Knowledge that Transforms

T HE secular decline in the number of banks and the associated increase in the size of the average bank have raised serious questions about the viability of a banking structure which contains the vast extremes of bank size which are found in the United States. In spite of the widespread interest in this matter, very little statistical evidence has been available to gauge the success with which different size banks have met the challenge of their environments. We have attempted to fill part of this gap in the literature by investigating the performance of large banks during the years 1930 to 1960. In this study, we measured a bank's success in meeting the challenge of its environment by the growth of its assets. This is not the only measure of success but, unlike some other measures (e.g., profits), asset figures are available in published sources and are comparable for all banks. Although we recognize that all banks neither operated in an identical environment nor faced an equal challenge from their environments, we did not attempt in this paper to assess the nature or sources of the comparative growth record of large banks. Our more limited goal was to determine, as a matter of historical fact, whether large banks grew more or less than the banking system as a whole during those years. This analysis of the growth of large banks is based on the performance of the 200 largest banks in the system on particular dates. The 200 largest banks were only .84 per cent of the bank population in 1930 and 1.48 per cent in 1960, but they accounted for more than half of all the commercial banking resources in the country on both dates.' We identified by name each of the 200 largest banks in the country on three different dates, 1930, 1940, and 1950,2 and traced the growth of each bank in each of these top groups (i.e., the 1930 top group, the 1940 top group, and the 1950 top group) for different periods of time up to 1960. A word about some limitations of these basic bank figures is in order.3 First, only three groups of large banks were included in this study. Second, the periods covered for these groups, ranging from ten years for the 1950 top group to thirty years for the 1930 top group, provided three observations on the effects of a ten-year period, two observations on the effects of a twenty-year period, and one observation on the effects of a thirty-year period. Third, the composition of these bank groups overlaps because some of the leading banks on one date were also the leading banks on another date.

SINCE Professor Triffin launched his plan five years ago, the international liquidity problem has been the subject of vigorous discussion. The debate will probably reach a climax this year and next when the IMF and the Group of Ten complete their studies of the subject. Some proposals for international monetary reform would retain the role of the dollar as the principal reserve currency, perhaps strengthening it by further building up what Under Secretary Roosa has called its perimeter defenses. Others envisage that the dollar would share that role with other currencies, as in the Posthuma and Lutz plans, or with a new international unit which would represent a claim against the International Monetary Fund, as in the proposals advanced by Chancellor of the Exchequer Alaudling in 1962 and by E. M. Bernstein in 1963. Finally, Triffin's original plan would transfer the reserve currency function outright from national currencies to an international unit.' Miost of the discussion has centered around the relative merits of the different plans in providing adequate, effective, and stable arrangements for supplying international reserves and settling international balances and rightly so, since this is clearly the crucial issue. A subsidiary question, which has recently received some attention in the United States and has been discussed for some time in the United Kingdom, is whether a country gains or loses by having its currency used as an international reserve by other countries. This question is closely related to the central issue, and is also of particular interest to the reserve currency countries. It is the subject of the present paper. Space limitations make it necessary to confine the discussion to one aspect of the question.2

IN recent years the behavior of productivity has received increasing theoretical and empirical attention. Two basic approaches have been developed. The first focuses upon the long-run trend in output per man-hour and examines the sources of that trend. The second focuses upon the short-run or cyclical behavior of productivity. The purpose of this paper is to explain the characteristic behavior of output per man-hour over the business cycle and to identify changes in the cyclical response mechanism. An explanation of cyclical changes in productivity is essential for an analysis of unit labor costs, and is therefore a necessary ingredient in an explanation of the price level and its movements. It is also a necessary precondition to understanding the longer-run trends; cyclical fluctuations in output per man-hour are large, and the trends based on capital and technology cannot be seen until the short-run variations have been removed.

