Knowledge that Transforms

I904-I4,2 total new construction had two peaks, the first of which coincided with that of replacement and the second with that of new investment. The present study shows clearly that in the period here analyzed, as in the earlier period, replacement was leading in the business cycle. For this analysis, the life characteristics of first-ownerships for the years I932-39 were calculated according to actuarial methods. In the calculations the following symbols were used:

So far as unemployment in general is concerned, there is now agreement that most of the predictions for the reconversion period 'were too pessimistic. A few of the forecasts follow. In a report released by the Office of War Mobilization and Reconversion three days after the surrender of Japan 3 it was stated: There will be 5 million or more unemployed in three months. By spring unemployment may reach about 8 In a research study published early in I945 by the Committee for Economic Development ' it was predicted that unemployment would probably reach a peak of at least 4 or 5 million workers during the transition, and that under adverse circumstances this total might approach iO or even I5 million. In a pamphlet, published in I943 by the Postwar Division of the Bureau of Labor Statistics,5 the following statement appears: If industry hesitates and delays the change-back to full-scale civilian production, unemployment may run up to I 2 million or more in half a year's time, whereas it may not go beyond 7 million subject to offsets by means of public works if management, labor, and government tackle our joint problems with real courage and intelligence. Actual unemployment estimates of the Bureau of the Census, covering the period July I945 to March I946, are given in Table i.

A SMALL shelf of new books covers the I L gamut of economic policies proposed for the postwar world, from the virtual socialism of the first two works to the free enterprise system of the third, and through the working compromises envisaged in the last two documents. The literary pieces of the Left and Right are done in bold strokes and brilliant hues: they are addressed to the eye and to the heart. The official pieces are coolly rational, moderate, and a trifle dull. Without intimating that the car of economic policy should in fact be steered according to the guidebook of greatest literary pungency and novelty, let us turn first to the Economics of Full To the theoretical economist this will be the most interesting of the lot because it displays the logical conclusions of one branch of the Keynesian revolution. In the introductory essay F. A. Burchardt considers theories concerning the Cause of Unemployment under three main divisions. The first set of ideas, ascribing to deviations from free competition, is made by Burchardt to mean indifferently that monopolistic organizations in industry and in the labor market . . . restrict output and employment opportunities, or that unemployment exists because wages are too high (pp. I, 13). The latter more prescinded and less defensible proposition apparently discredits in Burchardt's thinking the former, much more inclusive, idea. Similarly natural wave theories, which embrace the concepts of self-generative cycles, are for him thoroughly discredited as explanations of because he believes they regard the cycle as beyond human control. We are thus left with the demand-deficiency theory of unemployment. Burchardt believes that the revolutionary discovery (p. 32) that the free play of the market does not automatically produce full employment renders obsolete the idea that market forces work in any way toward a rational utilization of resources. A second essay, by Michael Kalecki, marked by daring abstractness in analysis and daring inventiveness in policy, weighs the relative merits of (i) deficit spending, (2) stimulating private investment, and (3) redistributing income from the rich to the poor, as Three Ways to Full Employment. Kalecki's general conclusions are that the second is relatively unsatisfactory, that the third is promising, but that it will probably have to be supplemented by the first. Kalecki regards political opposition as the only significant limit on achieving full employment by income transfers (p. 55). Otherwise we have the categoric pronouncement that redistribution of income from higher to lower income classes increases effective demand; here (as throughout the Schumacher essay on public finance) the squeezing of profit margins always encourages fuller production and employment. The deterrent effect on investment which may proceed from differential taxes on profits or from steeply progressive income taxes, and which some authors regard as more or less completely offsetting the stimulus to consumption, is neglected entirely. The inferiority of stimulating private investment as a road to full employment is a consequence of Kalecki's underlying assumption of I The Economics of Full Oxford: Basil Blackwell. I944. Vii, 2I3 pp. I2 shillings, 6 pence. [Six studies in Applied Economics prepared at The Oxford University Institute of Statistics.] Full Employment in a Free Society, by William H. Beveridge. New York: W. W. Norton and Company, Inc. I945. 429 pp. $3.75. The Road to Serfdom, by Friedrich A. Hayek. Chicago: University of Chicago Press. I944. Viii, 248 pp. $2.75. Employment Policy. New York: The Macmillan Company. I944. 31 pp. $I.00. [Published by Permission of the Controller of His Majesty's Stationery Office.] Economic Stability in the Postwar World: The Conditions of Prosperity after the Transition from War to Peace. Geneva: League of Nations. I945. 3I9 pp. $2.50 (paper). [Report of the Delegation on Economic Depression, Part II.]

THE war distorted the pattern and volume of consumers' expenditures. Output of durable goods and services, and even of some nondurable goods, was held down by various kinds of war-imposed restrictions; and the spill-over of surplus income into nondurables only in part offset these forced reductions of consumers' expenditures from the larger totals consumers would have desired to realize at war-time levels of income. In consequence a huge volume of liquid savings has been accumulated by consumers. In times consumption is a predictable factor in the economy, determined within narrow limits by the level of disposable income and the total number in the civilian population. In the transition period now beginning, these relationships will again become effective, and this will tend after the initial period in which supplies are still restricted to raise consumers' expenditures above recent levels, even though disposable income declines and remains below its war-inflated volume. In addition, the spending of accumulated war-time savings will tend to raise consumption outlays above normal in the postwar period. The tremendous volume of savings now on hand is largely in liquid form; and the spending of even a fraction of these savings will assure a high level of postwar purchases, especially for the durable goods foregone during the war years. These savings will also tend to support the economy in the event of unemployment; the lower the level of current income, the more rapidly will savings have to be drawn upon for the maintenance of living standards. Chart i shows consumers' expenditures since I9IO and the trends for the remainder of the decade as determined by analysis of the above and other relevant factors. The projected trends conform to two over-all economic perspectives: The lower represents an outcome highly probable in the light of current pro-