Introduction, 195. — I. The distinction between international and domestic commodities, 196; the criterion of physical movement, 198; of price behavior, 200; of market independence, 205. — II. The statistical procedure, 207; the selection of commodities, 207; of prices, 208; and of weights, 211. — III. The results, 215; the movements of the primary international and domestic indexes, 216; the difference in level of the New York and Chicago indexes, 218; comparison of the indexes with medians of the same commodities, 221; the analysis of sub-groups within the primary indexes, 223. — Conclusion, 225.

BETWEEN I 9 I 9 and I92I the REVIEW OF ECONOMIC STATISTICS published several studies of the balance of payments of the United States, which pointed to the conclusion that the War had made us a nation. We assumed that this term, which was well established in economic literature, had a definite and generally accepted meaning; and we did not undertake to define it. In recent years it has become clear that we should have defined the term with care, and that the United States has not become a in the sense that we intended at that time. Whatever their origin, and this is not important for present purposes, the terms and became well established in economic literature by the end of the nineteenth century. England was a nation. From interest on foreign investments, earnings of ships, and various other items in her annual accounts she had a large balance in her favor, which enabled her to import commodities greatly in excess of her exports and so to pay for a large unfavorable balance in such accounts. Upon the other hand, the United States, with a large balance against her on account of the invisible items, exported commodities greatly in excess of her commodity imports, and thereby paid her debts. Clearly the term had reference to a country's position on account of the invisible items in her balance of payments, and the visible proof of that position was the existence of an excess of commodity imports. If usage had been guided wholly by the idea of an annual reckoning of a country's international accounts, the terms might as well have been applied differently; and a country with a sufficient excess of commodity exports might just as well have been called a country. But interest on foreign investments bulked so large among the invisible items that a country, like England, that had long exported capital was in the old and familiar sense the of the countries to which her capital had flowed. Therefore it was natural that the country with a balance of invisible items should be called the nation, and the country showing a surplus of commodity exports should be termed the debtor. All this, of course, related to transactions on income account, and disregarded capital transactions which in any year might temporarily make a country a debtor if it exported an unusual amount of capital. Thus the richest country might be temporarily in debt, and export gold to balance her total accounts in any year; while at the same time, and for just the opposite reason, the poorest debtor country might temporarily become a and receive gold imports. Those who follow the exchanges from month to month, or try to determine a country's position at the end of every year, must of course consider capital as well as income transactions. But a country's normal position as debtor or is not determined by the capital transactions of any year, but by those on income account which are the ultimate determinants of a country's international position. If, therefore, economists are to use the terms and country, they should disregard capital transactions and consider only a country's normal position on income account. According to the older usage, therefore, a country was one which in any normal year had a balance in its favor on account of the invisible items entering into its foreign transactions on income account. Visible items might have been considered instead of invisible; but they were not, and this was probably because the countries having favorable balances of the invisible items were also the countries that made foreign loans or investments and therefore were creditors in the old-fashioned and legal sense of the word. This we believe to be a correct account of the term creditor nation as it was used prior to the War. Obviously a may be a debtor on account of the invisible items but so largely a on account of the visible items (commodity exports) that its total income account for a period of years shows a balance in its favor. Should such a be classified as a debtor? Obviously not, unless the term is going to be used in a technical sense not conducive to scientific insight and con-

Reviews the book "Business Machines," by Perley Morse.

Accounting does not occupy the honored position in the French system of education which falls to its lot in the United States. The French make but little provision for it and do this in what appears to some a grudging manner. The French schools undertake the preparation of young Frenchmen and Frenchwomen for citizenship in a highly centralized democracy with aristocratic and monarchic traditions. The French school system is under the direct supervision and control of the Ministry of Public Instruction and comprises two classes of establishment: public and private. The professors in these institutions are appointed by the national or local authorities after a competitive examination, while the nomination of professors by the private schools is subject to the approval of the Minister of Public Instruction. Accountancy is not taught there by what they might term the textbook method, so popular in many American institutions of higher learning. A combination of lectures and laboratory practice is used. The lectures are of a high calibre viewed from both form and content and if taken down as delivered, would form a respectable manual for the course.

