Knowledge that Transforms

INC,CE the war there has been a constantly wider use of national income and product accounts as a framework for discussions of economic policy. standard treatment of international transactions in these accounts has confused many laymen, while its further development in the tables on The Nation's Economic Budget, which appeared first in the President's Economic Report itself (and now appear in the accompanying ElConomic Review by the Council of Economic Advisers), is even less clear. Beyond this, the foreign investment component of the gross national product presents a puzzling problem to those who wish to adjust the components of the national expenditure series for price changes or to make seasonal adjustments in the quarterly data. This article attempts to deal with some of the questions raised by the present treatment and to offer some positive suggestions, in the hope of stimulating further discussion. third part of the article attempts to explain how the concepts of receipts, expenditures, and particularly the net item excess of receipts or expenditures shown in The Nation's Economic Budget tables for the different sectors of the economy have actually been applied to international transactions.

THE preface by Marcelle Gaetan Pirou to Charles Bettelheim's L'Aconomie Sovietique ' announces that le lecteur sera certainement frappe de la sobriete et l'impartialite de ce volume. This reader feels that this prediction may have been too rash. If he was struck at all, it was by the light touch which distinguishes M. Bettelheim's treatment of statistical information and of problems of economic analysis. The long book is replete with statistical data copied from Soviet sources. At least in one case (p. 347) the figures given do not quite check with the source, but this reviewer does not wish to cast aspersion on M. Bettelheim's ability to copy accurately. What is wrong with the book is that the author hardly ever goes beyond the copying stage and does not try to understand the meaning of the figures he presents. Thus M. Bettelheim reprints the official series on grain crops, I928-40, without pointing out that the concept of the crop was changed in I933, and that the pre-i933 and the pOst-I933 portions of the series are not comparable without complicated adjustments; and he proceeds to interpret expressly the strong rise in output in I933 as an actual rather than a statistical increase (pp. 8I-82). In many cases (as, e.g., on pp. I5, I28, 298), the author presents ruble value figures without indicating whether they are expressed in constant or current prices. Foreign trade data are given in rubles but the rubles are not defined, and the reader is not forewarned that, while they have a definite relation to the dollar, they are unrelated to domestic rubles and that accordingly he must not try comparisons between, say, values of imports and values of industrial output. That grave problems are attached to the use of I926-27 prices as weights for the indices of industrial output seems unknown to the author. At one point (p. I36), there is indeed a veiled remark on certain modifications in statistical methods and a reference to a previous publication by the author; but that publication does not contain more than a passing reference to a rather secondary problem, viz., the treatment of outputs of small-scale industry. Meanwhile, the author discusses rates of industrial growth, productivity of labor, and comparisons with other countries without any concern for the upward bias in the Soviet index. As a result, the reader is left with altogether erroneous impressions. There are, however, at least two cases where the author goes a step beyond mere reproduction of Soviet data. In the first case, M. Bettelheim comes to the conclusion that between I928-29 and I937 real wages increased 25 per cent. How does he arrive at that result? He finds that the aggregate volume of agricultural goods and industrial consumers' goods increased 2.3 times between I928-29 and I937, while the value of goods sold in retail trade rose tenfold over the period. Therefrom the author deduces that retail prices must have increased about fourfold (I0:2.3). This is a bold deduction indeed, and the author mentions some of the uncertainties to which it is subject. He then compares the fourfold increase in prices with the development of average annual money wages and finds an increase by about five times. Hence his statement that real wages increased 25 per cent (5X4 . ioo). The troublesome fact, however, is that money wages did not rise fivefold over the period. M. Bettelheim is never too explicit about what he is doing. From the context, most readers will assume that his computations refer to wages in industry, for which a tabulation is given on page I84. If this is the case, then the fivefold increase results not from a comparison of 1937 and I928-29 (or rather I929), but from a comparison of the plan target for I942 with the figure for I929! If the period until I937 is taken, not a fivefold but about a threefold increase in money wages is shown, and accordingly the author would have to conclude that real wages fell more than 20 per cent (cf. 1 Charles Bettelheim, L'1conomie Sovie'tique. Published in the Gaetan Pirou's Series, Traits d'Aconomie politique (Recueil Sirey. Paris I95O). Vm. A72 nnp

John Lintner, J. Keith Butters, The Lintner-Butters Analysis of the Effect of Mergers on Industrial Concentration, 1940-1947: Rejoinder to Dr. Weston, The Review of Economics and Statistics, Vol. 33, No. 1 (Feb., 1951), pp. 73-75

cumulate. But a simpler solution may well be heavier taxes and compulsory loans (i.e., taxloans). These, together with income control and, where necessary, adequate price and supply controls, may keep the supply of money in check and induce additional demand for money for holding. Only in so far as the seriousness of the world situation does not justify generous use of controls and the liquidity problem continues to threaten stability, would special incentives to non-banking lenders be justified. In short, we should seek help in the fight against inflation wherever it can be had; but we are not optimistic concerning the contribution likely to be had from monetary policy. In the present (Spring, I951) state of the world crisis, we should depend primarily on fiscal policy and secondarily on limited income and other controls. Monetary policy may be helpful, but as the crisis deepens it is likely, as in the past emergencies, to become increasingly passive. In this discussion, I have not dealt with the restraints on monetary expansion exercised through controls of particular types of loans, or even rationing of total loans or freezes on the amount outstanding. These, in fact, belong to the category of direct controls and not to general monetary control operating through changes in the price of money.