It is almost universally recognized that money plays a role of high consequence in aggregate economic activity and in the day to day operations of households and business firms. But I would suggest that the theory of money has not yet been satisfactorily integrated with the pure theory of production, principally because inadequate attention has been devoted to the potential fruitfulness of money in production theory (as distinguished from its usefulness in the ordinary transactions activities of consumers and firms and its role as a private asset in various macroeconomic growth models). Indeed, it seems that the moment theoretical analysis of production functions and technological change is undertaken, money qua money simply falls by the wayside. For example, in two recent and important books that deal with theoretical (Murray Brown, Charles Ferguson) and empirical (Brown) analysis of production in a neoclassical spirit, monetary matters are not even mentioned. The theoretical and empirical research concerning the importance of money in several areas tangential to production theory is so vast that the scope of this paper must be stringently limited. I shall not deal with any of the empirical literature, but shall instead try to summarize what seem to be the most significant broad theoretical views currently held. Following this, I shall sketch in very general terms what may be a more useful way to incorporate money inproduction theory: namely, as a source of technological change.

[The nonlinear Kaldor theory of macroeconomic business cycles is combined with a classical growth mechanism to derive a deterministic model of business cycle phenomena. Sufficient conditions for the existence, uniqueness, and orbital asymptotic stability of a limit cycle are given. It is shown that the model also exhibits stochastic stability when the deterministic variables are randomly disturbed.]

The fact that long term interest rates have been higher on average than short rates in the twentieth century has often been interpreted in the term structure literature as evidence of the existence of positive or term premiums. The purpose of this paper is to point out that an average differential between long and short rates does not necessarily represent a differential between returns realized by holders of long versus short term bonds. In particular, it is shown that if short term rates are positively autocorrelated, interest rate differentials overstate differentials in realized rates of return. We conclude that liquidity or term premiums properly estimated from the Durand yield curve data are not consistent with the liquidity preference theory. LONG TERM INTEREST RATES have been higher on average than short term rates during the twentieth century. The average differential over the period 1900-1958 between long term interest rates and spot one year rates in the Durand yield curve data increases monotonically with term to about half a percentage point at forty years. The interpretation given to these differentials in the term structure literature is that they are the additional rate of return earned on average by capital invested in long term bonds. The purpose of this paper is to point out that an average differential between long and short term interest rates does not necessarily represent a differential between realized rates of return. This is because the realized increment to capital invested in a sequence of short term bonds depends on the ex post product of uncertain future spot rates. The expected value of this ex post product will in general differ from the product of expected future spot rates. We show that if short term rates are positively autocorrelated, the interest rate differentials overstate differentials in realized rates of return. We shall refer to differentials in realized rates of return as term premiums. The proper interpretation of interest rate differentials is important to the assessment of the evidence for various theories of the term structure. The liquidity preference theory of J. R. Hicks [4, pp. 144-147] predicts that a term premium will be earned by capital invested in long term bonds because their holders require compensation for risk of capital fluctuation. Forward interest rates will exceed one period spot rates on average by the amount of premium which rises monotonically with horizon. The positive and monotonic average differentials between forward and spot one year rates in the Durand data have been

[The estimation of a CES production function for real sectoral value added with factor augmenting technological change first is discussed, with emphasis on the possible effects of the deflation procedure utilized and on the attempt to estimate relatively long-run parameters. The estimates of that function for nine Chilean sectors then are examined with respect to the implied degree of sectoral flexibility, the absorption of surplus labor, the implications for linear assumptions about Chilean production functions, the distribution of income, and the degree of constraint on long-run growth due to a relative shortage of a primary factor.]