Research as applied to business problems may take on one of two fundamentally different aspects. It may be conducted with the view of extending the limits of knowledge of business phenomena in general. In that case, the research leads to the establishment of new generalizations or to the measurement of phenomena for which previously only qualitative facts were known. This is the truly purely scientific aspect of business research. The other type of business research is that which concerns itself primarily with the providing of data or generalizations on which are to be based the solutions of specific business problems. Such research may be truly scientific in its method in the sense that it involves the statement of the problem, the collection of facts, their analysis and final presentation in conclusive form. Such research is usually narrower in its scope than is the first type; its conclusions may not be of a general nature nor may they be of general interest. In fact, the conclusions may have no social or economic significance whatever. Some of these studies are made with the specific objective of aiding management rather than that of increasing the store of human knowledge, they are likely to result incidentally in such increase. Facts are revealed and relationships are discovered that may be new to the accounting profession in general or which may point out the need for a revaluation of principles already held.

Reviews the book "The Dual System of Stabilisation, ed. 2"by J. Taylor Peddie.

Accounting statements are one of the chief sources of data which mold the financial activity over the various phases of the business cycle. They are the basis on which capital funds are (or should be) invested and earnings distributed. Thus they contribute directly to those influences which bring about business inflation, and, in turn, they measure the extent of the aftermath of recession, possibly viewing it through the dark-colored spectacles of pessimism. This paper is an attempt to indicate some considerations with which accounting is concerned in its relation to the business cycle. The paper has been suggested by the types of financing which have taken place in the recent period of prosperity, by the several questions raised in accounting theory by the fact or myth of appreciation, that there is a fundamental error in bookkeeping which tends to augment directly those influences that contribute to the optimism of business expansion and the pessimism of depression. The discussion will be limited to a consideration of accounting for income over the period of the business cycle.

I. Mercantilists not desirous of mere numbers, 698. — Importance of employment, 700. — Remedies for idleness: provision of employment, 702; corrective and punitive legislation, 705. — II. Condemnation of luxury, 708. — Means of curbing it: sumptuary laws, 712; taxation, 713; moral suasion, 713. — Defense of luxury, 714.—Hume's views, 716. —Conclusion, 718.

THE weekly sensitive price index, to which there has been frequent reference in both the Weekly Letters and this REVIEW, was designed as an aid in forecasting intermediate fluctuations in business.' The series selected, therefore, were those which were found to be most consistent in anticipating such intermediate movements during the years upon which the choice of prices was based (I923, I924, and I925) when compared with indexes of wholesale commodity prices and of the physical volume of production of basic commodities. A list of the series is given in the table on page 44. The constituents of the index are mainly raw materials for use in manufacture, and their prices are therefore responsive to industrial prospects. Furtfhermore, several of them are byproducts; the supply of such goods is relatively inelastic, and the price consequently especially dependent upon demand. Finally, the commodities as a whole are subject to wider influences than their small number would suggest, since most are important in international trade, and many are used in numerous industries. The index is an unweighted geometric mean of actual prices, relative to the average for I926 as base.2 The considerations governing the choice of such an average are quite different from those that are important in the construction of an index to measure purchasing power or to be used in studying the quantity theory of money. In the present case, the purpose directs attention to the timing and direction of changes, not to the general level of the index. The type of average follows from this fact and from the several assumptions that follow concerning the relationship between commercial fluctuations and prices. These assumptions are: first, that any given change in the conditions of demand and supply for any one of the commodities has an influence that is relative to the price of the commodity at the moment; and, second, that the various commodities are of equal value for the purpose of the index. The index has been computed weekly, and is designated as applying to the week ending Wednesday; the prices included are those datedwithin the week either prices for a given day or averages of daily prices for a seven-day period. The index for any month is obtained by averaging the weekly indexes for those weeks whose major part falls in the month in question. The computation of the weekly index is, of course, performed with the aid of logarithms; the logarithm of the base is subtracted from the average of the logarithms of the actual prices to obtain the logarithm of the index.3 The number of commodities used in the index is relatively small, so that there is at all times possibility of distortion resulting from extraordinary fluctuations in one of the constituents. For example, the exceptionally wide movements in the price of rubber (arising from causes peculiar to this particular commodity) have at times had considerable undesirable effect on the index. But it is probable that such temporary disturbances have at least during the period covered merely necessitated caution in the interpretation of the index, and not impaired its usefulness. The period for which the sensitive index is now available (I92I-3I) is sufficiently long to make fruitful some review of the success or failure of the index in accomplishing the purpose for which it was designed.4 From I923 through 1925 (the test period) its performance was, as is