Journal Article The Adjustment of Savings to Investment in a Growing Economy Get access J. E. Meade J. E. Meade Cambridge Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 30, Issue 3, October 1963, Pages 151–166, https://doi.org/10.2307/2296315 Published: 01 October 1963

I. Ambiguous use of the term identity, 617. —II. A solution without recourse to either of these laws or any other identity, 621. — III. Reexamination of the original intent of Say and Walras, 623.

I. Introduction, 112. — II. The selling expense barrier to entry, 113. — III. Probabilistic considerations, 124. — IV. Relevance to the theory of imperfect competition, 127.

highly abstracted purely competitive model A of a factor market has as an end result an equalization of factor prices throughout the market. Consequently, the persistence of sizeable regional wage differentials in a national labor market calls for an explanation. An often offered one is that there are barriers to the free flow of resources between regions, barriers such as a lack of labor mobility, high moving costs, lack of labor market information, etc. Such an explanation is suggested by Cairnes' concept of non-competing groups 1 and receives support from the findings of the labor market research of Reynolds, Kerr, et al.2 However, explaining regional wage differentials by such a device is not entirely satisfactory. To a sizeable extent this approach is a question-begging one. While it provides considerable insight into the factors which serve to perpetuate a wage differential, it does not afford much that is helpful with respect to determining the forces which generated the initial differential. After all, the existence of regional wage differentials insistently demands an explanation primarily because it represents a deviation from the expected result of a competitive market. Explaining such a differential by merely pointing out that the market is imperfect is next to no explanation at all. This is tautologically implicit in the conceptualization of the competitive market. If a competitive market eliminates differentials and differentials persist, then the market is obviously not competitive and barriers to the adjustment process must exist in order to perpetuate the differentials. This suggests that an appropriate point of departure for attempting to explain the existence of regional wage differentials is to accept as a working proposition the assumption that barriers to the free flow of resources between regions do exist. Given this, the task of accounting for regional wage differentials becomes one of determining what forces work to create differentials. Several alternative explanations may be considered. Trade union representatives would argue that regional wage differentials are created by the ability of employers to exploit an unorganized labor force. Others have suggested that an explanation may be found in a more plentiful labor supply or a deficiency of product demand 3 while a fourth possibility is that the production functions vary interregionally so as to produce a lower marginal value product schedule for the workers of one of the regions. In this paper an attempt will be made to shed some light on the nature of regional wage differentials by developing suitable empirical tests for several of the suggested explanations of their causes. As a vehicle for discussion, the best known of the regional wage differentials, the North-South one, will be treated.

C. E. Ferguson, Cross-Section Production Functions and the Elasticity of Substitution in American Manufacturing Industry, The Review of Economics and Statistics, Vol. 45, No. 3 (Aug., 1963), pp. 305-313

F what I have seen of the work of the Commission on Money and Credit, one thing stands out.It is a part of one question addressed by one task force to the Federal Reserve Board, and it reads as follows: "Given the customary credit control instruments and the ultimate objectives of price stability, highlevel employment, and economic growthhow is monetary policy formulated in the short run?For instance, what sort of factors are weighed in determining current policy, what guides are utilized and what are the immediate objectives of policy?"The merits of the Board's reply, the many contributed papers, the Commission's Report, and recent monetary policy itself, are all certainly debatablebut I submit, if you will pardon the use of strong language, that this is a damned good question.It asks, politely but firmly, that we omit the usual garbage about opposition to sin and advocacy of motherhood, and just say what it is we are trying to increase, decrease, or hold still.The Board's reply ran to some 35 doublespaced pages.The burden of drafting was carried by my colleague, Woody Thomas,