are strong, but just how strong and how effective we need to measure. Not only the factors that help determine consumer demand, but also consumers' perceptions of the extent to which marketed goods and services will satisfy their wants, are important questions relevant to purchase predictions. This again is a little explored frontier for systematic research. Exciting opportunities have presented themselves in such events as the development of a market for small cars. Until we have gathered more data of the kinds indicated and then studied the predictive value of relevant attitudinal material in combination with that of other variables, no verdict on their predictive value but a Scotch one would seem acceptable.

T HE crisis will no doubt be surmounted. dollar will be saved. Its parity will be successfully maintained, and world will be spared that ultimate and unmentionable calamity whose consequences are more dreaded for never being described. The world monetary system will stay afloat, and its captains on both sides of Atlantic will congratulate themselves on their seamanship in weathering storm. But storm is in good part their own making. And if financial ship has weathered it, it has done so only by jettisoning much of valuable cargo it was supposed to deliver. Currency parities have been maintained, but full employment has not been. The economic growth of half advanced noncommunist world has been hobbled, to detriment of world trade in general and exports of developing countries in particular. Currencies have become technically more convertible but important and probably irreversible restrictions and discriminations on trade and capital movements have been introduced. Some government transactions of highest priority for foreign policy of United States and West have been curtailed. Others have been tied to a degree that impairs their efficiency and gives aid and comfort to bizarre principle that practices which are disreputably illiberal when applied to private international transactions are acceptable when government money is involved. These are costs. Were, and are, all these hardships necessary? To what end have they been incurred? They have been incurred in order to slow down and end accumulations of obligations in hands of European central banks. It is fair to ask, therefore, whether these accumulations necessarily involved risks and costs serious enough for countries concerned and for world at large to justify heavy costs of stopping them. Which is easier? Which is less disruptive and less costly, now and in long run? To stop private or public transactions that lead one central bank to acquire another's currency? Or to compensate these transactions by official lending in opposite direction? I do not suggest that answer is always in favor of compensatory finance. But issue always needs to be faced, and especially in present case. Several courses were open to European countries whose central banks had to purchase dollars in their exchange markets in recent years. (a) They could have built up their holdings quietly and gladly, as they did before 1959. (b) By exercising their right to buy gold at United States Treasury, they could have forced devaluation of or suspension of gold payments. (c) They could have taken various measures to correct and reverse chronic European payments surpluses. (d) By occasional withdrawals of gold and by constant complaints they could have brought tremendous pressure for discipline upon United States without forcing a change in parity. European central banks and governments chose fourth course, with token admixtures of third. They have made world opinion, and American opinion, believe there is no other choice. Almost everyone agrees that pressure of balance of payments deficit upon United States is inescapable arithmetic rather than deliberate policy of foreign governments. Yet for almost ten years previously, United States deficits were no problem. Clearly it is a change in human attitude and public policy, not inexorable circumstance, which has compelled us to take corrective actions. It is true that concern of financial officials about the dollar was only an echoand a subdued echo at that of fears, hopes, anxieties, and speculations that arose in private financial circles in late 1950's. But financial officials do not have to follow private exchange markets; they can lead instead. By an equivocal attitude toward private suspicions of dollar, European officials kept pressure on United States. Never did they

