purely physical preservation of resources, necessarily requiring regulatory actions, and energy efficiency, where conservation is a technical question,, to economic energy efficiency. Here conservation is associated with net energy savings maximizing economic benefits over time under various combinations of energy inputs. It is shown that in accordance with Hotelling, not only the low but also monopolistically high prices could waste energy, once these prices deviate from the optimal path maximizing the present value of net returns over time. Ultimately, it is suggested that in the economic analysis, energy conservation be replaced with economic energy efficiency, provided that it is clearly established as to which benefits, private or societal, are sought to be maximized.

The Duration of Unemployment: How Should It Be Viewed? JOHN A. CARLSON AND MICHAELW. HORRIGAN Purdue University and Williams College

Three measures of unemployment duration can be found in the literature: (1) S, the average duration of all spells of unemployment. This is the usual "turnover" statistic when unemployment is expressed as a product of the inflow into unemployment and the average duration. (2) T, the average interrupted spell of unemployment. This is published by the BIbS and is the average time already spent unemployed by the currently unemployed. (3) S*, the average total time that the currently unemployed will spend in unemployment. Because of rising aggregate continuation rates, T is typically about 50 percent higher than S and

S* is about three times as large as S i n the U.S. These patterns can be replicated by a simple sorting model of just two types, both of which have expected durations well below S*. Thus, those who say S* is a "less misleading" statistic are emphasizing something that bears no obvious relationship to parameters in the process generating the statistics. Their claims that the large size of S* amounts to a refutation of the search and contract paradigm are unwarranted and tend to draw attention away from useful positive questions about why some people spend so much time unemployed.

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Wages in the People's Republic of China EDWARD C. KOZIARA AND CHIOU-SUANGYAN Drexel University

The paper studies wages and unemployment in China. The sources are prior research which covers the period through the Cultural Revolution; interviews conducted in 1981 with Chinese management, party, government, union and academic officials; and materials gathered at the same time. The study was done through the cooperation of the Institute of World Economy of the Chinese Academy of Social Sciences. The study found many of the labor market arrangements unchanged. Specific examples would be the step wage classification system initiated in the 1950's and the ban on movement into the cities from rural areas. Changes

are seen in the development of individual employment, the reappearance of piece rates, the growth of bonuses, and allowing enterprises to pay for productivity increases by workers out of profits. The zigzag course of Chinese wage policy is developed from 1949 to the present and the authors speculate that the incentive oriented policy will continue in the near future. However they warn this should not be interpreted as a divorce from communism and that nonmaterial incentives could again take precedence over incentive systems such as bonuses and piece rates.

The Rising Cost of Children and Female Unemployment in Canada z. M. KUBINSKI University of Calgary-Canada

This study relates high rates of unemployment of women to the rising cost of children. The relevant links in this relation start from the proposition-based on the established theory-that the cost of children consists of the foregone income of the mother and the cost of direct market inputs. The former cost of children (extremely time-intensive household outputs) has been rising as a consequence of substantial improvements in the real wages of women. Hence, a strong substitution effect away from children. As a result, the fertility rate has declined dramatically and, at the same time, female labor participa-

tion rates rose rapidly. However, these newcomers to the labor force have an inadequate stock of human capital and thus enter mainly "secondary labor markets" rather than "primary labor markets." The former are characterized by a high rate of frictional and technological unemployment. Women thus record much higher unemployment rates than prime-age males who dominate "primary markets." The study made an attempt to estimate the cost of a male child in Canada over a period of eighteen years. The estimated combined total cost of the foregone income and direct market inputs was $475,978.

Industry as a Predictor in Explaining Job Satisfaction ROBERT S. FRANZ, CHARLES N. WEAVER, AND HERIBERTO GONZALESDE LA FUENTE University of Southwestern Louisiana, St. Mary's University, and ALFO Industries of Mexico

This paper explores the relationship between job satisfaction and three sets of independent variables: 1) industry, 2)job-related variables, and 3) non-job-related variables (attitudes). Setwise regression was used in analyzing the sam-

ple which was based on the large and authoritative data base developed in the General Social Surveys conducted by the National Opinion Research Center. The main hypothesis that no statistically significant amount of variation in

ABSTRACTS job satisfaction can be explained by the independent predictor "industry" was not rejected. The secondary prediction that no statistically significant increment in job satisfaction variation is accounted for when the job-related set is added to the set of industry variables was rejected. The results of this study cast doubt on the line of reasoning which conceives of the predictor "industry" as a system of influences encompassing job-related and nonjob-related variables. This study supports the

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traditional viewpoint that job-related variables are more closely associated than broader, global life-attitude variables in explaining variance in job-satisfaction. It would appear, therefore, that while industry differences in job satisfactio. It would appear, therefore, that while industry differences in job satisfaction do exist, researchers would be wise to continue to search the micro-level for predictors to explain the variation.

