CCORDING to a recent estimate by the A Department of Commerce, the United States direct foreign investments are in excess of $22 billion and are expanding at a record rate. How much do we know about the impact of United States enterprises abroad on the host countries, and what is their economic contribution in particular? Aside from a few isolated case studies,' our knowledge is extremely limited. This is perhaps because direct foreign investment is of relatively recent origin. On the basis of total investment made by Britain during the nineteenth century, bonds and preferred stocks comprised indeed no less than three-quarters of the outstanding total in I9I3 2 As a result, there is a lack of concensus among economists of what constitutes economic contribution, let alone an acceptable measure of it. It is argued that direct foreign investment exerts an impact on almost every aspect of life in the recipient country.3 Measurement in some cases is extremely difficult if not impossible, and precise statistics which would illustrate the relationships are in general not available. For example, some foreign enterprises contribute to the opening of new frontiers, resource discovery, and creation of social capital in the form of road building, provision of public utility services, etc., and most of the foreign manufacturing operations engage in the training of skilled and semi-skilled workers. In this way, the foreign establishments, consciously or not, have created an ever-growing supply of many of the modern skills which are indispensable to the economic and social progress of the host countries. stimulation of more private investment within less developed countries is intimately related to the development of a spirit of enterprise among the natives themselves. Here again, the foreign companies can make an important contribution. They provide living examples of the material rewards of private enterprise and its importance to the community, and they also familiarize the natives with modern business attitudes and activities and disseminate the necessary managerial know-how. In short, such direct foreign operations give the wage and market economy its decisive start, with an attendant loosening of the bonds of the static self-sufficient agrarian societies. benefits presented above are undoubtedly valid. broad social and economic consequences of transformation should not be passed over lightly. But the nature of these impacts is generally regarded as belonging to the long-term effects of an industrialization process. In short-run analysis, economists customarily confine themselves to the immediate impact of investment in terms of changes in production, employment, and income. In this respect, the statistical survey conducted by the Department of Commerce on the various phases of United States business operations in Latin America is worthy of attention, because the survey provides, for the first time, data on production, income, and capital accumulation in this area.4 However, comprehensive as the data are, with figures classified by industry and by country, there is no criterion in the survey by which we can arrive at an over-all evaluation of the relative contributions by United States operations in different industrial groups and/or countries. purpose of this paper is to utilize the data in the survey in such a way as to make a composite ranking possible. In attempting to do this, we shall first sort out the data in accordance with four criteria which we shall lay down I See six case studies on U.S. business performance abroad published by the National Planning Association. They are Sears, Roebuck de Mexico, Casa Grace in Peru, Philippine American Life Ins. Co., Creole Petroleum Corporation in Venezuela, Firestone Operations in Liberia, and Stanvac in Indonesia. 2R. Nurkse, The Problem of International Investment Today in the Light of Nineteenth-Century Experience, Economic Journal, LXIV (December I954), 744-58. 8For a more detailed listing of possible principal benefits of foreign direct investment to the host country, see the policy statement of the National Planning Association in its series of case studies referred to above. ' U.S. Investm6nt in Latin America (I957).

T HE minimax strategy is the foundation of the theory of games of von Neumann and Morgenstern. It may sound surprising that after a decade of discussion, objections based on certain misconceptions still prevail in the professional literature. Although one may take comfort in the thought that the impact of most theoretical development, such as that of modern physics, is often not appreciated till after decades, yet such persistent misunderstanding of this basic theorem should certainly be dispelled. Three papers deserve particular attention because they encompass a broad range of common criticisms. papers are: Hans Neisser, The Strategy of Expecting the Worst '; Carl Kaysen, The Minimax Rule of the of Games and the Choices of Strategies under Conditions of Uncertainty2; and Daniel Ellsberg, Theory of Reluctant Duelist. 3 To avoid repetition, I shall single out only certain aspects of each paper to illustrate my point, since some of the remarks can be directed to the others as well.

outside the range of attainment once full employment is reached. For even discarding the oft-used but spurious (for the problem at hand) historical average growth rate of 3-3Y2 per cent, the ceiling rate (with little inflation) seems to be in the neighborhood of 6-7 per cent. But if income cannot grow at the (adjusted) required rates, neither can induced investment, which by definition is dependent upon income growth for its achievement. At the very least, then, the accelerator is an extremely doubtful generator of growth. It is with such thoughts in mind that we assert (or reassert) the importance of innovational (autonomous) investment in providing, on the one hand, the principal generating force of periods of sustained growth, and on the other, because of its inherent irregularity, the primary source of unstable growth known as the (major) business cycle.

PROFESSOR Frisch shows that an adverse balance of payments can be met with less reduction to the aggregate volume of trade by discriminatory rather than non-discriminatory import restrictions.2 In his argument for his plan, Frisch seems to have overlooked a case where in the short run the nature of demand of a deficit country, say B, for goods such as staple foodstuffs and basic raw materials fromn a surplus country, say A, may be such that there is a floor of B's imports from A. The issue depends largely upon (i) the possible sources of supply in countries other than A. If A does not represent the rest of the world but is only one country among many countries trading with B, it is improbable that B has to import a fixed amount from A. B's requirements for, say, cotton may be very rigid, but its requirements for cotton from any one source, such as A, may be flexible. (2) It is possible that B may produce most kinds, if not all, of the goods which she imports from A. In such a case, the reduction of A's goods will cause B to expand the output of these goods. These two considerations together make it unlikely that B has to import a specified quantity from the depressed country A. But if A represents not one country alone but a large portion of the countries in depression, there would be a rigidity of B's requirement for goods from A, and a restoration of the balanced situation would call for a reduction of trade between B and C, and the aggregate trade under discriminatory restriction would be little more than that under non-discriminatory restriction. Herein really lies an important weakness of Professor Frisch's scheme; because at a time when there is a large section of the world under depression, which is the time when the need for preserving the volume of trade is most pressing, discriminatory restriction will not achieve any noticeably better result than non-discriminatory restriction. Nor can it prevent a rigidity of requirements of certain countries for imports as a result of the propagation of depression to a large part of the world.