Knowledge that Transforms

IN addition to their customary significance for the interpretation of economic conditions, commodity prices have at present a peculiar importance because of the emphasis placed upon them in the discussion of official attempts to stimulate recovery. During the formulation and operation of the recovery program, great emphasis has been laid upon the supposed necessity of inducing an advance in prices. Destructive price cutting was listed as a chief form of excessive competition, and stable or advancing prices were regarded as necessary in order to bring to an end the wave of liquidation. The advance of particular types of wholesale prices, especially those of agricultural and some other basic commodities, was accepted as a means of achieving at least in part that redistribution of wealth (income) which was one of the announced objectives of official policy. Officialdom did not overlook, moreover, that advancing prices are generally considered a symbol of improving business, and would therefore have a favorable psychological effect. Various items of official policy accordingly had the elevation of prices as an important, if not their main, objective. These policies appeared not merely in'the handling of the money problem, with the actual devaluation of the dollar and the continuing threat of inflation, but also in numerous phases of the attempted control of agriculture and other industries. The systematic purpose to raise prices was so frankly and clearly indicated in the so-called recovery legislation, in the related administrative regulations, and in the frequent and emphatic official pronouncements, that it seems almost unnecessary to recall the facts. Through it all the official mind 'clearly supposed -or wished to be thought to suppose that there existed somewhere between producer and consumer a great slack which could be taken up, so that the advance of prices received by producers need not be transmitted in full and in all cases into an equivalent advance of prices paid by consumers. Allegedly excessive increases in prices to consumers were frowned upon, and somewhat energetic measures were taken to prevent or discourage such increases. It was a no time officially' promised, however, that consumers would not be called upon to foot a large portion of the bill for recovery ultimately, if not immediately.

pRACTICALLY all of the economists who have published serious discussions of the relation between gold or prosperity and prices have specifically stated that the general price level is not identical with the average of wholesale prices, still less with any single index of wholesale prices.2 Having made this admission they have proceeded to argue to conclusions that can be justified only on the assumption that the general price level is adequately represented by the Sauerbeck or some other wholesale index.

rTHE original plan of this investigation was to study the movement of wholesale prices in Boston during both the seventeenth and eighteenth centuries.' This had not appeared an impossible task in view of the traditional frugality of the early New Englanders and the well-known prominence of Boston as an early trading center. These together probably had sufficed to create and to preserve abundant material in regard to Boston business in general and to her numerous trading enterprises. The results were surprising in many ways, showing as they did the utter lack of printed sources of price data and the paucity of other material giving similar information. Because of the former deficiency, this investigation becomes, as far as the writer knows, the first attempt to erect for an American colonial market a monthly index of wholesale commodity prices based solely on data from manuscript records. For other colonial markets, sources of price data were available which were more accessible and at least of more apparent merit. For his study of prices for Charleston, South Carolina, Professor Taylor found prices-current printed in the newspapers as far back as I 732. From that time on, with but few gaps, such quotations formed a regular part of the local news.2 In New York, prices-current appear occasionally in the periodicals from I720 on, and regularly after I748.3 For Philadelphia, too, this type of source is available far back into the eighteenth century.4 The story for Boston should be similar. Yet a painstaking search through all the papers published there before September I795 revealed the amazing fact that except for six months in I7I9-20, a few months in I789, and a portion of the years I792-94, no prices-current were published in the Boston newspapers.5 Another printed source sought for was the prices-current sent by local merchants to their clients and agents in other trading centers. These were similar to those published in the papers mentioned, but apparently were prepared and printed by the merchants themselves; and pricescurrent of this sort were known to have been issued from Philadelphia and other colonial ports. Neither in special collections nor in the numerous files of unsorted documents consulted in the course of this investigation was even a single one of these printed forms found which was dated from Boston before I795. The first part of this study is devoted to a description of the sources from which the data were gathered, the methods used in assembling them, and the statistical procedure thereafter followed. The annual data obtained from I700 on are presented and described on pages I2I-22; the monthly data from I750 to I795, on pages I25 and following. Monthly statistics of prices of individual commodities, I750-95, which, for reasons of space, could not be included here, will be published in a forthcoming issue of this REVIEW.

