Knowledge that Transforms

T HE minimax strategy is the foundation of the theory of games of von Neumann and Morgenstern. It may sound surprising that after a decade of discussion, objections based on certain misconceptions still prevail in the professional literature. Although one may take comfort in the thought that the impact of most theoretical development, such as that of modern physics, is often not appreciated till after decades, yet such persistent misunderstanding of this basic theorem should certainly be dispelled. Three papers deserve particular attention because they encompass a broad range of common criticisms. papers are: Hans Neisser, The Strategy of Expecting the Worst '; Carl Kaysen, The Minimax Rule of the of Games and the Choices of Strategies under Conditions of Uncertainty2; and Daniel Ellsberg, Theory of Reluctant Duelist. 3 To avoid repetition, I shall single out only certain aspects of each paper to illustrate my point, since some of the remarks can be directed to the others as well.

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.

HIS article is concerned with the deterT minants of consumer saving in the short run. Preoccupation with consumer saving springs from a desire to predict year-to-year changes in the over-all level of economic activity and to show the effect of consumers' actions on these year-to-year changes. As its central theme, the article focuses on and demonstrates the existence of a strong relationship between tangible consumer investment and consumer saving. Potentially, the use of this relationship, which has been hitherto overlooked, may enable economists to achieve better predictions of consumer saving. The analysis is restricted to the consumer sector only. (Thus, this article does not deal with the essentially entrepreneurial investments of consumers'whose occupation classification is self-employed businessman or farm operator.) Supporting data are introduced from the I94952 Surveys of Consumer Finances. Deflationary saving, or in net claims, defined as disposable money less total expenditures for goods and services, has been taken as our dependent variable. This variant of saving does not count as saving purchases of tangible assets such as houses or cars; only changes in claims to assets are counted as saving. We chose this variable because we are in-' terested in short-run fluctuations in the level of economic activity. Deflationary saving measures the extent to which the actions of economic units increase (the case of negative or decrease (the case of positive the circuit flow of The usual variants of saving which define saving as change in net do not measure directly additions to or subtractions from the flow and thus are less suitable for our purposes.' If the magnitudes and movements of the net worth variants of saving were highly correlated with deflationary saving, they could be used as proxies for it, but this is not the case.2 The question may legitimately be raised as to why we do not consider the use of Milton Friedman's3 (or saving) concept. The answer is that the permanent consumption concept is designed to eliminate just those transitory elements of consumption (or in which we are chiefly interested, namely those which account for most of the year-to-year variation in saving. For a similar reason we have employed measured income rather than income.