Prospects of Change from Adversarial to Cooperative Labor-Management Relations W. B. NELSON University of Texas-Arlington This paper asserts two central premises, and suggests the implications for future labormanagement relations in the U.S. The first premise is that such relations are at present almost totally adversarial. George Strauss has made this point by suggesting that "By law and custom we have frozen this system (U.S. collective bargaining) into an adversary mode in which differences are ultimately settled by seeing which side can do more harm to the other (without excessive concern for externalities, such as to costs to third parties or the general public." This adversarial mode was influenced non-union/management relationships as well, where personnel policies are developed principally with a "keep the Union

out" objective in mind. The second premise asserted is that a key to effective labor/management relations is the actual and perceived due process arrangements in the firm: arrangements designed to assure employees of "fair treatment" where employee/organization interests collide. We suggest that one of the most fruitful approaches to understanding, and ultimately to doing something constructive about, this adversarial posture is to be found in Walton & McKersies seminal A Behavioral Theory of Labor Negotiations. As Kurt Lewin has pointed out, group behavior in social settings are subject to multiple forces (both encouraging and discouraging specific behaviors), but these forces tend to be relatively stable over time.

Can Women Economists Have Both Children and Tenure? LAURA STERN AND MYLES STERN Oakland University and Wayne State University Is superwoman alive and well in the economics profession? Is it possible to attain tenure while pursuing traditional roles and obligations in being a wife and mother? This paper provides a tentative "yes" to both questions and examines how the timing of education, marriage, and children affects both attainment of tenure and role satisfaction. Of the 178 questionnaires returned (55 percent response), 116 were completed by women with doctorates who hold full- or part-time academic appoint-

ments. Tenured and non-tenured women are similar in marital status, husband's occupation, and number of children. The only statistically significant differences in attitudes are that the tenured women are more satisfied with both "rate of professional advancement" (p < .05) and "job in general" (p < .10). Among mothers, both tenured and non-tenured women are more satisfied with "rote as mother" than "amount of time I have to spend with my child(ten)." Interestingly, women, regardless of

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tenure, are highly satisfied with "role as mother" and somewhat less satisfied with "rate of professional advancement" and "job in general." As expected, the number of articles and meet-

ings papers are much larger for tenured women. Among non-tenured women, those without children anticipate receiving tenure about two years earlier than those with children (p ~ .05).

An Interdisciplinary Look at the Economic Theory of Crime Causation VERGIL L. WILLIAMSAND VELMA A. WILLIAMS University of Alabama Economists and criminologists both trace their assumptions about human behavior to concepts refined by Jeremy Bentham in I780. Economists have retained the Utilitarian assumptions in their theory of choice models, but criminologists have rejected the doctrine of free wilt to adopt deterministic views of behavior. Consequently, economists and criminologists are poles apart in their approaches to crime causation. Economists crossing disciplinary lines to study economics of crime are well received by criminologists if the economists are doing cost-effectiveness studies. Economists who follow the lead of Gary Becker in claiming that the theory of choice is adequate to explain

all criminal activity are considered rather naive by criminologists. The Becket viewpoint is useful in analysis of some crimes. While economists tend to see the Becket viewpoint as a single causation theory of crime, criminologists view the economic approach as one of many contributions to multiple causation theories. Both disciplines need a better empirical base for assessing behavior assumptions. The possibility of interdisciplinary cooperation in building that base is explored by analysis of a logitudinal study in the field of Human Development demonstrating an empirical base for the belief that early childhood education can prevent crime.

Hospital Nursing Production and Quality of Care Measures RICHARD T. FOX St. Louis University

Comment DENYSE L. DAGENAIS,Ecole des Hautes Etudes Commerciales-Canada The paper presented here raises many questions. First: From the information contained in the paper it seems that the function that has been estimated is not strictly a production function since the dependent variable used is not services produced but services needed. It would be appropriate, I think, to reinterpret the estimated parameters accordingly. Second: In order for the reader to get a better understanding of the results obtained, more information would be required about the exact form of the equation estimated and the exact definition of the variables. For example, for evaluating the acuity measure, does one distinguish between needed time of registered nurse, licensed practical nurses and nurses aides? Third: It is

said that for some aggregate results, the sum of the input coefficients was .45. Were the variances of the parameter estimates very large? Has the hypothesis that the sum of the coefficients is equal to one been formally tested? Fourth: Since the data used are time series, was there serial correlation between the residual errors? Has any effort been made to correct for serial correlation? Fifth: It is said that the correlation matrix was used to detect evidence of possible substitution between the different type of nurses. This assertion should be substantiated by further explanations since it is not evident how the sample correlation matrix can give any clue to substitution or complementarity of inputs.

