Knowledge that Transforms

A RECENT study has attempted to provide a critical evaluation of some of the main savings, or consumption, functions proposed for the United States and has assessed the predictive accuracy of different forms of seven of these functions as applied to the early postWorld War II years, I947 to the first half of I950.' The results of this study are subject to the limitation of being based, in the main, on predictions made over a relatively short period of time and one in which more usual peacetime consumption-savings patterns may have been distorted by after-effects of the war, e.g., shortages of consumer durables. It is the purpose of this paper to test the validity of these earlier results in the light of the more recent trends in consumption and savings. In view of this objective, we shall begin by outlining the plan of the empirical work in the earlier study and summarizing the results obtained. Section II, the bulk of this paper, is devoted to an extension of the empirical analysis in the earlier study to I950-53; there is an appendix at the end of the paper providing additional details on particular questions. In section III there is a comparison of the results obtained for this later period with those for the earlier years, and a new set of conclusions is propounded.

A LTHOUGH the symmetry of the relation2i ship between factor and consumer markets has been questioned in studies of wage differentials,' little investigation has been undertaken to determine the directness of that relationship and the degree of symmetry which may exist. The findings of this paper offer some evidence for the conclusion that the relationship is inverse, and that where earnings are low, the cost of living tends to be high. An intercity comparison of both earnings and the cost of living indicates that the magnitude of the earnings differential among the large cities of the United States is three to four times that of the cost-of-living differential. The data presented in Tables i and 2 show an inverse relationship between earnings and cost of living which suggests that the worker in substandard earnings areas is forced to reconcile his position in terms of a lower standard of living than that prevailing in more advantageous factor markets. Table i shows the differentials in the earnings of direct labor 2 in 35 cities throughout the United States. Table 2 shows the cost-of-living differentials in 33 cities. Differentials are based on the relationships of local earnings and living costs to those in New York City during the period of full employment in I95i. The cities included are grouped into five regions: New England, Middle Atlantic, South, Middle West, and Far West. Both earnings and cost-of-living information are not available in all cases, but 23 cities common to both sets of data provide direct local comparisons. Some discrepancies in the timing of the collection of raw statistics should not be considered as hindering the reliability of comparisons, since it is proper to assume that these differentials are constant, at least in the short run.3 Differentials in the earnings of direct labor are presented in Table i as percentages of average hourly earnings in New York City for October I95 I.4 Average earnings for the month were computed by dividing the monthly earnings reported by the total number of hours worked.5 These were then converted to a simple index and ranked in column two. The method of computation included payments for premium hours nd such incentive wage systems as happen to have been in effect during the month of October. While it is not the purpose of this paper to discuss in any detail the circumstances which are responsible for the position of particular communities in the rankings, it should be noted that intercity comparisons reflect heterogeneous influences which provide a useful basis for investigation of the diverse factors involved in arnings differentials. The rankings retain the

THE purpose of this note is to communicate in summary form the results of an attempt to measure the growth of output in Soviet heavy industry. The study has been conducted at Harvard in the years I949-54 under the auspices of The RAND Corporation of Santa Monica, California. While the title chosen for this summary appeals to the author's ego, it is somewhat misleading. The underlying research did not cover the whole range of Soviet heavy industry. Most notably, production of heavy chemicals and of nonferrous metals has been entirely omitted. The investigation in its present form embraces the following five branches of industry: (i) machine-building, ( 2) iron and steel, (3) petroleum, (4) coal, and (5) electric power. Granted these limitations, it should be clear that the industries just mentioned, during the period under review, must have accounted for the bulk of the heavy industrial output in Soviet Russia. It should be remembered in particular that the concept of machinery used in this study is comprehensive indeed. In addition to industrial machinery proper, it includes railroad rolling stock, automotive production, and agricultural and road-building machinery.