Knowledge that Transforms

CONSIDERATION of many of the problems concerning regional development has been conspicuously absent from modern economic writing; only recently have theoretical foundations for empirical analysis been formulated adequately. The purpose of this paper is to apply the new techniques of input-output analysis to a concrete problem of economic change. The entrance of the aluminum industry into the Pacific Northwest I during World War IT provides an excellent framework for such a study, as will be made clear in section III below. It is hoped that this analysis will be useful not only in determining the importance of aluminum in the Northwest economy but also in illustrating the methodology of the input-output technique and pointing out some qualifications.2 In section I brief attention will be given to the present locational pattern of the aluminum industry in the United States, with particular emphasis on the application of modified Weberian analysis.3 After a brief inspection of the Pacific Northwest in section II, the theory, application, and qualifications of regional input-output analysis will be presented in section III. Results and comparisons, as they apply to the Pacific Northwest, will be treated in section IV.

Also published in: Joseph Berechman et al. (Eds), Transport and Land Use, Elgar Reference Collection Modern Classics in Regional Science Vol.2, Edward Elgar, Cheltenham, 1996, pp. 524-532. Also: Reprint No.5, Netherlands Economic Institute, Rotterdam, 1957

This book is a collection of some of Professor Shackle's papers written between 1939 and 1953 is largely concerned with the problems of 'expectation' and 'uncertainty' and with reducing these universal factors to some sort of plausible rules. Also included are essays on interest rates, on investment and employment, and on the philosophy of economics. This book, by one of the finest economic writers of his time, will appeal to anyone with an interest in the history of economics.

HOW important is it to avoid a moderate, creeping inflation? When nearly full employment has been reached, should continued pressure for higher employment be applied even at the cost of inflationary results? If inflationary pressures exist, what repressive measures are justified to offset these pressures? In spite of widespread agreement on the general objectives of monetary-fiscal policy, we have little organized information on the effects of inflation on different groups in periods of substantially full employment. We need to know more in detail about these effects in order to make reasoned judgments as to how hard we should fight against such inflation and what particular types of repressive policies are best to use. Most major American groups appear to be against inflation. President Eisenhower and ex-President Truman, the C.I.O. and the A.F. of L., the National Association of Manufacturers and the Committee for Economic Development, all have stressed the importance of preserving the purchasing power of the American dollar. Avoidance of mass unemployment and depression seems definitely the first objective of governmental monetary-fiscal policy, but avoidance of inflation appears to come not far behind. Yet the reasons why these diverse groups oppose inflation, if we are to judge by the statements of their leaders, are many, and often muddled. Nor is there any clear consensus among economists as to who gains and who loses from inflation. The most common statements we have found by leading economists 1 fall into two groups: lead-lag propositions, notably that wages lag behind profits in inflation, while interest and rents lag still further, reflecting varying degrees of upward price flexibility; and debtor-creditor propositions, notably that debtors gain at the expense of creditors in inflation. The present investigation suggests that these lead-lag propositions about inflation are questionable, if not wrong, as applied to the type of inflation in the United States since I939. And while there has indeed been a mass debtorcreditor inflation-induced transfer of purchasing power in the United States since I939, the pattern of the transfer has been complex. Business firms, often thought to be major debtors in the American economy, have not been major gainers from inflation on debtor account. This exploratory paper is concerned primarily with the redistributional effects of the recent moderate American inflation on current incomes and on wealth. It does not consider directly the effect inflation may have on aggregate output and employment, although the findings may be helpful in analyzing this question. The following sections include: (I) a brief statement of our approach in investigating the problem; (II) some evidence concerning the effect of inflation on the distribution of income by economic function; (III) an analysis of the transfer of wealth by inflation; and (IV and V) brief consideration of inflation's effects on different classes of households and on nonfinancial corporations, respectively. For those already familiar with the behavior of shares of the national income over the years considered, the later sections of the paper will be of primary interest.

Although such generalizations must always be made with cautions, differences in market structure - differing degrees of monopoly and competitiveness - have not usually been thought of central importance in their bearing on general price movement. It has been customary to assume broad homogeneity of product markets - the labour market is ordinarly treated as a special case - and the particular assumption have not be considered decisive for the analysis. Certainly in the Keynesian tradition market structures have been assigned a secondary role as compared with the aggregative relations of demand to the level of employment and the current capacity of the economy.

T NVENTION, defined as activity directed toward the discovery of new and useful knowledge about products and processes, is one of the most important phases of the growth of civilization. Yet it is one of the least understood. Who engages in an inventive activity, why, when, and how? Only in recent years has serious research been undertaken on these problems, and even now the amount of work being done to ferret out the answers is lamentably small. The low level of genuine knowledge in the field has permitted the propagation of views sufficiently at variance with the facts as to raise doubts concerning the soundness of existing policies, public and private, designed to foster invention. Most of us believe the independent inventor is dead and buried. Most of us believe, too, that invention today has become the exclusive stamping ground of the salaried Ph.D. working in the laboratories of large corporations, surrounded by mysterious instrument panels, electronic brains, and other Ph.D.s. The prevailing view was well expressed by Professor Galbraith when he wrote, There is no more pleasant fiction than that technical change is the product of the matchless ingenuity of the small man forced by competition to employ his wits to better his neighbor. Unhappily, it is a fiction. Technical development has long since become the reserve of the scientist and engineer. ' Similarly, M.I.T.'s famous mathematician-inventor, Norbert Wiener, recently wrote, Invention came to mean, not the gadget-insight of a shopworker, but the result of a careful, comprehensive search by a team of competent scientists. 2 This belief is substantially reflected in official attitudes at the highest levels. Thus, in a recent 99-page report of the National Academy of Sciences-National Research Council to the Mutual Security Agency on Applied Research in the United States, team research in organized laboratories alone receives attention.3 The activities of independent inventors, and even those of hired inventors whose main function is not invention but the guidance of existing processes, are ignored. The prevailing view has a factual basis in the great and well-advertised increase in industrial research laboratories since World War I, and more especially since World War II. Well-advertised is italicized, for it is probably mainly because business managements have been shouting their own progressiveness from the transmitting antenna-tops that these ideas are so popular. It makes a difference whether the widely held view is true or false. If false, continued public belief in it will help make it true. Potential independent inventors will be dissuaded from inventing and thereby help make true what had only been believed to be true all along. The fundamental argument of this article is that the prevailing view has magnified an important characteristic of modern invention into a universal one, and that in doing so a serious distortion of reality has occurred.