Structural reforms of a fundamental nature now under way in Wall Street have been proclaimed so often of late as to become commonplace. The fact that many of these changes are not welcomed by established and influential persons who make their living in or around Wall Street is not news. What may be news, however, is that neither of these facts is particularly new.

Donald G. Simonson, Comment: The Predictive Content of some Leading Economic Indicators for Future Stock Prices, The Journal of Financial and Quantitative Analysis, Vol. 9, No. 2 (Mar., 1974), pp. 259-261

T ESTED with regional data for the United States, the neoclassical growth model has yielded inconsistent results. Borts and Stein (1964, chapter 3) employed a simple growth model relating interregional factor movements to factor price differentials, but found little evidence of responsiveness. In a recent paper Smith (1973) found such a model consistent with the long-run factor mobility experience of states. Since a similar model was employed in both studies, the contrasting results may be ascribed to the use of inappropriate data in the test of the model of Borts and Stein, and/or inadequate model specification. They tested their model on the nonagricultural sector of each state, while Smith's model is tested on aggregate state data. Use of data on the nonagricultural sector of each state embodied the implicit assumption that capital and labor move only between states from one nonagricultural sector to another, and ignored the possibility of intersectoral factor movements. Smith avoided this potential problem by aggregating each state's output to a single sector. Thus, only interstate factor movements were relevant. In this paper, both intersectoral (within states) and interstate factor movements are considered. Factor movements affect the growth rate of a sector's capital-labor ratio, which determines the growth rate of the wage level.

Economic theory tells us that there is no single best way to treat capital gains in a definition of income. But it is necessary for practical reasons that some policy toward capital gains be adopted by institutions with endowments. This creates a dilemma which can be resolved only by a careful blend of theoretical analysis and judgment. I will attempt to clarify the roles of theory and judgment in this paper, and then to outline their implications for the income formula of the American Economic Association (AEA).

I. The state variables: balance sheets and information, 279. — II. The model, 284. — III. Numerical illustrations of monetary control, 290. — IV. Conclusions, 301. — Appendix: Derivation of Figure I, 303.

There have been many efforts in recent years to explain differences in the performance of commercial banks. Interest has centered on the extent to which changes in a selected group of indices of bank performance are related to the structure of banking markets and selected other factors thought to influence bank behavior. While various techniques have been used, the most common has been multiple linear regression. The measures of performance entered into the regression equations have included the price and quantity of bank services and bank profitability, while the explanatory variables have included, to name only a few, the one-, two-, or three-bank concentration ratio, the number of banks in the market, the existence of competition from nonbank financial institutions, bank costs, bank size, and proxies for the demand for banking services. Generalizations then have been made about the impact of market structure and other variables on bank performance, generalizations based upon the regression coefficients of the explanatory variables. The consensus appears to be that the demand for banking services and bank costs are significant determinants of the performance of individual commercial banks; market structure appears to be much less important. However, the conclusions are by no means unanimous.