Knowledge that Transforms

HE relationship of finance charges to T terms of consumer installment contracts (such as loan size and maturity) and to regional variables has been well established in the literature [8] [12]. Our study demonstrates the importance of the characteristics of the borrower, particularly his overall wealth position, in determining the cost of credit. Although this study examines the determinants of automobile finance rates, the general results should be applicable to the financing of other consumer durables.

M OST of the problems of measurements of productivity are related in one way or another to problems of aggregation. This statement also covers the measurement of technical change. There are few, if any, conceptual problems in measuring a production process which consists of a single factor and a single product. As soon as more factors or more products are included, complications arise. Some of these are examined in this paper. In the absence of technical change (TC) the main finding is our claim that the well-known concept of index number bias has no empirical validity and is therefore irrelevant in answering some of the questions it has been supposed to answer. In introducing TC, a natural definition of neutral TC (NTC) is suggested so that changes in output can be allocated to NTC, differential TC (DTC), and changes in inputs. It is shown how in general DTC is measured as NTC. An important role in our discussion is played by aggregates derived from the underlying production function. To illustrate the use of such aggregates a multiproduct production function is partly estimated. We start this paper by presenting the empirical production function which serves as illustration in subsequent discussion. In section III we take up the question of index number bias. In section IV we define the two forms of technical change and deal with the effects of NTC and changes in inputs on output. In section V the measurement of DTC is discussed.

T HE concept of the capital-output ratio has played an almost indispensable part in economic planning in underdeveloped countries, notwithstanding numerous theoretical objections. The range of areas in which the concept is brought into play stretches from judgement-free projections of capital requirements and of future growth rates to the wise man's role of setting an acceptable target rate of growth and of selecting investment criteria. However, progress has been seriously hampered partly because the available empirical evidence has been very limited in the coverage of various countries and also in the level of sectoral disaggregation.' In the present paper, we make use of certain new data whose analysis seems to suggest that the conventional notion of relative factor-endowments and choice of production techniques needs to be re-examined. The main objectives of this study are two: first, we present a comprehensive statistical analysis of detailed sectoral output-capital ratios for a large number of countries. Second, in doing so, this paper will point to a surprising characteristic of present-day economic underdevelopment. This evidence has a significant bearing on a number of related topics.

CANADA was one of 52 countries participating in the negotiations of 1964-1967. Because of the openness of the Canadian economy, the potential results of these trade liberalizations on its imports and exports are of special interest.' In this study we forecast the price effects of the Kennedy Round on Canada's trade as of 1973, when all the negotiated tariff reductions are scheduled to have occurred. We consider the impacts on total Canadian imports and exports to the United States, and analyze them disaggregatively by commodity groups. This is done by means of a four-stage procedure:

T HERE is fair agreement among scholars familiar with the economy of the Peoples' Republic of China (China) that there is stability in the retail price index. It is admitted that this index is biased downward because there were years of high black-market prices. However, they say that such issues are not central because (1) the basic necessities were available and rationed at stable prices; (2) the index is biased downward when prices are rising, and biased upward when prices are falling.' The contention of these scholars is both serious and important. It makes a very major difference how we look at the performance of the Chinese economy. Below in table 11 the price indices are presented which represent Chinese official claims. Perkins has attempted to verify the weighting system of the retail price index by reconstructing the index, and he states:

It has been argued recently that the size of the holdings of foreign exchange by commercial banks provides a better measure of the adequacy of international means of payments than the size of official reserves.' At first glance this appears obvious for it is these commercial holdings of foreign exchange which are used directly for financing international exchange while official reserves are used only to finance imbalances in countries' balance of payments which result from the maintenance of relatively exchange The argument becomes less clear, however, when one stops to question what is meant by the adequacy of international means of payments. Within a free market context, what does it mean to say that commercial holdings of foreign exchange are inadequate? The commercial interests involved clearly can not feel that their foreign exchange holdings are inadequate (apart from a desire to have higher wealth positions in general) for otherwise they would simply exchange domestic for foreign currency until their foreign currency holdings were no longer inadequate. In other words, from the point of view of commercial banks and traders, at any point in time would merely mean a temporary disequilibrium situation. traders on both sides of the market felt their foreign currency holdings to be inadequate then they would in effect merely swap currencies with one another (a practice now common between central banks). the size of the desired swaps did not match on each side of the market, then under flexible rates the price of the relatively scarce currency would be bid up until desired holdings equalled actual holdings, i.e., until foreign currency holdings were adequate. As Yeager has put it, If no authority concerned itself with gold and foreign exchange, and if private persons, firms and dealers such as banks, found their holdings inadequate, they would bid for additional amounts, thus depressing the home currency on the exchange market, stimulating exports relative to imports, and making available the quantity of foreign exchange desired at the new level of exchange rates. 2 Under a fixed rate system the increased demand for foreign currency would be reflected in official reserve losses. In either case, observed foreign currency holdings would always reflect desired or adequate holdings except for the effects of transitory disequilibrium. We could, however, meaningfully speak of inadequacy in terms of a discrepancy between desired and actual holdings if a free market does not exist. In other words, where exchange controls, etc. effectively prevent traders from satisfying their demands for foreign balances then we could unambiguously say that observed holdings were inadequate. As is brought out in Heller's figures,3 the rapid expansion of holdings of foreign currencies by banks in industrial Europe as postwar exchange controls were loosened suggests that there was considerable inadequacy at the beginning of the period. one accepts the argument put forward here that one can meaningfully speak of an inadequacy of commercial holdings of foreign exchange only where traders do not face free markets for foreign exchange, then inadequate commercial holdings of foreign exchange are themselves a reflection of an inadequacy of official reserves (at least from the point of view of the country in question). In other words, inadequacy of commercial holdings of foreign exchange is a reflection of impediments placed on the foreign exchange market which in turn reflect that the government of the country in question feels that its official reserve holdings are below their desired level, i.e., that they are inadequate. At first glance Heller's figures would seem to contradict this argument. Over the 1951 to 1966 period the global ratios of official reserves to imports and banks' foreign exchange holdings to imports show quite different trends, the former falling by almost one half while the latter almost tripled. Hence, Heller's conclusion that, while according to