Knowledge that Transforms

Quarterly time series for all manufacturing are used in this study to test the relationship between plant and equipment expenditures and (a) output and capacity, (b) the flow of internal funds, and (C) the level of corporate bond yields. The study makes use of a newly derived capacity index for all manufacturing and experiments with a number of different lag distributions. THE PURPOSE of this paper is a simple one: to confront some widely held hypotheses about the demand for capital goods with some widely used quarterly figures measuring business investment. The hypotheses relate to the influence on investment of output and capacity, of gross profits less dividends, and of rates of interest. The figures are the Commerce-SEC quarterly series on capital expenditures by manufacturers, and other manufacturing statistics. The figures and the hypotheses are so often used together in analyzing current business developments that it seems profitable to attempt to relate them systematically.2 In doing so, furthermore, byproducts of interest will be developed, namely, an index of manufacturing capacity and some experimentation with lag distributions. The first section of the paper will present the hypothesis to be tested and reduce it to a form which relates to available quarterly time series. The second section will develop and modify the quarterly time series for manufacturing so that they relate as closely as possible to the final hypothesis of Section 1. The third section will present the results of testing the hypothesis. The principal substantive indication of the paper will be that under certain assumption as to lags, a modified acceleration principle variable (capital

This article examines some economic problems concerned with profit sharing in a Socialist economy. Two alternative systems of incentives have been made the subject of parallel investigations, comparing the effects which each of these systems have on the firm's behavior. We also examine some problems of price regulation. In the investigation both linear and nonlinear programming methods have been used.

A multi-sector buffer-stock inventory model is developed in an attempt to resolve the problem of aggregation involved in deriving implications for the stability of the economy from a consideration of inventory practices of individual firms. It is demonstrated that stability depends upon a multitude of parameters, some of which are suppressed in aggregative model construction. The economy is necessarily unstable when perfect, if myopic expectations are assumed. With naive expectations stability becomes a definite possibility, particularly if firms attempt only a delayed adjustment of inventories to the equilibrium level. Although the empirical evidence marshaled in order to illustrate the application of the theorems does not prove sufficiently accurate to permit precise conclusions, it is apparent that the conditions for stability may well be satisfied for reasonable values of the system's parameters. Tax schemes which have been suggested as means of stabilizing fluctuations in inventory investment are appraised in the concluding section.