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Deliberation in Buying and Use of Referents among Adolescents KAREN S. GAMBLE AND JOHN D. SCHOLLIII General Electric and University of Maryland The purpose of this study was to determine if there were any differences in deliberation in buying and use of referents between adolescents from low and middle income families. Ninth and tenth graders from Syracuse, New York were divided into low and middle income groups based upon eligibility requirements for the school's free and reduced price lunches. Students were questioned as to whether they shop around or decide quickly when purchasing clothes, toiletry articles, and small appliances, and on their use of five referents: parents, friends, sales clerks, magazines and newspapers, and television when buying each of the three products. A chi-square test of significant dif-

ference was used to determine if there were any differences between the adolescents from the two income groups. Adolescents from both income groups shop around for clothes and decide quickly when buying toiletry articles. A significantly greater percentage of adolescents from middle income families shop around for small appliances. There were no differences in the use of referents when buying clothes and small appliances. The majority use parents and friends when buying clothes and small appliances. A significantly greater percentage of adolescents from low income families use parents and sales clerks as referents when buying toiletry articles.

Comment ANNETTE D. FORTI, SUNY/State University of New York The authors are to be credited with explor- use is made of this information in their report. ing an area of consumer behavior for which Also not noted are essentials of extensive, there is limited research. A great deal of con- limited and routine consumer decision-making sumer behavior research has focused on other theory even though the products included in segments, specifically, women, older consumers their study are suitable for such analysis. In and children. However, limited though the re- summary, the study may be considered a search may be if the authors had examined valuable contribution to exploratory research more recent studies, the limitations of their in the field of adolescent consumer behavior, study would have been apparent. The literature but has too many limitations (including selecindicates differences in purchases of younger tion and size of sample) for its findings to be vs. older adolescents, and although the authors accepted as conclusive. of this study ask for the age of respondent, no

Advertising and Marketing Executives' Perceptions of Elderly Consumers: A Comparison BRACKSTON HINCHEY AND R. LARRY JOHNSON New Hampshire College

Comment ANNETTE D. FORTI, SUNY/State University of New York The authors contribution to the study of the sample selection may have had built-in bias over-65 consumer is that this study reports on as noted herein. Because of their varied clients, the perceptions of this market as indicated advertising agency executives may have greater from a study of advertising agency executives knowledge and/or interest in several market and operating executives of consumer goods segments than individual firm operating managers firms. Although generally appropriate, the whose concern may be one segment. It is ap-

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propriate to assume that a firm with large advertising billings may be marketing products chiefly to targets other than the elderly, which could have accounted for the reported perceptual differences. Other differences could have occured from regional aspects, advertising

agency respondents having a metropolitan area culture, whereas operating managers more heterogeneous. The authors assumption that the over-65 constitutes one distinctive market segment may also be limiting their studies in this area.

Consumer Search Capital: Essential Component of the Appropriate Technology Debate ROBERT R. KERTON University of Waterloo Enlightened appraisals of "appropriate" technology recognize that before optimal production methods can be chosen, some prior decisions must be made about the appropriateness of product choices for individuals. These decisions impose heavy information requirements on consumers. Consumer search capital (searching skills, methods and principles) is essentialparticularly so if new products and sophisticated marketing techniques are introduced rather abruptly because the accumulated consumer search capital (CSK) may no longer be suitable for the new circumstances. The paper argues that there are economic reasons why we cannot expect all the necessary information to come forth on its own. The problem is especial-

ly acute whenever production hazards or product defects exist, because producers or sellers do not have an incentive to make available any negative aspect of the good or service. A possible solution rests in a Technology Assessment Board but this has serious weaknesses. More promising is a "reverse onus" provision to require that negative information be made available, though this may not help much in countries too poor to provide resources for enforcement. If the consumer is to make prudent choices between a good in the traditional economy and a new opportunity in the exchange economy, there is no escaping the need for sharply higher investments in consumer search capital.

Urban Consumers View of Sugar Regulation: Good, Bad or Indifferent? KENNETH L. PARKHURST John Carroll University The production and import of sugar have been, for many years, subject to tight and detailed regulation in the U.S. and other countries. The present sugar program in U.S., for example, still retains the major features of the original Sugar Act of 1934. This restrictive, Great Depression-type legislation was suspended during WW II, but restored by the Sugar Act of 1948. Although the latter law is still in use today it has been subject to several amendments. The main features of the Sugar Act are the determination of the total sugar supply available to U.S. consumers, and allocation of this total supply, by quotas, to foreign and domestic suppliers, government subsidies to domestic producers, an excise tax on sugar supplied domestically and an import tariff.

