Journal Article The Gains from International Trade and the Backward Countries Get access H. Myint H. Myint Oxford Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 22, Issue 2, 1954, Pages 129–142, https://doi.org/10.2307/2296287 Published: 01 January 1954

Journal Article A Note on Dynamic Economics Get access H. D. Dickinson H. D. Dickinson Bristol Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 22, Issue 3, 1954, Pages 169–179, https://doi.org/10.2307/2295874 Published: 01 January 1954

Journal Article The Problem of Oligopoly: A Comment Get access J. H. Davies J. H. Davies Sheffield Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 22, Issue 3, 1954, Pages 228–229, https://doi.org/10.2307/2295881 Published: 01 January 1954

Introduction, 181. — I. Autonomous Investment, 181. — II. The Domar Equation, 184. — III. The Kalecki Effect, 188.

M R. J. Steindl's book, Maturity and Stagnation in American Capitalism,' was completed in the summer of I949, prior to Korea. At that moment the United States was experiencing a recession and all the free world was worried lest it might develop into a serious depression. The outlook seemed to point toward the continuation of rather moderate military expenditures, and it was perhaps even possible to hope for a gradual approach to a more peaceful world. Since then we have had the shock of the Korean War and the enormous increase in military outlays 2 with the prospect of continued high levels of expenditure, not indeed at the peak levels, but at levels far beyond anything envisaged in I949. In the kind of world now in prospect, the problem of stagnation assumes a quite different aspect from that of I949. Indeed even in I949, with a federal budget of about $40 billion, half of which was for national security, the situation was obviously not at all like the peacetime conditions prevailing in the 'thirties before the Second World War. It is amazing how many economists have been able to close their eyes and blandly announce that events since I940 have disproved the stagnation thesis! Perhaps Mr. Steindl might concede that under current foreseeable conditions (despite some considerable decline in military expenditures) it makes no sense to talk about stagnation except in terms of past history. But I suspect that he might disagree. And, indeed, unless fairly drastic action is taken, there is a serious danger that we may move sidewise in the United States or even slip down gradually over the next few years. Measured against the attainable growth of GNP of which we are capable, such an experience would indeed be a form of stagnation. The mere maintenance of the GNP at the level of the second best year would give us ten to twelve million unemployed four years hence. It is therefore perhaps not altogether a useless exercise to reexamine, as Mr. Steindl does, the stagnation thesis. To begin with, it may be well to attempt a short classification of stagnation hypotheses, in order to give perspective to Mr. Steindl's thesis, as follows: i. A theory based primarily on exogenous.' factors including technology, population growth, and the opening up and development of new territory. This point of view is represented by my own analysis and perhaps also that of Harrod. 2. A theory based primarily on fundamental changes in social institutions, such as increasing state intervention in the form of the welfare state and related developments including the growth of the labor movement. This development, it is argued, has afflicted a formerly vigorous capitalism with a bad case of arterial sclerosis. This point of view is represented by Schumpeter in his Capitalism, Socialism and Democracy. 3. A theory based on endogenous factors inherent in the development of capitalism primarily the development of imperfect competition, monopoly, and oligopoly. This point of view is represented by Steindl in the book here under review. In his endogenous theory of stagnation, Mr. Steindl argues that already as early as the I890's the American economy had undergone a transition to the oligopolistic pattern. Stagnation did not come overnight. There had been going on a long process of secular change. Hardly anybody during the 'New Era' was aware of the fact that the annual rate of growth of business capital then was only half

of the explanation for the unexpectedly low level of consumption in I95I and 1952. 4. The formula assumes that the behavior of large aggregates of individuals is reasonably stable. Unless this assumption is made no prediction is possible and the limits within which any economic speculation is valid becomes doubtful. Absolute stability of behavior cannot be expected, and to the extent that behavior is unstable the formula will fail. 5. There are without doubt other variables affecting consumption which have been ignored in the formula. Controls and wartime shortages of consumers' goods are two examples. Campaigns to induce consumers to save and buy bonds, and waves of speculative excitement are others. Changes in the distribution of incomes might also be expected to have some effect on consumption. 6. The statistics of disposable income and consumption may need some adjustments. Disposable income, for example, is a net figure after deducting depreciation calculated mainly on an original cost basis. Consumers, however, may well behave as if depreciation were calculated on a replacement cost basis. 7. The measurement of wealth is subject to conceptual and statistical difficulties which make it particularly elusive. The measure may moreover need to be adapted to the purpose for which it is being used. For example, Goldsmith has included the structures and durable equipment of corporations at their current values. In assessing the influence of investments in corporations on current consumption it may be that the market value of the common stock and the bonds issued by the corporations would give a better measure. Further investigation may make it possible to allow for some of these disturbing elements. To make allowance for instability of behavior will be more difficult but may be possible. Nevertheless, in view of these uncertainties the question naturally arises, can any formula be expected to give a reasonable guide to the consumption habits of individuals? The answer will be found only through the success or failure of some formula, such as the three considered in this paper, to explain consumption for a sufficient number of years. The closeness of fit of all three formulas at least holds out some promise that a useful guide can be found in this way. After reviewing the circumstances in which any formula of this kind might be expected to fail it is impressive to find how well all three formulas do in fact predict the behavior of consumers.

Whether the relatively underdeveloped areas can accelerate their process of development by recourse to deliberate inflation has, in the recent past, been a subject of widespread contention. It now appears to be settled in the negative, at least by most professional economists and responsible central bankers. Nevertheless, it may still be useful to give some thought to the problem, particularly emphasizing aspects of the economic structure of underdeveloped countries that condition their response to a deliberate attempt to use inflation as a method of stimulating and accelerating economic development.' For the purposes of this paper inflation will be defined as any steady increase in the general level of prices (no matter whether at an increasing, decreasing, or constant rate), reflecting an expansion of money income relative to available goods and services, over a period of time. Once this rise has come to a halt, there is no further inflation.2 This steady increase in the price level is, if the monetary authorities are willing to make credit, available, basically the result of one group (private individuals or the government) in the economy attempting the consumption of a larger share of (given) real output than other groups are willing to acquiesce in.3 If the group is successful, the real income of some sector(s) of the economy must be reduced as the general price level rises through the process of competition for a given quantity of goods.4 If the amount of real output available to some groups (whose money income does not increase in proportion to the price level) is reduced, inflation may encourage economic development if the group gaining command over additional real resources purchases resources, such as machinery, which themselves will produce a stream of income in the future. The reason inflation is needed to secure these results is attributable to a situation where the existing level of voluntary savings is inadequate to sustain a desired rate of increase in real output; inflation, by redistributing income, may increase the amount of savings and therefore the possibility of increased real investment.5 The redistribution of income and wealth, the immediate decline in the standard of living of some segments of the community, a possible allocation of resources to luxury goods, inappropriate construction, investment in inventories or foreign exchange, and a possible deterioration in the country's external position are some of the costs of inflationary financing. If the additional savings go into undesirable investment, this will very likely prevent the inflation from having a significant effect on the rate of development.

D. C. Hague, J. H. Dunning; Costs in Alternative Locations: The Radio Industry, The Review of Economic Studies, Volume 22, Issue 3, 1 January 1954, Pages 2