George Kaufman and Cynthia Latta in “The Demand for Money: Preliminary Evidence from Industrial Countries, ” have presented econometric evidence that the money-demand function may shift with the development of financial markets. The thesis depends on the heightened cross-elasticities and lowered wealth-elasticities (or income-elasticities) that are supposed to attend the development of new near-money forms. Their evidence is based on a summary of statistics from money-demand equations for developed and less-developed countries.

Citations are given to show that since 1888 some people have understood the idea of effective tariffs. For fourteen studies on twenty-six countries done during the last five years, one finds a rank correlation of .95 between the height of a nation's average effective tariff and the height of the nation's average nominal tariff. Looking at the effective tariff and the nominal tariff for various industries within a country, one finds both a significant regression between them and a rank correlation between them of over .70 for twenty-three of the twenty-six countries. I speculate on reasons for these results.

I. The concept of seigniorage, 495. — II. Its practical significance in the British case, 496. — III. The gross seigniorage gain from sterling, 498. — IV. The offsetting interest cost of the sterling balances, 502.