Knowledge that Transforms

Wassily W. Leontief, Factor Proportions and the Structure of American Trade: Further Theoretical and Empirical Analysis: Comment, The Review of Economics and Statistics, Vol. 40, No. 1, Part 2. Problems in International Economics (Feb., 1958), pp. 111-116

ECONOMIC theorists have done work of high quality and great quantity in the field of taxation. Public expenditure seems to have been relatively neglected. To illustrate this, let me turn to Professor Pigou. I do so with some diffidence, remembering what Ralph Waldo Emerson said to Oliver Wendell Holmes when Holmes showed him a youthful criticism of Plato. When you strike at a King, Emerson said, sure you kill I have no wish to assassinate Professor Pigou. Nor even to criticize him. But immortality does have its price: if one writes an outstanding treatise such as Pigou's A Study in Public Finance, one must expect other men to swarm about it, picking a nugget here and probing for a weakness there. Of a book of some 285 pages, Pigou devotes most attention to taxes. At least 200 pages to taxes; of the rest, most are concerned with fiscal policy and its impact on the business cycle. What about the pure theory of public expenditure? I can find barely half a dozen pages devoted to the heart of this matter specifically, pages 30-34. And even if we widen the category to include Pigou's definitions of transfer and exhaustive expenditure and his discussion of pricing of state-operated public utilities we still cannot bring the total of pages much beyond twenty. Now it may be that this ratio of 200 on taxes to 20 on expenditure is the proper one. Perhaps there is really nothing much to say about expenditure, and so heavily overbalanced a page budget may be truly optimal. On the other hand, we must admit that fashion has a great influence in economics, which suggests that we ought periodically to survey the neglected areas of theory to make sure that they do deserve to be left in their underdeveloped and backward states. I have previously published (this REVIEW, xxxvi, November I 9 54, 3 8 7-89) some thoughts on public expenditure theory; and in order to widen the discussion among economic theorists, I later gave a non-mathematical exposition (ibid., XXXVII, November I955, 350-56). I do not propose here to give a detailed review of these theories. Rather, I'd like to think aloud about some of the difficulties with expenditure theory and with political decision-making. On these subjects, Richard Musgrave and Julius Margolis have done outstanding research and I must confess my obligation to them for much friendly counsel.

What is the exact nature of the consumption function? Can this term be defined so that it will be consistent with empirical evidence and a valid instrument in the hands of future economic researchers and policy makers? In this volume a distinguished American economist presents a new theory of the consumption function, tests it against extensive statistical J material and suggests some of its significant implications.Central to the new theory is its sharp distinction between two concepts of income, measured income, or that which is recorded for a particular period, and permanent income, a longer-period concept in terms of which consumers decide how much to spend and how much to save. Milton Friedman suggests that the total amount spent on consumption is on the average the same fraction of permanent income, regardless of the size of permanent income. The magnitude of the fraction depends on variables such as interest rate, degree of uncertainty relating to occupation, ratio of wealth to income, family size, and so on.The hypothesis is shown to be consistent with budget studies and time series data, and some of its far-reaching implications are explored in the final chapter.

Journal Article A Note on Kaldor's “Speculation and Economic Stability” Get access Paul Streeten Paul Streeten Oxford Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 26, Issue 1, October 1958, Pages 66–68, https://doi.org/10.2307/2295859 Published: 01 October 1958

Trader's Behaviour - An Alternative Explanation Get access T. I. Matuszewski T. I. Matuszewski Vancouver Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 25, Issue 2, February 1958, Pages 126–130, https://doi.org/10.2307/2296211 Published: 01 February 1958

A Comment Get access Nicholas Kaldor Nicholas Kaldor Cambridge Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 26, Issue 1, October 1958, Page 69, https://doi.org/10.2307/2295860 Published: 01 October 1958

Journal Article Consumer's Surplus, and Discriminating Monopoly Get access Roy Houghton Roy Houghton Sheffield Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 26, Issue 1, October 1958, Pages 72–74, https://doi.org/10.2307/2295862 Published: 01 October 1958