Knowledge that Transforms

John F. Helliwell, Lawrence H. Officer, Harold T. Shapiro, Ian A. Stewart, Econometric Analysis of Policy Choices for an Open Economy, The Review of Economics and Statistics, Vol. 51, No. 4 (Nov., 1969), pp. 383-398

that the size coefficient (i8jl) was statistically significant at the 0.05 level in thirty-five of the 118 industries examined.6 The results for these industries are reported in table 1. The range of variation in the magnitude of i,/3 is considerable; the high, in Perfume and Cosmetics, is 0.114, and the low, 0.014, is found in Men's Clothing. The mean coefficient for the thirty-five industries is 0.0405 suggesting that on the basis of this group one would expect the rate of return to rise by 1.2 per cent if size doubles, and by 4.05 per cent for a ten-fold increase in size. VI Conclusions

T HIS paper has the dual purpose of presenting spectral analysis in a different, perhaps more appropriate application than that of past work and of analyzing differences among industries in the relation of gross changes in employment and changes in output. Spectral analysis has been applied to a problem in labor economics only once.' The cause of the dearth of studies using the technique is possibly the limited number of observations available on most variables relating to labor. Even if we had such information, there are relatively few problems for which spectral analysis might be expected to give interesting results. The technique does not seem to have produced much new evidence about the cyclical relationships to which it has been applied, perhaps because we have so few observations on complete cycles in economic activity, or perhaps because these low-frequency movements are of such irregular length as to be undetectable by spectral analysis.2 Because of these problems the major use of this technique in labor economics must lie in the analysis of behavior reflected at higher frequencies, particularly to those we call seasonal. It is only at those frequencies that we have enough information on behavior to make any inferences about it.

Joel Bergsman, Samuel A. Morley, Import Constraints and Development: Causes of the Recent Decline of Brazilian Economic Growth: A Comment, The Review of Economics and Statistics, Vol. 51, No. 1 (Feb., 1969), pp. 101-102

This paper extends the fundamental theorem of share (or capital) valuation under conditions of certainty and purely competitive markets, to allow for the distinction between capital gains and income in the taxation of personal income. The objective is to develop the theorem for the tax case in a form general enough to allow for corporations both currently and not currently paying a dividend. However, the general derivation is sufficiently tedious to warrant a presentation which begins with less general cases. Accordingly, we will first develop the share valuation equation for a continuous discount version of the taxless case for corporations either paying or not paying a dividend. Then we turn to the effect of income and capital gains taxes for corporations currently paying a dividend; and finally the more general case. The derivations will be simplified by assuming a constant rate of interest over time, but all the theorems can be extended to deal with foreseen changes in interest over time.

Thompson's model preserves the existence of many firms producing the collective good by having all firms act under the Cournot-Bertrand convention and by discriminating in price among consumers. This use of the Cournot assumption is clearly at variance with the prior assumption by Thompson that there is perfect knowledge of all market-relevant information . peculiar results of the Thompson model rely on perfect knowledge by producers of consumers' preferences, and upon perfect knowledge by consumers of the intentions of producers to discriminate in price. But perfect knowledge of all market-relevant information evidently excludes knowledge of the fact, by any producer, that he can have all the revenue of the industry at no additional cost simply by reducing his price (s) slightly. This is simply not compatible with perfect competition as usually understood, and has nothing to do with whether or not consumers have an incentive to compete against each other. A new entrant or an existing firm in Thompson's model who accidentally reduces his price will reap great rewards. This could not happen in a perfectly competitive equilibrium. If any firm in Thompson's model reduces its price, a destructive competitive price reduction spiral will ensue, reducing the price to equality with marginal cost, which is zero. This is what perfect competition is all about, and it is very different from the behavior of Thompson's producers, who do not, in fact, compete. Just as the nongovernment allocation of a good requires barriers to competition, price discrimination requires the same. There is nothing in the inherent nature of a good which provides these barriers. As a result, Thompson has to make special assumptions about the nature of competition to get his result. These assumptions are not consistent with perfect competition. I would have no quarrel with Thompson if he had titled his paper The Production of Collective Goods Under a Very Peculiar Kind of Non-Competitive Polipoly, and had deleted all further references to perfect competition. One might still argue, of course, that the model is then void of either practical or theoretical usefulness. On the practical side, I submit that each of the examples cited by Thompson of the (e.g., nongovernment) allocation of a good is a case in which there is either some barrier to competition, or in which some good has been substituted for the collective good. In broadcasting, for example, stations substitute the private good, audience size, for the public good, programming. They sell the good, not the one. No collective good can be privately and competitively produced. Nongovernmental allocation of such a good requires both exclusion devices and barriers to competition. Efficient allocation may require price discrimination.

to the randomness of profits, rather than to errors in the measurements of K, which would imply a negative bias in p', this too could not explain away the observed negative as, since again one would expect bias /3' in this case too, to be less than one in absolute value. Thus, the observed negative cannot be explained as the consequence of using a bad cost of capital variable and therefore can be taken as an indication of greater capital-schooling (skill) complementarity.4