Knowledge that Transforms

increase in the scarcity of funds. If, instead, the short run refers to a definite time period, such as one year, then in one of our examples the short-run decline in investment would come to I.28 percent,5 and in the others it would be 20 percent. Or, to put this differently, how should we interpret the elasticity in the following example? T = $I5,000, D = $500, and P is initially 6 years. Then the age at replacement is 5 years. If there should be increase of ioo percent in the required rate of return -to use Duesenberry's phrase -with the payoff period being cut to 3 years, the age at which replacements are made would be io years. But this would imply a 20 percent reduction in investment lasting for 5 years. Query: is the investment function elastic? Now, let us consider the denominator in the measure of elasticity. It should, of course, refer to the relative change in interest rates, or if desired, in the required rate of return. If the item has a long life it is nearly correct to identify the percentage fall in the payoff period with the percentage increase in the required rate of return. But if the item is expected to have a short life, there would be a very considerable difference. To illustrate: a project which has a 3-year payoff period and an expected life of 4 years would yield about 23 percent. If the payoff period of this item were reduced to 2 years, its yield would come to 47 percent.6 In short, it is dangerous to identify the percent change in the payoff with the percent change in yields except when the item is expected to have an operating life of, say, ten or fifteen years, or longer.7 To summarize: the investment response that Duesenberry finds is misleading, the change in interest rates as he calculates it could be wrong, and the assumptions upon which he bases his illustration are arbitrary. It is hard to take this seriously as evidence for or even suggestive of a very elastic investment function. What makes the whole matter most surprising is that just before setting out his example he identified the elements upon which the elasticity really does depend the pattern of yields expected on all the various projects. But he has not used them.

There are several major reasons why general levels and patterns of concentration in United States and United Kingdom manufacturing industry might be expected to differ; among them are size, economic history, growth patterns, international trade, and anti-monopoly policy. Assuming similar technology of production in both countries, smaller domestic markets (in terms of geography and level of demand) would make for higher concentration ratios in the United Kingdom, since fewer optimal-size firms would suffice for each industry.1 Of course, past technological trends may have offset this, by evolving lower optimal firm sizes, such as the British system of shorter runs as against American mass production. Britain's greater maturity, and the widespread rationalization waves in the last two generations, would point toward higher British ratios. As for growth patterns, Britain's higher proportion of basic manufacturing trades (metals and heavy engineering), where economies of scale may be greatest, might also indicate a higher general level of concentration. Britain's greater involvement in international trade probably is important for individual industries, though its effect on concentration ratios might go either way. And Americans might suppose that United States anti-trust policy has kept the ratios relatively lower there than in the United Kingdom (though anti-trust vigor may merely reflect a largely ideological, and token, effort against an especially grave concentration problem). Other reasons one way and the other could easily be added. With all the difficulties of measurement and comparison that plague this topic, and with all the counterpoised influences in the two countries, it is surprising that one recent comparison, by P. Sargant Florence in I953 dealing with the year I935, reaches the straightforward conclusion that on the whole American manufacturers are roughly equally in control as are the British.2 In contrast, Rosenbluth in I952 reached different conclusions for the same year, I935, on the basis of a frequency of employment in manufacturing industries by degree of concentration.3 In each iO per cent bracket, cumulative United Kingdom employment as a per cent of the total exceeded that in the United States; in short, more employment was in more highly concentrated industries. It is clear therefore that the general level of concentration is higher in the British industries.4 As for patterns of concentration in sectors and industries, Florence found a remarkable association between specific industry ratios, whereas Rosenbluth's figures for matched industries tended to show important differences. Whatever the truth about comparative concentration in the United States and the United Kingdom (and whatever such a comparison may mean), the discrepancy and obsolescence of these conclusions suggest a need for more research, especially concerning more recent years. Now that two new sets of ratios for a fairly recent year (195 i) are available, a new Transatlantic comparison is bound to be made. This paper, it is hoped, provides it. Methods. The methods used in this paper are intuitively simple.5 In the British data from Evely and Little, industries are classified according to the degree of concentration of their employment in the largest three firms, and this gives a frequency dispersion with ten ten-per-cent categories.6 For the United States a similar tabulation for the same year (195I) has been drawn from that rich volume of data com-

HE purpose of this paper is to present a T short-term planning model for the Indian economy. It involves (a) the formulation and implementation of an input-output model for India, closed with respect to all household consumption except that originating from government employees, and (b) an endogenous determination of the distribution of consumption expenditure among several groups of households, each group having a specific consumption pattern. The paper is divided into three sections. An attempt is made in section I to classify the economy into several sectors. In section II, we calculate the intersectoral transfers of intermediate products as well as final goods and services. Section III presents the planning model and considers the possibilities of using it for planning purposes.

T HERE is general agreement that nineteenth century was unparalleled in growth of large-scale production. However, fate of scale of production in twentieth century seems to be lost in a limbo of uncertainty. One investigator comments that the movement towards large-scale production is largely a nineteenth century phenomenon and had run its course by i890. 1 Another commentator holds that size is growing with great rapidity. 2 Yet again we read that long-term, general and pervasive increase in plant size throughout most industries has come to an end. I It is purpose of this paper to present some empirical evidence on changes in scale of production in United States manufacturing industry. By scale of production we refer to size of plant rather than size of firm. The very notion of scale of production implies a relationship between volume of output and unit costs. Where economies of scale bear upon questions of monopoly, problem is one of control of output. Hence, scale of production is measured in this paper by physical output per establishment. Indexes of physical output are available for United States manufacturing industry, permitting construction of indexes of scale of production as measured by an index of output per establishment.4 To measure scale by number of employees would tend to underestimate industrial expansion linked with labor-saving innovations.5 Similarly, trends in ratio of value-added or capital per establishment may diverge significantly from movement of scale. In addition, data from which indexes of value-added can be constructed are not available for a sufficient period of time to be useful while records of capital value are flagrantly unreliable in that they are subject to judgment of person making estimate and to vagaries of longand short-term fluctuations in prices. The interpretation of long-term movements in indexes of output per establishment as changes in optimal plant size need not be vitiated by assumption of an optimum range of output rather than an optimum point.

Wesley J. Yordon, Jr., Industrial Concentration and Price Flexiblility in Inflation: Price Response Rates in Fourteen Industries, 1947-1958, The Review of Economics and Statistics, Vol. 43, No. 3 (Aug., 1961), pp. 287-294