There is a view that monetary policy is effectively summarized by the time path of a single variable, the money stock, and that erratic fluctuations in the money stock generated by erratic policy decisions are a major, even the principal source of business cycle fluctuations. This view, which I will call monetarism, is losing adherents among economists, for several reasons. For one thing, rational expectations theory, having shown how the Phillips curve could emerge as a statistical regularity in an economy where it was not exploitable for policy purposes, can now do the same for Granger causal priority of money and money's strong explanatory power for future movements in real output. Theories of endogenous cyclical variation in money are gaining attention in part because of results which have begun emerging from the data as new statistical techniques are applied to new historical developments. Data from outside the United States or outside the 1950's and 1960's do not fit the predictions of monetarist theory.

This paper is a probe. I am concerned with presenting a number of questions concerning the methods of radical political economy vis-a-vis the problem of heroin addiction and, more generally, the problem of crime in U.S. society. Heroin addiction has become a target of analysis by professional economists in recent years. This is not an isolated phenomenon: is rather part of the contemporary tendency to apply techniques of neoclassical economic theory to a variety of issues which have been traditionally though not formally considered to be outside the scope of economic science. I myself used marginal principles and benefit-cost analysis in the study of the clandestine heroin market and the procedures for the rehabilitation of narcotic addicts (Fernandez, 1971). This application of economic theory led me to a growing sense of the limitations of the neoclassical techniques. The basic flaw of traditional economic theory is its ahistorical character and the lack of social perspective of many of its models. In this respect economic theory does not differ from other social sciences although a ray of hope is seen from time to time in the outlying areas of criminological research. Walter D. Connor in a recent work on criminal behavior in the Soviet Union states that it would be most accurate to characterize statistics on deviance, assembled and produced by agencies of social control, as reflecting the activities and foci of attention of those agencies themselves, not the deviants who are both their clients and their targets (p. 3). This statement indicates that, regardless of the actual uses of numbers collected by agencies of social control, a critique of these societal institutions is a necessary element of social research. This fundamental point is largely ignored by social scientists and economists. The analysis of radical political economy emphasizes aspects of social reality which the neoclassical omits. This in itself is a meritorious task: when Hercules was commissioned to clean up the Augean stables he was not expected to replenish them. But in addition to this essentially critical activity can offer a number of positive contributions. In this paper I summarize and examine the analysis of David M. Gordon in the light of the specific circumstances of heroin addiction and, secondly, I discuss the limitations of the radical paradigm and its uses in the area of criminal behavior.

Dear Old Friend: As you have doubtless observed, it has been many a week now since I last stepped out of the shadows, put the barrel to your ribs and divested you of cash, trousers, and credit cards. You have probably asked yourself, Where is my faithful old stickup man, John? Doesn't he like me any more?-The truth is, sir, that I'm terrified you'll take it amiss and move out of New York if I overwork my welcome. John [Quoted in Russell Baker's column, New York Times, December 9, 1975]

Income maintenance and housing allowance plans, both currently being evaluated as potential federal programs for low-income families, provide households with supplements to income which increase the demand for housing. While income maintenance schemes allow the consumer complete freedom of choice with respect to consumption, housing allowance plans may constrain choice in a variety of ways.1 The response of housing demand to changes in income is a significant factor in assessing the relative merits of these two programs. The research presented here is concemed with the impact of increased income on the annual housing expenditures of households who have moved. The data employed are drawn from the University of Michigan panel study of income dynamics, which follows a sample of 5,000 households over a period of years. These panel data allow us to link each household's change in income over time with changes in its demand for housing. Most previous studies of housing demand rely on cross-sectional estimates which are long run: they implicitly assume a household would respond to a different income level just as would a household who may have been at that level for a long enough period of time to acquire a different set of tastes. To the extent that households move from one short-run adjustment to another because of repeated changes in economic circumstances, rather than ever actually achieving the implied long-run equilibrium, short-run elasticities may be more revelant for evaluating housing policy.