THIS article will treat the logical problem of the significance of trend-cycle separation in the analysis of time series, and also the related practical problem of choosing the best secular trend representation for a particular economic series. The article will with a discussion of the various points of view which have been held regarding the meaning of secular trend. I. A problem in mathemcatical curve fitting. It might be urged that in establishing a representation for secular trend, closeness of of the curve to the data should be the criterion, and mathematical measures of of fit might be set up, analogous to those employed for frequency series. A fundamental difficulty, however, immediately appears. In applying this principle to secular trends, we must choose a curve which reproduces the underlying movement of the data without bending or twisting, itself so as to conform to the extreme sinuosities, and which at the same time gives a good 'fit' as judged by some arbitrary criterion say, the mean square error.' These two requirements, however, are mutually contradictory,2 and evidently exercise of arbitrary judgment is required in effecting a compromise between them. In a word, our difficulty arises from the fact that we wish to represent not the series itself, but the secular trend of the series, and we are consequently unable to place sole reliance on a mathematical test for goodness of fit. Additional criteria are required. 2. A problem in statistical description. The problem of secular trend might be thought of as a problem in statistical description. Just as we describe the essential characteristics of a fre, quency series by the citation of averages, standard deviations, and measures of skewness, so we might describe the general tendencies shown by a time series through the computation of a line of secular trend. The secular trend has in fact often been defined in some such language as the following: the gradual and persistent movement of the series over a period of time which, contrasted with the short run fluctuations of the series, is long. In fitting the trend line which is designed to furnish a statistical description of the fundamental movements of a particular time series, he decisions as to type of curve and trend interval are by no means matters of indifference. In particular, with reference to the trend interval it is patently inappropriate to combine segments from time periods which are clearly non-homogeneous as would be the case, for example, if the years 1910-22 were selected for a commodity price series. Furthermore, if intervals for trend fitting are chosen indiscriminately, the calculated line is likely to be distorted by the influence of the cyclical movements at the beginning and end of the computation period.3 It is clear, then, that .even though we may fully accept the view that the problem of secular trend is one of statistical description, we have by no means reduced the problem to a mechanical basis, nor have we done away with the necessity for careful examination of the characteristics, and in particular the economic characteristics, of the original data. With respect to the usefulness and validity of the concept of secular trend as a statistical description, there is possibility for contrary opinions. On the one hand, it may be asserted that such a statistical description can have little or no value unless the calculations are preceded by an extensive causal analysis of the forces behind the movements of the series such analysis to be obtained through a theoretical examination of the causal forces in question, or through historical investigation, or both; and still further, that in the absence of an exhaustive analysis of this sort, the determination and representation of secular movements should not be undertaken. The opposing opinion is that until such time as our knowledge regarding economic causation shall be greatly increased, there will still be room for 1Henry Schultz, Statistical Laws of Demand and Supply (Chicago, I928), p. 47. 2 On the one hand we can obtain the curve which actually goes through the points here the sum of the squares of the errors is zero, but the curve is composed of perturbations or sinuosities. On the other hand we can obtain a perfectly smooth curve ... and we obtain a large mean square error.E. C. Rhodes, Smoothing, Tracts for Computers, No. VI (London, I92I), pp. 43-44. 3 The commonly quoted statement to the effect. that in the fitting of a straight-line trend, the interval should begin and end in the same cyclical phase is inadequate. For a precise statement of the criteria, see W. L. Crum. and A. C. Patton, Economic Statistics (Chicago and New York, I925),. p. 3II .

COLBERT AND HIS TIME COLBERT was by temper an administrator; ordinarily shrewd in his judgments of current problems, and energetic in accumulating precise information. Though he certainly possessed genuine convictions, he was ever ready to temporize and to adapt his policies to local conditions. Many aspects of his reforms were essentially liberal in character, because his administrative reorganization necessarily led him to destroy obsolescent feudal rights and privileges, and to remove the numerous impediments to freedom of internal trade that were created by the officials of provinces, towns, and villages. His correspondence discloses such flexibility of thought on all these matters that any reader will be quickly convinced that the full content of Colbert's mind cannot be rendered in the catchwords of mercantilism. His industrial policy likewise discloses considerable breadth of mind. There is so much emphasis on advanced instruction, training in the fine arts, and upon technology that one must be careful not to impute to Colbert indifference to the achievements of the individual. In discussing his position in respect of the merits of individualism and collectivism it is necessary to bear in mind that in his day France was already beginning to feel the stress of competition with England and Holland. There were changes in the valuation of her economic resources that constituted a threat to her continued prosperity, though they were not at that moment an explicit factor. Colbert lived in a region that had really reached the height of its development. It was a society, too, already deeply affected by the peculiarly insidious inertia of a venal bureaucracy dominated by persons holding life interests in their salaries, irrespective of the continuance of the functions of the office. Many families of wealth looked upon their positions in the judiciary as estates by inheritance, subject to the payment of specified fines. It -was a society characterized by the courtier and the sycophant, dominated by ambitions for the secure social position conferred by land and offices. Industry and commerce were at best merely means of purchasing social security, and neither industry nor trade was expanding rapidly enough to inspire much hope or to foster a general spirit of enterprise and adventure. It was a society deeply conscious of its age; the individual looked for shelter and security rather than for opportunities to do new things or to exploit new fields. Neither the appeal of India, nor the romance of the New World, really stirred this blase and timorous society. Colbert's judgment of the possible contribution of the individual to society must thus be read in its context. His policies express only his estimate of the possible achievement of the Frenchmen that he knew, both bourgeois and nobles. To conclude, as he did, that the state might contribute much to the economic development of this society was shrewd realism. We must recognize also that Colbert was by no means the first to formulate the policies that are commonly associated with his name. Scarcely aniy phase of his policies or administrative reforms was significantly original. His financial reforms were foreshadowed by the projects laid before the States General in i6I3. The administrative system embodied in the Intendants was merely the culmination of a process of growth that reached far back into the sixteenth century. The industrial policy is foreshadowed by the edicts of I58i and I597 and' by the systematic schemes of Laffemas for the development and encouragement of industry. Many projects of economic reorganization were entertained by Richelieu. Despite these extensive plans, there was little effective accomplishment before Colbert's time. In some instances edicts had been issued with all possible solemnity; in other cases, schemes were worked out on paper but never given legal sanction. Whatever the history of the various projects, actual accomplishment was negligible. Colbert gave practical effect to concepts of royal authority and to policies that had been held since the later phases of the Wars of Religion.

Journal Article Periodicals Received Get access The Review of Economic Studies, Volume 1, Issue 3, June 1934, Page 236, https://doi.org/10.2307/restud/1.3.236-a Published: 01 June 1934

Journal Article A Rejoinder Get access L. M. Fraser L. M. Fraser Oxford Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 1, Issue 2, February 1934, Pages 141–143, https://doi.org/10.2307/2967620 Published: 01 February 1934

Materials for a Theory of the Duration of the Process of Tax Shifting Get access Mauro Fasiani Mauro Fasiani Genoa Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 1, Issue 2, February 1934, Pages 81–101, https://doi.org/10.2307/2967615 Published: 01 February 1934