Knowledge that Transforms

DETWEEN I947 and I957 the price of )manufactured goods, other than foods, rose 33 per cent. The price of constituent crude materials rose 20 per cent. (Their spot market prices fell io per cent.) Production workers' payrolls per unit of output rose I7.5 per cent. The growing gap between these costs and selling prices was partly filled by certain fringe benefits of production workers, by depreciation accruals, and by taxes. A further substantial portion of the margin over direct costs is attributable to the work performed by non-production workers in manufacturing whose number rose 55 per cent while the number of production workers increased only 2 per cent. Payments to non-production workers were a major factor in causing the compensation of all workers in manufacturing to increase almost twice as fast as payrolls for production workers alone. The rise in prices over the decade has been blamed on a demand-pull or a cost-push, or both. Rising costs of the articles currently purchased push against operating margins and presently against prices. In this sense, union demands for higher wages or suppliers' demands for a higher price of materials constitute a direct rise in costs that tends to push prices up. But the figures just cited indicate that costs have risen in other ways also. Manufacturers have added hundreds of thousands of workers engaged in marketing, advertising, administration, research. They have bought vast quantities of new machines for which depreciation must be charged as a current cost. Had they not changed their input in these and other ways, production labor per unit of output would have risen more than it did. Indeed, if each decision to alter. the character and quantities of input had been a perfect textbook example of economic behavior, the total cost-push would presumably have been minimized by the shifts in inputs. But insofar as this has not actually been the case -insofar as the shifts have been inefficient with respect to minimizing costs or maximizing contemporary consumer satisfaction the rapid rise in the cost of non-production labor and equipment could bear directly on the inflationary process. In the closing section of this paper I shall argue that there are strong reasons to suspect that this has actually been the case. If so, the matter has not been accorded the attention it deserves. For the figures indicate a potential quantitative importance of substantial scope. It is this potential quantitative importancethe extent of the shifts in cost structure-which is examined in the following pages. First we review recent trends in the unit cost of production labor and next in prices of crude materials. The data are examined over the postwar decade ending with the business peak in I957.1 The third section shows how trends in these major direct costs are associated with shifts of very considerable proportions in the rest of the cost structure of manufacturing. The final section speculates on the probable bearing of these shifts on the inflationary process, and points to questions that require answers.

Coussy Jean. Hoffmeyer (Erik) - Dollar shortage and the structure of U.S. foreign trade.. In: Revue economique, volume 12, n°1, 1961. pp. 155-156.

T HE much-used term has never been clearly defined in the literature. It is generally agreed that it cannot mean an increase in cash holdings, for all cash (money) is held by somebody at all times. A common explanation is that hoarding is a decrease in velocity. As a matter of fact, a decrease in velocity seemingly explains most of the phenomena that are ordinarily thought to result from hoarding. There is a tendency among some economists, however, to assert that velocity is a meaningless ex post coefficient. On first thought, it seems possible to argue with those who hold this point of view. Consider the stock of coin and currency. It is held at all times, but it changes hands from time to time. If you count the number of times each unit changes hands, you have the operational basis for a seemingly satisfactory definition. When you consider demand deposits, however, difficulties arise because, in transfer of ownership, you cannot identify the unit transferred. This problem arises from the nature of a demand deposit dollar. It is not a thing; it is only an idea, accepted by practically everybody in a developed economy and dignified by an institution, the banking system, that records the idea on paper. But its essence is as evanescent as that of a poltergeist. After all, an accounting system could be devised to keep track of poltergeists; and, if people took this system seriously enough, they would talk of a stock of poltergeists, of its turnover,' and of increases and decreases in it. In other words, velocity is not a good concept to use in the definition of another term, for it does not itself possess a good operational definition. It is fairly clear, however, that the monetary concept is associated in the minds of the profession, on the one hand, with the notion of holding money and, on the other, with the notion of the flow of money through the economy. It it also associated with certain observable real phenomena, all of the sort described as deflationary. A satisfactory definition should rationalize this somewhat cloudy collection of ideas and, at the same time, demonstrate why each individual idea has some intellectual nexus, not necessarily completely sound, with it.

In this volume, four distinguished scholars explore several important facets of the growth of labor union power.