The Secretary of Agriculture, who is charged with administering the program, determines the yearly'total for the U.S. allotment. Since maintaining a "fair" price for sugar is the law's main objective, the supply must be set, in the Secretary's judgment, consistent with the law's guidelines based on a parity principle. After setting the overall supply, a quota share is then among the domestic and foreign suppliers affixed by law. The distribution of sugar raw quotas among foreign countries had, however, only become a problem after the cessation of sugar imports from Cuba in 1960 when its quota became available for distribution among domestic and foreign suppliers. The domestic share of the total supply has fluctuated yearly but the trend has been constant percentage.

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A Micro Test for the Determinants of Agglomeration Economies MICHAELBRADFIELD Dalhousie University

in a complete model of an industry, labor's share is related to the firm's efficiency capital/ labor ratio which, with a CES production function, is determined by the exogenous variables such as product price, cost of capital, and the neutral and capital efficiency coefficients. Agglomeration economies may affect these variables and therefore labor's share should vary with city size and with the urban characteristics which generate agglomeration economies for any given industry. The test involves

regressing labor's share against city size measures and against a variety of urban characteristics measuring economic potential, business services, and amenities. The results indicate that there is no continuous agglomeration relationship for any of the industries tested, although there was some evidence of an agglomeration-disagglomeration relationship. While urban characteristics did influence labor's share, industry characteristics tended to be the more significant determinants.

Comment MARCEL G. DAGENAIS, Universite de Montreal This paper raises a number of interesting emeconomic variables such as lower interest rates, pirical questions. The author claims that if lower price of capital . . . . etc., the regression there are agglomeration economies, one should model used to explain labor's share of output observe a positive relationship between labor's by these more direct variables should not simulshare of output and city size. However, it must taneously contain the population variable since be pointed out that the same positive correlathe latter then becomes redundant. Would it be tion might have other explanations. For examuseful for the author to introduce intermediate ple, if larger cities contain older plants using inputs such as energy, into his industry producan earlier, more labor intensive technology, one tion functions? What would be the consequence would wrongly impute to agglomeration a for his analysis? Finally, should not the major differences of tax structures between states be phenomenon that is related to age of plants. taken into account, even if only in a very apSince agglomeration as measured by population proximate manner? is in fact a proxy variable standing for other

Anticipating a Major Earthquake Occurrence: Preliminary Exploration of Nationwide Effects CHRISTEL KONANG State of California

The occurrence of a major earthquake in the Los Angeles, California area would not be limited to localized losses of human and material resources. By making local ports inoperative (which affects imports and exports) and disrupting connecting transportation routes (particularly highways and railways), by breaking computer and communications links, and by disrupting financial markets and stock market activities, the total cost burden will be distributed over the entire U.S. population.

Scientists now give it a better than fifty percent chance that an earthquake of 8.3 on the Richter scale will occur before the year 2000 in the five-county area which comprises the Los Angeles regional economy. Current estimates place the death toll within the area as high as 23,000 and property losses between $60 and $80 billion. Since time is running out, earthquake preparedness has become a timely topic for research planning. While current efforts by and large concentrate on short-run

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problems in areas likely to be affected by major seismic events, broad-based, long-run research and planning efforts are essential if

nationwide trade disruptions are to be kept to a minimum and the massive resources necessary for reconstruction are to be mobilized.

Human Migration: InterdisciplinaryMethodological Approach PHILIP E. GRAVES AND ROBERT L. SEXTON Pepperdine University A complicated mix of influences gives rise to observed migration flows, the traditional approach being implicitly based on imperfect information: Spatial variation in utility (income, unemployment, or housing differentials, assumed to be non-compensatory) gives rise to job or residential search behavior which, ultimately, eliminates those differentials. Hence, models based on imperfect information are fundamentally disequilibrium in nature. The perfect information assumption gives rise to equilibrium models: There are no "free lunches" in job or housing markets with rent and income differentials rendering utility the same for similar individuals in all locations. Only changes in relative spatial prices, incomes,

and tastes alter the equilibrium. The preceding dichotomy holds with identical tastes, yet clearly people differ due to stage of life cycle stages. Some people like seasonal variation in climate; others would prefer 68 degrees F, low humidity weather year round. Hence, in a perfect information world in long-run equilibrium, some locational consumer surplus can exist especially for those with very unusual tastes. All migration research can then, be viewed as mobility impacts of individual-specific variables, disequilibrium variables, and/or equilibrium variables. Unfortunately, since these variations are simultaneous, and it is difficult to empirically isolate effects.