In a recent paper in this Review (1983) James Gwartney and Richard Stroup (G-S) take with what they assert is the widespread view (p. 447) that because changes in tax rates have a theoretically indeterminate effect on individual labor supply, the impact of changing tax rates is also indeterminate at the aggregate level. Gwartney and Stroup suggest, for example, that if the initial output of public goods is optimal and the government cuts taxes and expenditures by equal amounts, the forgone public goods would be valued as highly as the private goods that individuals purchase with their increase in disposable income. Hence, aggregate real income would not rise, but remain at its pre-tax-cut level. Gwartney and Stroup state that under these circumstances, a tax cut's impact on aggregate labor supply would not be indeterminate, but labor inducing, because in the aggregate there is no income effect, only a positive substitution effect.1 Gwartney and Stroup illustrate this point by examining the aggregate labor supply effects of an increase in transfer payments financed by an exactly offsetting increase in income taxes. They argue that if the transfer payments are income conditioned, this policy would decrease net wage rates for transfer recipients, as well as for taxpayers, thereby producing work-reducing substitution effects for all members of society. On the other hand, the aggregate change in disposable income in the economy would be zero since, by design, the expansion in transfers is exactly offset by the increase in taxes. They conclude that, unless recipients and taxpayers respond differently to a given change in disposable income, the income effect of the tax-transfer program will leave both the aggregate supply of labor and consumption of leisure unchanged. [But] Of course, the substitution effect will still be present. Unambiguously, it will induce individuals to work less, although how much less is strictly an empirical issue (p. 450). In this comment, we demonstrate that the G-S tax-transfer illustration and the policy implications drawn from it are highly misleading. We first show that the G-S conclusions about the relationship between tax rates and labor supply are based upon strong assumptions about the degree of homogeneity in the population and that without these assumptions, their conclusions are not guaranteed to hold. We then use microsimulation techniques to challenge the impression given by the G-S paper that more redistribution must necessarily imply a reduction in the labor supply and output of the economy.

In the March 1972 issue of this Rezview, Duncan Bailev and Charles Schotta published a study of the returns to investment in the graduate education of Ph.D. academicians in the United States. They use as a proxy for the academic income of Ph.D. faculty, the salarydata reported by the American Association of Universitv Professors (.4A4UP). The alternative income used is an estinmate of the income of bachelor's degree holders taken from an extensive survey of salaries in occupations open to bachelor's degree holders in the state of California. They conmpute both a private and a social rate of return. Their private rate of return includes as costs an estimate of the foregone income of graduate students. Their social rate of return in addition to incomne foregone by students, includes an estimate of the per unit contribution of the state of California to graduate education at the Berkeley, and Los Angeles campuses of the University of California. A second social rate of return is computed by including an estimnate of the costs of graduate school dropouts. Each of these rates of return is estimated for two through six Xyear periods of time spent in graduate school and for eleven different academic income patterns.' Bailev and Schotta explicitly omit from their calculations all incomes earned by academicians in addition to their academic -ear contract salaries. Since they are interested only in test-of-the-marketplace conclusions, they do not consider externalities or the public good aspects of research. T heir conclusions may be surmmarized as:

When households have different consumption patterns, whose cost of living should actual price represent? This issue was first raised by J. L. Nicholson and S. J. Prais in 1950's. Both made essentially same point: official price indexes give each household's consumption pattern an implicit weight proportional to its total (see Nicholson, p. 540). Prais calls such plutocratic, and both Nicholson and Prais suggest alternative democratic price index which gives all households equal weight. A cost-of-living index is that measures impact of price changes on welfare of a group or population of households. To define such requires explicit or implicit concept of the welfare of a group, and hence requires interpersonal comparison and distributional judgments. Since group indexes such as Consumer Price Index play important role in our perception of inflation and formation of macro-economic policy and are used to escalate wages and Social Security benefits, they have significant effects on government decisions and economic welfare. Despite their intellectual interest and practical importance, however, until recently they have been virtually ignored by number theorists. The theory of cost-of-living (CLI) provides a generally accepted framework for measuring impact of price changes on welfare of a particular household. This paper extends CLI concept to groups and discusses which questions require group indexes and which do not. I begin by introducing some notation and terminology in context of household CLIs. A household's CLI is ratio of expenditures required to attain a particular base indifference curve in two price situations. Suppose there are n goods and S households, and denote preference ordering of rth household by R r. The base indifference curve can be identified by a goods collection, Xro, which lies on it. The function, Er(P, xr, Rr), shows minimum expenditure required to attain base indifference curve at prices P. The CLI of rth household, Ir(Pa,pb,XroRr) is ratio of minimum expenditure required to attain base indifference curve at prices pa (comparison prices) to that required at prices pb (reference prices). Except in very special cases, value of CLI depends on base indifference curve at which it is evaluated; as successively higher base indifference curves are specified, one would expect prices of luxuries to become more important relative to prices of necessities.' Hence, it is convenient to regard CLI as a function of base indifference curve rather than as a single number corresponding to a particular base. Thus, instead of offering guidance in choosing appropriate base indifference curve, theory suggests that there is no need to choose. To construct exact CLI, investigator needs to know household's preferences. Lacking this knowledge, he rnust fall back on indexes which require less information and which are upper bounds on exact index. The Laspeyres index, Jr(papbXrb) is ratio of cost of purchasing reference period consumption basket at comparison prices to its cost