Knowledge that Transforms

N international trade theory the concept of the elasticity of demand for a country's exports has had a long life. It is frequently advanced as one of the chief determinants of the effects of a currency revaluation, and recently has been the subject of some empirical studies. The justification of the first part of the present study, apart from its special interest for the country it deals with, Australia, lies in the fact that it attempts a more precise definition of the concept in measurable form than it has usually received, and that this definition leads to the study of the demand for exports one commodity at a time, instead of the demand for exports as a whole.' In the second part of the paper, similar methods are used to define and measure the elasticity of export demand with respect to income of the export market. The theoretical expressions obtained are applied to three principal Australian export commodities, using prewar data, to estimate in effect how their proceeds would have responded to a given change in the exchange rate, or in the income of the export market.

BY comparison with the voluminous literature on the theories of the firm and consumer, the amount of space devoted to the theory of the union is small indeed. This is not accidental; it results from the fact that the behavior of firms and consumers can be easily interpreted as maximizing while that of a union cannot. In recent years, however, the theory of the union has received increased attention. For example, John T. Dunlop in his now famous volume of essays, Wage Determiinationi Under Trade Unions,' has attempted to apply the maximization principle to labor union behavior, arguing that a union typically, although not universally, attempts to maximize the money income of its membership. The thesis that unions are maximizers has served as a spur to the enunciation of at least one antithesis: Ross's theory that union behavior is determined by considerations.' Ross's view of union behavior is not entirely new, but he has given the most lucid statement of this position of which I am aware. However, his arguments have not convinced Dunlop; in the preface to the new edition of Wage Determination he argues that the importance of the political determinants of wage rates has been exaggerated by Ross and others, and that political factors (although occasionally inmportant) are, on the whole, a relatively minor factor in wage determination.3 The issue is thus joined and a rather large-scale controversy is in the making;4 the present paper is offered as a contribution to this debate. Before embarking upon the discussion proper it nmight be well to define some of the crucial concepts used. When I speak of the political aspect of union behavior, or the political determinants of such behavior, I refer to those aspects of the behavior of individuals acting in behalf of a union ' which are best understood if it is assumed that they are motivated by a concern with the interests of the union qua organization,6 rather than with the interests of its members considered as individuals. It is not alleged that the interests of a unioil organization and those of its members are always or usually in conflict; indeed, the frequent confluence of these objectives has been a source of considerable theoretical difficulty. The individuals who act on behalf of a union -hereafter called union leaders -are alleged by Ross to be best understood as seeking primarily the well-being of the union organization rather than the welfare of its members. The well-being of the union organization, as I see it,7 involves the attitudes and behavior of three groups of people toward the union organization: (i) the members of the union,8 (2) the employers of the union members, and (3) the community at large, especially as its attitude is manifested in the behavior of the government toward the union. It is not seriously denied

TN their critical analysis of the evidence advanced by Colin Clark for his conclusion that taxation exceeding approximately 25 per cent of national income is inflationary, Messrs. Pechman and Mayer have successfully accomplished a much needed task. The concept of the 25 per cent limit was presented in both the Economic Journal and Harper's in an unqualified manner. It is little wonder that it has been incorporated into popular discussion on tax and budget policy as a new dogma. As is so often true, the assertion of an oversimplified proposition obscures the need for discriminating judgments in the formulation of alternative policies. The purpose of this note is to suggest some of the limitations and distinctions which should be recognized in applying the idea that taxation may be inflationary in policy determination. Three general propositions are stated below; on them there may be fairly general agreement. These are followed by brief comments on the current situation in the United States; on these there will inevitably be considerable disagreement. The latter opinions are expressed in a terse form, without full elaboration or listing of assumptions, to illustrate the extensive coverage, though not the thoroughness, of the analysis appropriate in the formulation of policy.