FOR all its many shortcomings, the homely concentration ratio is a direct and fairly clear indicator of industry structure, and it is available on a comprehensive basis for manufacturing industries.' Although cross section comparisons of concentration are hazardous, these ratios are relatively reliable and useful as indicators of changes in industry structure over time-2 Recently, the Census Bureau's set of concentration ratios for 1958 has become available.3 Taken together with the 1947 and 1954 ratios, the 1958 compilation provides a nearly complete set of comparable ratios for 4-digit industries covering a span of 11 peacetime years, with an intermediate year to help distinguish trends from erratic movements. present study uses these new ratios to analyze changes in concentration over time, and their relations to some other industry conditions, including growth and oligopoly. first section considers broad trends, and begins with the traditional and natural question: has concentration generally increased or decreased over the 1947-1958 period? Changes in concentration in the basic metals and engineering industries will also be reviewed. second section offers tests of several hypotheses which have been put forward relating industry concentration (as cause or effect) with industry growth or contraction. Some evidence on the role of entry is also presented. findings also bear on discussions of the size distribution of firms. In the third section, trends of concentration in industries which had structures in 1947 will be surveyed. This will give some indication of how vulnerable the dominant firms have been, and will thereby throw some light on two theories of oligopolistic behavior which have been advanced by J. S. Bain and G. J. Stigler. * I am indebted to Leonard Schifrin, Charles H. Berry, George Stigler, William J. Fellner, and Paul MacAvoy for a number of helpful comments on an earlier draft of this paper. Leonard Schifrin also suggested the inclusion of coverage ratios in the regressions of the second section. multiple regression program was borrowed from James Friedman. 1Among the obvious weaknesses are the following: Industry definitions according to the Standard Industrial Classification (SIC) system do not accurately delineate true markets, nor do they allow for potential entrance by firms across industry lines. Based as they are on national figures, they do not allow for higher concentration in regional submarkets. In some cases they neglect the role of imports in domestic markets, and of export markets for domestic producers. ratios do not describe the entire firm distribution, but only one slice of it; and they give no information about the relative positions among the top group of firms. ratios also fail to reflect turnover among firms over time. Finally, there is the obvious but important point that concentration is purely a structural indicator, and says nothing explicitly about behavior or performance. For a thorough treatment of these and other problems of concentration ratios, see National Bureau of Economic Research, Business and Price Policy (Princeton, 1955). 2 Recent examples of studies involving concentration ratios for individual industries include G. Rosenbluth, in Canadian Manufacturing National Bureau of Economic Research (Princeton, 1958); A. L. Phillips, Scale and Technological Change in Selected Manufacturing 1899-1939, Journal of Industrial Economics (1956), 179-193; R. T. Selden, Accelerated Amortization and Industrial Concentration, Review of Economics and Statistics, xxxvii (Aug., 1955), 282-291; W. G. Shepherd, Comparison of Industrial in the United States and Britain, Review of Economics and Statistics, XLIII (Feb., 1961), 70-75; and V. R. Fuchs, Integration, and Profits in Manufacturing Industries, Quarterly Journal of Economics, LXXV (May, 1961), 278-292. A different approach to concentration (based on size inequality of firms) has been taken by P. E. Hart and S. J. Prais. See especially S. J. Prais, The Analysis of Business Concentration: A Statistical Approach, Journal of the Royal Statistical Society, Series A (1956), 150-191, and P. E. Hart, Concentration in Selected Industries, Scottish Journal of Political Economy, (1958), 185-201. This approach is discussed in the second section of the present paper. 3 Ratios in Manufacturing Industry: 1958, 87th Congress, 2nd Session, No. 78696, Government Printing Office (Washington, D. C., 1962), Part I. volume containing ratios for 1954 and 1947 is in American Industry, 85th Congress, 1st Session, No. 46358 0 (Washington, D. C., 1957). In addition, there is expanded coverage of 5-digit product classes, and for many products there are ratios for both 1954 and 1958. Also, a smaller companion volume (Part II) presents some estimates of concentration within regional markets for a number of 4digit industries.

Draft

F. Gerard Adams, Consumer Attitudes, Buying Plans, and Purchases of Durable Goods: A Principal Components, Time Series Approach, The Review of Economics and Statistics, Vol. 46, No. 4 (Nov., 1964), pp. 347-355

Journal Article The Definition of Selling Costs Get access E. H. Chamberlin E. H. Chamberlin Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 31, Issue 1, January 1964, Pages 59–64, https://doi.org/10.2307/2295935 Published: 01 January 1964