The perspicacious peregrinator model of Solomon W. Polachek and Francis W. Horvath hypothesizes that individuals decide to migrate based on the size of potential gains. This model is tested using themigration decisions of Major League Baseball players between 1977 and1979. Potential gains are measure d as the differ-ence between earnings with and without migration. A distinction is made between players eligible for free agency and those ineligible so as to a ccount for differences in the level of competition for players' services in diff erent segments of this market. Migration is found tobe related to the expected gain from earnings for players eligible for free agency, but not for those ineli gible.

High labor costs in large Midwestern metropolitan areas have significantly reduced their manufacturing capital stock. For the period 1974 to 1978, the authors estimate that sixteen metropolitan areas in the Midwest, taken together, had approximately $2.8 billion less capital stock than they would have had if their labor costs had been at the national average. This difference is equal to 4 percent of the capital stock in these areas. The results are simulated from the estimation of a labor demand equation that is derived from a generalized Leontief cost function.

One of the leading hypotheses concerning the dynamics of production over time is the production smoothing hypothesis. Given a planning horizon which spans a number of production periods, the firm need not produce in each period an amount equal to expected sales. Rather, resorting to inventory accumulation and liquidation, the firm may follow a production plan temporally smoother than the path of demand. If firms faced with convex cost functions chose to smooth the rate of output in order to minimize costs, one would expect to observe that the rate of output would vary less than the rate of sales, with variations in inventory stocks absorbing some of the fluctuations in sales. Recently, work on the testing of the production smoothing hypothesis has cast doubt on its empirical validity. The evidence presented by Alan Blinder seems to indicate that the variance of production exceeds that of sales in seven out of eight two-digit retail industries (1981) and in eighteen out of twenty two-digit manufacturing industries (1983 and 1986). The purpose of this paper, then, is to examine the validity of such tests when seasonally adjusted aggregated data are used. The evidence presented show that the relative size of the variances of the seasonally adjusted production and sales does not provide valid tests of the production smoothing hypothesis. In addition, aggregating over firms where the seasonal patterns differ may also distort tests of production smoothing. Blinder realized that the use of seasonally adjusted data may not provide an adequate test of the hypothesis, stating Had they been available, I would have preferred to use data that were not seasonally adjusted since the production smoothing model presumably applies to seasonal fluctuations in sales. However, such data are not (1983, fn. 19). In this paper I focus on the cement industry because the unadjusted disaggregated data are available for the direct testing of the conjecture that aggregate seasonally adjusted data mask production smoothing phenomenon. Aggregate monthly data on five other industries will also be examined.

A casual glance through the Proceedings of past annual meetings of the American Economic Association reveals that in almost every year during the past twenty years, president-elects of the AEA have devoted at least one session to an examination of issues concerning the international monetary system. Prominent on the agenda has been the question of reform. How should the international monetary system be reformed so as to function more effectively? premise underlying this question is that the international monetary system has failed and that it must be reformed by an institutional change. In what follows I present some skeptical notes on both the verdict on the failure of the system and on some proposals for reform, especially the target-zones proposal. To set the stage, it is worth noting that one of the main sources of disenchantments with the present monetary system has been the unpredictability of exchange There has been nothing more confusing than reading through the ex post journalistic explanations offered for the day-to-day changes in the U.S. dollar. For example, over the past few years we were told that The dollar fell because the money supply grew faster than expected-thereby generating inflationary expectations, but on another occasion we were told that The dollar rose because the money supply grew faster than expectedthereby generating expectations that the Fed is likely to tighten up and raise interest rates. On another date we were told that The dollar fell since the budget deficit exceeded previous forecasts-thereby generating inflationary expectations on the belief that the Fed will have to monetize the deficit, but, on another occasion we were told that The dollar rose since the budget deficit exceeded previous forecasts-thereby generating expectations that government borrowing needs will drive up interest rates since the Fed is unlikely to give up its firm stance. On yet another day we were told that The dollar fell since oil prices fell-thereby hurting Mexico and other debtriddenoil-producing countries whose bad fortune may bring about the collapse of important U.S. banks, but, on another occasion we were told that The dollar rose since oil prices fell-thereby helping the debt-ridden oil-consuming countries whose improved fortune will help the vulnerable position of important U.S. banks. More recently the dollar changed again, and this time the explanation was a bit more sophisticated: The dollar changed because the extent of the revision of the estimated GNP growth rate was smaller than the expected revision of previous forecasts of these estimates. One cannot but sympathize with the difficulties shared by newspaper reporters and financial analysts who feel obligated to come up with daily explanations for daily fluctuations of exchange rates, and one can only imagine the deep frustration that yielded the recent headline in the International Herald Tribune according to which The dollar rose on no news. dismal performance of short-term forecasting does not reflect a lack of effort. Rather, it is an intrinsic characteristic of efficient asset markets. Difficulties in forecasting short-term indices of stock markets (like the Dow-Jones index) do not call however, for a reform of the way stock markets operate. For similar reasons one should not assess the performance of the international monetary system on the basis of short-term forecastability of exchange This does *International Monetary Fund, Washington, D.C. 20431, University of Chicago, and National Bureau of Economic Research. research reported here is part of the NBER's research programs in International Studies and Economic Fluctuations. Any opinions expressed are my own and not those of the National Bureau of Economic Research. 205

A stylized fact associated with inventory behavior is that the variance of production exceeds the variance of sales. This paper presents a model of production decisions with demand uncertainty that incorporates nonnegativity constraints on inventories. Even with no productivity shocks, optimal behavior by the firm is consistent with this stylized fact, either if demand exhibits positive serial correlation, or if the firm can backlog excess demand.