Knowledge that Transforms

IN recent years considerable interest has attached to economic relations among the nations of the Soviet Bloc. One aspect of these relations which has received particularly intensive analysis has been the terms on which trade has been conducted between the Soviet Union and the communist countries of Eastern Europe.' Dr. Horst Mendershausen, utilizing the now annually published Soviet foreign trade returns, has attempted to throw some light on this question by comparing the average unit values of Soviet exports to and imports from the Bloc and Free Europe, respectively, where the same class of export or import is sold to or purchased from some countries in each group.2 Some of the major results of Mendershausen's analysis for the years I955-58 are as follows: (i) For more than 2 out of every 3 commodities sold by the Soviets to both the Bloc and Free Europe, the Bloc nations have paid a higher average price than the Free European nations. Had the Bloc imported from the Soviets at the Free Europe price, the cost of their imports (of the sample of commodities studied) would have been reduced by the following percentages in the I955-58 period: i6, II, 7, I2. (2) The Soviet import sample is quite small and the results therefore somewhat more tentative. In I955 and I958, the Soviets actually paid the Bloc higher prices for a slight majority of commodities than they paid Free Europe. On the other hand, in I956 and I957, the Soviets paid the Bloc lower prices than Free Europe in roughly 2 out of every 3 cases. The weighted average, furthermore, was very unfavorable to the Bloc in all years. Had they sold to the U.S.S.R. at the same prices that Free Europe did, their receipts (for commodities covered) would have been increased by the following percentages over the years I955-58: I3, 22, 2I, 20. (3) Mendershausen concludes on the basis of the above evidence that the Soviets price discriminate against the members of their Bloc, charging them more for exports and paying them less for imports than they do for comparable commodities in trade with Free Europe. Regarding the procedures which lead to discrimination, Mendershausen concludes:

T HE first general hospital in the United States was chartered in I76I by the Assembly of Pennsylvania under the auspices of Benjamin Franklin.' Over one hundred years later, in I873, the first census of hospitals in the United States was conducted by the Bureau of Education. This census revealed that there were I78 hospitals and 34,453 beds in existence at that time.2 With the growth of population and income in the United States, the number of hospitals grew rapidly after I873. Between I873 and I909, the number of hospitals increased over 24 times. The American Medical Directory of I909 listed 4,357 hospitals. Of these, 7I were federal, 230 state and 4,056 either private, church or church affiliated, or owned by local government. By I909, the number of hospital beds in existence was 42I,065.3 From I909 to

W ITHIN recent years several lines of adI,/'VTvance in quantitative economic research have converged to focus attention upon the deflation of value added and, where the data relating to the desired social accounting concept are available, gross product originating by industry. The common proximate goal of such endeavors has been to secure measures of the contribution made by various industries or sectors of the economy to real national product. Estimates of real product on an industry basis are held to be useful on a number of counts. They may be aggregated to provide a check on the results of the deflation of gross national product by expenditures on goods and services in the major categories of final demand. Moreover, not only do they offer a means of analyzing the industrial composition of historical and contemporary changes in total real and aggregate productivity, but they form a basis for the incorporation of industrial detail into current economic projections.' Working toward these ends, the Canadian Dominion Bureau of Statistics has prepared annual and quarterly indices of industry net output by deflating census value added. The indices have been used to project estimates of gross domestic product by industry of origin available for bench-mark dates.2 The United States has not been inactive on this front. A cooperative governmental project, undertaken at the request of the Interagency Subcommittee on Production and Productivity (Office of Statistical Standards, Bureau of the Budget) has carried out exploratory work developing annual estimates of constant dollar gross product originating by industry.3 In still another quarter, American economic historians have recently been presented with estimates of major sector real commodity in the United States during the latter two-thirds of the nineteenth century. These were prepared by Robert Gallman through the deflation of (state and federal) census value added data.4 In the light of these developments wlhich not only portend, but seem certain to encourage, continued pursuit of the industry real product approach, it will perhaps be useful to consider the implications of the accepted statistical procedure for deflating value added and gross product originating. As it is usually defined, current dollar value added is the value of gross sales, at producers' prices, less the cost of raw materials (including fuel and energy) purchased from other industries (and/or firms within the same industry), at delivered prices. Gross product originating can be defined as the market value of the industry's output, less the expenditure on purchases of all intermediate goods and services.5 It is a direct step from the current value definition to the derivation of constant dollar value added, CDVA, by the ith industry in year t as