Knowledge that Transforms

ON READING Mr. McIntyre's article' on the undistributed profits tax one is chiefly impressed not that he reaches the conclusion that the tax has no appreciable effect on dividend distributions but that his chart apparently indicates that the tax actually had the effect of causing a distribution that was very much below normal. His scatter-chart showing the ratio of dividends to earnings on the vertical scale and the per cent of industrial activity to on the horizontal scale shows a negative relationship as would be expected. But the two data for 1936 and 1937, the two years during which the tax was in effect, while showing a relatively high distribution compared with the mass of data, are considerably below and to the left of this main island of cases. The impression conveyed to the reader is that the dividend distributions of 1936 and 1937 were really quite low when read in the light of industrial activity. Thus it appears that the undistributed profits tax has the effect of causing retention rather than distribution of earnings. A possible explanation of this extraordinary result would lie in the definition of normal industrial activity for the years 1936 and 1937. As in most indexes of normality weighted heavily with the tendencies established in the 1920's there may well be a considerable overstatement of the normal trend line. The data which will establish current normality lie in the future and so are indeterminate. The final data for any trend or normal series are the most uncertain and the whole significance of the chart used in this article depends upon the accuracy of this normal for the last two years, 1936 and 1937. If a lower normal for industrial activity were established, the present position of the dividends-to-earnings ratios would move to the right and so alter the picture at its crucial point. A simpler and clearer picture is obtained by merely charting the Cowles indexes of earnings and dividends. Reference to the accompanying chart, Figure 1, showing these figures, leads one to the conclusion that the proportions of earnings distributed in 1936 and 1937 were comparatively high. Of the years in which dividends were less than earnings (and so bore a substantial relation to that year's earnings) only eight years showed a higher per cent than 1936 and 1937, three were within the range of the 1936 and 1937 data (74.4 per cent and 78.7 per cent), and forty-seven were lower.

IT IS IMPORTANT for problems of storage and of price discrimination to know whether the total-revenue curve is convex or concave. I shall try to state the conditions for the demand curves under which the totalrevenue curve is convex or concave. Let D be the quantity. is the demand curve and the total-revenue curve. The total-revenue curve is convex if d2[DF(D)] /dD2 0. In the first case, d2[DF(D) ]/dD2 O, or DF(D) -2F'(D). If the total-revenue curve is a straight line, DF(D) =2F'(D), and by solving this differential equation we get = a/D + b, where a and b are constants (a>O). These are Marshall's constant-outlay curves, a/D, shifted up or down by any constant quantity b (Figure 2). If the case of a straight-line total-revenue curve, = a+bD, we have F'(D) = -a/D2 (Figures 1, 2), F(D) =2a/D3 (Figure 1), and DF(D) = 2a/D2 (Figure 1). In Figure 2 some demand curves and their marginal curves for straight-line total-revenue curves are represented. If the marginal curve, F'(D) =I'(D), of a given demand curve, = I(D), cuts one of the curves F'(D) =-a/D2 from above at a point P', then its slope at this point is smaller than the slope of the curve F'(D) =-a/D2. Since the slope of the curve F'(D) =I'(D) is F(D) =I(D) and the slope of the curve F'(D) = a/D2 is F(D) = 2a/D3, the relation

The ever-increasing demand for more and better statistics relating to agriculture in its many phases can be met by the two governmental agencies responsible for these statistics, (The Agricultural Marketing Service of the U. S. Department of Agriculture and the Bureau of the Census of the Department of Commerce) by the development and practical use of objective methods of sampling and, estimation. Three specific suggestions for using objective sampling methods in strengthening agricultural statistics were made by the writer in a previous paper, as follows: (1) Use a split schedule in Census enumerations to broaden the scope of basic agricultural statistics by from 50 to 200 percent, (2) Take a rotating partial census in intercensal years in commercial fruit and truck areas to obtain more reliable and more useful basic statistics regarding these specialty crops than is possible in connection with a general enumeration, (3) Take a nation-wide annual enumerative sample of individual farms covering crop acreages and production, livestock numbers and production, etc. The need for these improved methods has been developed more fully in the present paper, in which a critical description has been given of some of the more important methods of sampling and estimating now used by the U. S. Department of Agriculture and of some of the results obtained in developing more objective sampling methods.

THE OBJECTIONS which have been raised against the fundamentals of the value theory of the classical school of economics hardly ever went so far as to affect the principle upon which the Ricardian explanation of land values was based, viz., the idea that the value of land is not to be explained in terms of cost, but in terms of a residual rent. This idea when developed into its consequences has even facilitated the insight into many value phenomena other than land values. However neither Ricardo nor his postclassical followers ever attempted thoroughly to examine the question whether and with what modifications the residual rent concept can be used in interpreting the economic phenomena presented by the existence of urban land values. To my knowledge the first author who undertook the task of establishing a consistent theory of the urban ground rent was the Austrian economist F. von Wieser.' Wieser emphasized an important distinction obtaining between the agricultural ground rent and its urban counterpart with respect to the relations between the factors which are instrumental in producing the differential returns: the former is due to the fact that, owing to increased demand for farm products, agricultural production may be profitable also at increased costs, with the result that a surplus profit accrues to those farmers whose production is privileged by lower costs. On the other hand, according to the Wieserian theory, the residual rent of urban sites is largely independent of differences in costs of construction; it is due to differences in the demand for the services rendered by different real-estate properties and, consequently, to differences in the prices paid for such services. Von Wieser has specified his theory by distinguishing within each locality a range of housing markets which differ according to the situation of the sites. The tendency to exploit the privileged sites to the fullest possible degree is reflected in the process of intensifying the utilization of land of this type both horizontally and vertically. The larger the portion of the lot which is utilized for dwelling and renting purposes and. in addition. the larger the number of dwellinL;s and premises * Paper presented at Colorado Springs, July 26 and 27, 1939, before Cowles Commission Fifth Annual Research Conference on Economics and Statistics, under title of Some Dynamic Aspects of the Urban Ground Rent. 1 v. Wieser, Theorie der gesellschaftlichen Wirtschaft in Grundriss der Sozialdkonomie, 1, p. 362.