THE documents produced by the Patman inquiry are a remarkable contribution to monetary literature. The first title, Compendium for short, consists of replies to questions propounded by the committee. The first volume of the Compendium contains the careful answers of the Treasury and the Board of Governors of the Federal Reserve System to the lengthy questionnaires submitted to them. The second volume includes replies from the Presidents of Federal Reserve Banks, the Council of Economic Advisers, federal and state bank-examining authorities, the Reconstruction Finance Corporation, economists, bankers, life insurance executives, and dealers in United States government securities. The questionnaires varied with the respondent and were designed to obtain both factual information and expressions of opinion. The answers provide a wealth of legal, institutional, statistical, and historical information. Whether you wish, for example, a complete chronology of Federal Reserve policy actions since I9I4, a summary of the reserve requirements of nonmember banks, a world survey of Treasurycentral bank relationships, or a study of the density of banking offices relative to population in the several states, the Patman Compendium is your source. The replies also provide a variety of opinion, comment, and theory concerning the role of monetary policy in the postwar United States economy. The second title, Hearings for short, reports oral testimony on these same subjects and includes also numerous documents and written statements submitted to the committee. The committee heard testimony from the principal contributors to the Compendium and from many others; the witnesses represented a wide variety of experience, interest, and viewpoint. The Hearings include four panel discussions on aspects of monetary policy. Two of these, How should our monetary and debt management policy be determined? (pp. 747 ff.) and What should our monetary and debt management policy be? (pp. 685 ff.), are especially deserving of the attention of the reader who can only hit the high spots of these volumes. The third title, Report for short, gives the findings and recommendations of the committee majority, with dissenting observations by Senator Douglas. The Report is an admirable review of the events investigated by the committee; and its findings on the issues discussed in the Compendium and Hearings are, in my opinion, well balanced and moderate. For this Report, and indeed for the skillful design of the whole inquiry, there can be no doubt that Henry C. Murphy, the committee's economist, deserves tremendous credit. It is patently impossible for a review to do justice to the masses of material in these three documents. I hope I have given some idea of their scope. For the rest, I shall confine myself to three major topics of the committee's inquiry: (i) the Treasury-Federal Reserve conflict, (2) the theory of the operation of monetary controls, (3) the place of monetary restriction in an anti-inflationary program. -

exactly the same way. It reduces investmentplus-consumption to the volume where the level of employment is not high enough to force up wages and thereby prices and incomes. If we need the iO per cent of output, we can not afford the fiscal policy that would prevent inflation any more than we can afford the monetary policy. And the same holds, of course, for all combinations of the two. Nor does our analysis point to the control of prices or of physical output. As long as employment is at a very high level, workers will press successfully for wage increases and the pressure will come to an end only when the impossibility of increasing prices to cover the increased cost has put enough men out of work to remove the pressure for higher wages. At this point the iO per cent output has also been removed. The use of physical controls to keep output down to the level where prices, costs, and wages do not rise must consist of preventing the iO per cent output right from the beginning. The only way out of this dilemma between accepting inflation and sacrificing the extra iO per cent, is to change our method of wage determination so that the very high level of employment does not result in the fruitless spiral of wages and prices. What is needed is a wage determining mechanism or market which will permit individual wage rates to be adjusted in response to change in the relationship between the demand and the supply in the particular labor market, while keeping the average level of wages from rising very much in relation to the increase in productivity. The criterion on which the wage must be determined in such an artificial market is the relationship between the number of men ready and able to take jobs in the particular labor market and the number of men actually employed in it. This ratio (the index of relative attractiveness) in conjunction with the national average of such ratios would determine whether the particular wage should be increased (and how much) or kept unchanged.1 Unless some such plan is developed for preventing very high levels of employment from raising the general level of wages more rapidly than productivity increases, the benefits of very high levels of employment, which may be of enormous importance in times of national emergency like the present, can be enjoyed only for very short periods and at the expense of severe damage to our greatest secret weapon the price mechanism.

T HE contention of this paper is that the demand for cash balances is unlikely to be perfectly inelastic with respect to the rate of interest, and that policy conclusions which depend on the assumption that the demand for cash balances is interest-inelastic are therefore likely to be incorrect. First, the relationship between monetary and fiscal policy recommendations and assumptions concerning the interest-elasticity of the demand for cash balances will be examined. Second, the argument of Dr. Clark Warburton, whose Monetary Theory of Deficit Spending implicitly depends on the interest-inelasticity of the demand for cash balances, will be considered. Third, the position of Professor William Fellner, who explicitly makes and defends the same assumption, will be reviewed. It will be held that this assumption leads Professor Fellner into a theoretical dilemma which can be escaped only by abandoning the assumption, and that Professor Fellner's reasons for believing the demand for cash balances to be interestinelastic are inadequate. Finally, a statistical relationship between the demand for cash balances and the rate of interest will be presented; this relationship, though admittedly not conclusive, is difficult to reconcile with the hypothesis that the demand for cash balances is interest-inelastic.