Knowledge that Transforms

THE stability of the relationship between income payments and savings balances, compared with income payments and the net amount saved, is of interest to persons concerned with economic, fiscal, and monetary theory. An experiment designed to test the linear relationships between (i) income payments and savings balances, and (2) income payments and the net amount saved is one way of obtaining information on this question. The test would then be one of comparing the correlation coefficients. If a higher correlation coefficient were obtained between income payments and savings balances than between income payments and the net amount saved, greater stability would be suggested in the first rather than in the second relationship. Such a finding would suggest instability in the marginal propensity to save, while an opposite finding would suggest the reverse. Information about the stability of the marginal propensity to save was obtained by fitting regressions to weekly time series data for the sample period of I947, I948, and half of I949. These data were obtained for a single New England community.1 This particular community was selected because (i) it was well isolated, (2) a small number of firms employed most of the wage earners in the community, and (3) the payrolls of these firms were subject to wide variation. Complete figures could not be obtained which indicated the receipt of all income payments, the holdings of all savings balances, and the net amount saved by the persons in this community during each week. Therefore the following figures were used: (i) payrolls in place of income payments, (2) time deposit balance figures in the commercial bank in place of savings balances, and (3) changes in the time deposit balances in place of the net amount saved. The payroll figures were obtained directly from the books of the major employers located in the community. The variations in the payrolls of the major employers accounted for most of the variation in income payments. The bank balance figures were obtained from the commercial bank in the community. These figures indicated the amount of time deposit balances held by the bank at the end of each week (Saturday). The figures on demand deposits were not used because changes in these accounts largely reflected the financial transactions of firms, which included the sales of outputs, the purchases of inputs, and other changes in asset holdings. The net amount saved each week was assumed to equal the change in the bank balance from the preceding week. The evidence that was available suggested positive correlations (i) between time deposit balances and all savings balances, and (2) between changes in time deposit balances and the net amount saved. No evidence was found of a negative correlation between the figures which were used and the ideal figures. The use of figures obtained from the bank and the employers had the advantage of eliminating the need of relying on data which otherwise could only have been obtained from household records and interviews. The following correlation coefficients were obtained from these data: 2

IN the Far East, the overall volume of intraregional trade is not as substantial as that of Europe, but much larger than that of Latin America.2 One rather unique and very interesting feature of Far Eastern intraregional trade is that one country, namely, Japan, stands out prominently, from the point of view of both the character and magnitude of its trade. Japan contributed about one-third of the Far Eastern intraregional trade in the immediate prewar years (32.3 per cent for 1935, 34.5 per cent for 1937, and 38.o per cent for I938). Immediately after the cessation of hostilities, its share suffered a sharp reduction, but again became a significant percentage of the total in 1949 (I6.5 per cent). The ratio of Far Eastern intraregional trade to its total export, and Japan's share in intraregional trade showed a tendency to fluctuate together.3 Since Japan's share was about one-third in the prewar period and its intraregional imports were related to the volume of total intraregional exports, several questions may be raised with regard to the future role of Japan in the intraregional trade of the Far East. What are the initial and secondary effects of Japan's imports from the Far East on the intraregional exports of the countries of this region? Does such relationship in the prewar period remain true in the postwar period? If there is a change of preand postwar relationships, what are some of the reasons for the change? How are Japan's imports from the Far East related to the over-all exports of the region to all countries? This paper is a preliminary attempt at an analysis of the above questions.

M. W. REDER offered his recent and interesting paper, Theory of Union Wage Policy, ' as a contribution to the debate between two schools of thought on the question of the of wage policy. One school, that characterized as emphasizing determinism, is represented in the paper by the writings of Prof. John T. Dunlop. The other, that characterized as emphasizing is represented in the paper by the writings of Prof. Arthur M. Ross. This paper may likewise be viewed as a contribution to the debate over the of wage policy. The issue with which we shall be primarily concerned is this: How could one empirically test the rival hypotheses stating that, typically, the important of wage are (i) political considerations, or (2) economic considerations? Reder, in commenting upon this aspect of the problem, says: Each argues that his statements apply to 'most cases' or to a class of significant cases, etc. Unfortunately, all the empirical evidence that is available consists of examples illustrative of one contention or another; but what is needed is a census . . . of wage decisions, so that some quantitative estimates might be made of the number and importance of the cases conforming to the various competing theories. 2 Unfortunately, Reder does not go on to tell us in what terms such a census should be drawn. That is, how, precisely, we would determine to which theory a given case conformed. In our opinion, the answer to this question is not so patent that it need not be discussed. It is our contention that no satisfactory empirical test can be devised unless careful attention is paid to the following two points: First, the concepts union wage policy and determinants (of wage policy) have as their empirical reference some behavior on the part of individuals. Unless the behavioral content of these concepts be specified unequivocally, we cannot know the nature of the empirical evidence that would be required to test the competing hypotheses.3 Second, the concept determinants (of wage policy) is susceptible to two widely different interpretations.4 On the one hand, it may refer to motivation. On the other hand, it may refer to certain aspects of the union's economic behavior other than motivation. The evidence necessary to test the competing hypotheses will depend upon which interpretation the investigator is putting upon the concept determinants. In what follows, we will attempt, in this order, to: (i) present the schematic paradigm in terms of which any particular behavioral model of wage should be cast; (2) elucidate the two interpretations of the concept determinants (of wage policy); (3) propose one particular behavioral model of the concept wage policy. Vis-'a-vis this model, will be understood in the nonmotivation sense. In the attempt to define a satisfactory model, a major difficulty arises from the consideration that the union's wage is probably determined by tactical as well as substantive considerations. A way around this difficulty is proposed. Finally (4), we shall consider, briefly, the analytical

IN the postwar period, the international trade of the United States has played a leading role in the world economy; not only have United States exports accounted for one-fifth of the world's, but this country's export surplus has been the world's largest, financed primarily, as is well known, by government grants and loans. American foreign economic policy has received a great deal of attention and study, in part to discover the reasons for, and in part to find a way out of, the international disequilibrium situation that is now summarily called shortage. Among the proposals put forth for the elimination of a seemingly chronic export surplus and its concomitant aid programs, suggestions for increasing United States imports on the one hand,' and for a more rapid expansion of private investments abroad on the other, have received the most attention. This paper will attempt to explore the question whether the dollar shortage of the soft-currency countries can be eliminated wholly or in part by private foreign investment; it will employ United States investment experience, especially that of the postwar period, as a guide but will concern itself only with the economic problems of foreign investment. An analysis of the political difficulties that tend to discourage further United States investment in certain countries, and an evaluation of the beneficial effects this investment may have upon the industrialization of underdeveloped countries, is not within the framework of this study.

THE purpose of this paper is to examine two of the major issues at stake between Professor Kuznets and the Department of Commerce: (i) the way of netting the income totals when governmental output is included, and (2) the significance of distinguishing between a national income total valued at market prices and the same composite valued at factor cost. The nature of these issues may best be revealed, we believe, if the same data are used to illustrate the various concepts. Hence we shall employ Department of Commerce data to estimate the Kuznets concept presented in National Income and Its Composition, I9I9-I938. This concept has subsequently been revised, but to derive the wartime revisions from Department of Commerce data would necessitate arbitrary assumptions without any further clarification of the issues at stake,' while the specific quantitative form of Kuznets' most recent revision has not yet been indicated.2 In section I we compare, on the basis of Department of Commerce data for I939, Kuznets' concept of national income with that of the Department of Commercefirst at the final products level, then at the factor costs level. Section II presents our conclusions on the basic issues involved.