Knowledge that Transforms

IT seems that a really great man in our field is known chiefly by one contribution which may or may not be his main achievement. As Malthus suggests population and Ricardo rent or perhaps the law of comparative advantage, so economic development, innovation, and entrepreneur are the catch words associated with Schumpeter. Such associations may be correct and may even have a function. Yet in the case of every great name in economics they are at best a small part of what constitutes the greatness. At worst they are a caricature. For what matters is not merely the one or the other idea, however great, however significant. What matters is the place of the idea in the vision of the genius, the theory in the literal sense: the view of things as a whole. Schumpeter, in his own writings, repeats this again and again: If a statement has logical flaws, it must be discarded. If it is free of logical mistakes, it receives its meaning only from its context. This viewpoint not only gives the clue to Schumpeter's open-mindedness and tolerance toward other men's ideas, his willingness and ability to see every point of view; it not only explains how he could understand everything and yet cling to his own view; it is essential to the real understanding of his theory.

C ONSIDERABLE progress has been made in U. S. national product and income statistics in recent years. One of the most useful improvements is that, since I939, quarterly estimates have been made available within two months following the close of the period. In addition to furnishing comprehensive indicators of general economic conditions more promptly than before, these quarterly estimates have made it possible to analyze many economic relations, involving lags shorter than a year, which could not be observed from annual data. There are, however, grounds for further improvements. This paper represents a very preliminary attempt toward partially filling one of the gaps, namely, monthly estimates of national product statistics.2 For the same reasons that quarterly estimates are desirable in addition to annual data, monthly estimates would be useful in providing a really up-to-date picture of economic developments and in supplying data for the study of many important economic relations which may involve lags even shorter than a quarter. In Section I, seasonally adjusted monthly estimates of the following components I of the gross national product are derived for the I946-49 inclusive: (I) personal consumption expenditures on durable and nondurable goods as a whole, (2) personal consumption expenditures on services, (3) gross private domestic investment in new construction, and (4) gross private domestic investment in producers' durable equipment.4 The estimated figures are presented in Table i and are plotted in Charts i and 2, together with the quarterly figures as reported by the U. S. Department of Commerce. In order to indicate a possible use of the monthly estimates, an attempt is made in Section II to find the lagged relation which, on purely a priori grounds, may be expected to exist between income and consumption. In spite of several statistical attempts to establish this lag on the basis of annual data, it seems that by no stretch of imagination could one believe that this particular lag is as long as a year. Since the pay period should be the most important single factor in the determination of this lag, and since by far the major portion of income payments in this country is on a weekly or bi-weekly basis, there are grounds for believing that this lag may be even shorter than a quarter. One would therefore be led to expect that the monthly figures would yield good lagged relations. On account of the difficulties inherent in drawing statistical inference from economic time series of a very short unit-period (in this case, a month), no definite conclusion is reached on this point. For what they are worth, the evidences found seem to indicate that the lag-by-one-month relation is about as good as the relation involving no lag at all.

1ASED on admittedly scarce stuidies, the prevalent feeling concerning movements in occupational wage differentials in the United States seems to be that there has been a trend toward a narrowing of the percentage differential between skilled and unskilled workers during the past half-century, and that this trend is accentua,ted in boom periods of full em.ploynment and reversed in depressions.2 Thils article has a threefold purpose: to indicate some of the failings of the studies made thus far on this topic, to sketch briefly the results of an empirical study of changes in occupational differentials, pointing out an important exception to the conventional mode]. (the depressionof I929-33), and to analyze changes in the occupational wage structure which have occurred.

textabstractAlso in: Horst Hanusch (Ed.), The Legacy of Joseph Schumpeter, Vol. 1: Intellectual Legacies in Modern Economics, Edward Elgar, Aldershot, 1999, pp. 23-25

IT has become evident, from the discussions of the last few months, that the major unresolved question of mobilization policy in the United States is the role that should be assigned to direct price and wage controls. The disagreement holds, especially, for conditions of considerable but still limited mobilization. Given expenditures on the scale of those being made prior to the Korean War expenditures, it will be wise to recall, that were more modest in their achievement than in their volume there was effective agreement that direct controls were unnecessary. For full mobilization, a loose euphemism for what a country does if it has a full-scale war on its hands, there is something close to agreement that comprehensive controls over prices and wages are necessary or at any rate inevitable. But in mid-December, as this is written, plans are still being based on an intermediate situation. The transfer of resources to military use that is now in prospect promises to enforce an actual and perhaps a substantial reduction in civilian consumption. But it is not assumed that this will proceed to the point where, if the maximizing of military potential were the only criterion, the reduction in civilian living standards would have to stop. In this situation as the President indicated in his speech announcing the declaration of a state of emergency the decision has been taken to invoke direct controls. It would not appear, however, that this decision is based on an agreed or even a clear view of the role of these controls in the strategy of defense against inflation. This becomes evident from even a brief review of the discussion of recent months.