Knowledge that Transforms

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Haley's line of reasoning can be reconstructed in the following way. When a borrower incurs a liability (issues a bond) he should gauge any prospective asset purchase with the proceeds against an alternative fund use, the purchase of his own bond. If the proceeds realized from the bond are B, but if the borrower would willingly pay L to be free of the obligation, L becomes a relevant variable in the asset acceptance decision. If the discounted value of any asset exceeds L, borrowing to buy it will be subjectively wealth-enhancing, whether or not the discounted value exceeds B.

Econometric models have often been used to explain and predict demand, production and price patterns of agricultural commodities. With computers generally available, estimation and application of these models is a simple matter. In spite of this, there has been nothing written, at least nothing that we are aware of, which details the use of such models as an aid to speculation in commodities futures. This brief note reports successful use of an econometric model and a time-sharing computer system for this purpose.

This paper presents the results of a simulation study of the dynamic characteristics of the model built by Professor Chow whose purpose was to study statistically the relevance of the multiplier, accelerator, and liquidity preference as determinants of the national income of the United States.