T HIS paper considers the major influences on the level of current expenditures on public primary and secondary education. Its purpose is to clarify their interrelation, directing attention toward those determinants that can be shown to be of major importance overall in both cross section and time series data. There are a number of empirical studies of determinants of public primary and secondary education in the literature. Among the most recent and thorough are those by Hirsch [14], Shapiro [29], Miner [23], Burkhead [7], James [18, 19] and Pryor [26] . There is, however, the lack of a structural theory in all of these studies, and this lack of a sufficiently explicit theoretical framework somewhat limits the capacity to interpret the economic meaning of the statistical results.1 A neat separation of economic and noneconomic factors is hardly possible. But it is possible to distinguish the economic framework of the problem which interrelates influences on the demand for public education, costs of producing it, and tax behavior (via tax handles or other revenue sources). It is also possible to bring to bear on the analysis of resources for education some of the developments in the broader context of public expenditure theory (e.g., Musgrave [25] and others) and the recent developments in consumption theory (e.g., Ando-Modigliani [1], Houthakker [16], and others).2 Although this is not a normative study of efficient allocation (for which see Bowles [4] for example), it can make use of certain advantages offered by education as a case study in public expenditure theory. For most school administrative units are single purpose units making quasi-independent expenditure decisions. Importance also derives from the fact that education is an extremely large industry, engaged in the furthering'of growth through human capital formation, and in the reduction of inequality. Part I considers the demand, production cost, and tax behavior structural equations. Attention is then turned to their joint solution and the reduced form public expenditure functions that are the result. The reduced forms maintain the degree of comparability to other studies that we desire for the large ones have used single equatioii methods (e.g., Miner [23], James [18, 19]) with data for a sample of individual districts. Others have focused on the relation of the aggregate expenditure-income ratio to per capita income (e.g., Musgrave [25], Pryor [26 pp. 182-226].) Part II considers empirical estimates of these reduced forms for cross-section data among states for 1955-1956, the mid-point of the postwar period, and for time series data for 1946-1968.

Variable Annuities are the subject of considerable discussion by individuals who identify themselves with life insurance companies and security dealers. The paper by Mr. Albert Linton published in the May, 1956, issue of the Journal of Finance is a case in point. This comment does not attempt to marshall arguments for or against variable annuities, but is concerned only with the major factors determining the size of the payments to be made from a variable annuity fund during the payment period. In Mr. Linton's Table 2, the assumption is made that the variable annuity payment would follow Standard and Poor's index of stock prices.1 The other major factor influencing the size of the annuity payment, the cash dividends that will be received by and added to the annuity fund during the period of the annuity payments, is omitted. This is comparable to omitting interest on the standard annuity contract. The purpose of Table 2 was evidently to display the magnitude of the fluctuations in variable annuity payments in contrast to the absolute dollar stability of the payments made under the terms of a traditional annuity contract. Mr. Linton emphasizes that “irate and disillusioned policyholders” might write letters to insurance commissioners and even congressmen when payments fall under variable annuity contracts. Such pressure might have been (or may be) the opportunity for federal regulation of those life insurance companies that issue variable annuity contracts. Column 1, Table 1, in this comment sets forth the fixed payment of $100 per month specified by Mr. Linton, Column 2 reproduces the assumed monthly payment made under a variable annuity contract as shown by Mr. Linton in his. Table 2, and Column 3 presents a revised statement of the monthly payment under a variable annuity contract taking cognizance of the dividends received by the annuity fund during each year of the life of the annuity. The period 1926 to 1954 is the period selected by Mr. Linton. According to Mr. Linton's presentation, the payments made under the variable annuity were less than those under the traditional contract in twelve of the twenty-nine years. The revised variable annuity payments fall below the fixed monthly payments of $100 in only three years. Furthermore, the lowest payment under the revised computation is $83 per month as compared with $49 per month shown by Mr. Linton. Certainly the intensity of the remarks in the policyholders' letters would be different if the variable annuity payments fell 17 per cent rather than 51 per cent below a norm established by the payment of a fixed number of dollars under a fixed annuity contract. Fixed annuity policyholders may well complain about the opportunities missed when they compare their $100 with the more than $200 monthly income in 1954 that might have been possible under a variable annuity contract. In the computation of Column 3, Table 1, the advantages accruing to the variable annuitant during the accumulation period have been foregone. Mr. Linton recognizes this advantage in suggesting that the rate of growth of funds during the accumulation period invested in a well-selected, properly diversified group of stocks has been larger than the rate of interest achieved by the investment portfolios that are the basis for traditional annuity contracts. We believe that such higher yields on equities are not dependent on inflation given the maintenance of our long-run rate of economic growth and that this relationship is very likely to continue. This position, however, must be left undefended since the space that may be alloted to a comment is very limited. Let the case of the conservative be admitted, however. The holder of a variable annuity contract, the annuitant, would take more risk with respect to the number of dollars he will eventually receive. Life insurance companies, other financial institutions, and even the structure of the capital markets will be affected by any considerable growth in the use of variable annuities. Such changes are certain to follow whether the life insurance companies themselves or some newly developed type of financial institution handles variable valued annuities.