tinue to neglect them for the present purpose. The specialists who now buy bills from the Treasury and then resell them to the ultimate investors are presumably being compensated for their activities. They have many alternatives. It is hard to see that they receive any economic rent that the Treasury in any way taps by its present method of auction. On the contrary, the Treasury enables those specialized abilities required to guess accurately the outcome of weekly auctions to earn a higher rent than they otherwise could. Private distribution costs are therefore higher under the present method of auction than they would be under the alternative method. Who pays these additional costs? Since we have assumed that the demand by ultimate investors is not affected, since the amount of bills is presumably not affected, since the Treasury does not succeed in imposing discriminatory prices on ultimate investors, the price paid by ultimate investors must be roughly the same whatever the method of distribution. It follows that the Treasury must pay the additional distribution costs by receiving less on the average from its bills than if it used the alternative method of auction. Two final comments. First, if this analysis is correct, it means that Brimmer's conclusion that noncompetitive bidding should be eliminated from present auctions is wrong. The introduction of such bidding reduces the unnecessary cost imposed by the Treasury on itself by the present method of bidding. Second, the defects of the present method of auction are quantitatively minor, and may be negligible, for bills because of their short maturity, large volume, and broad market. The defects are far more important for bonds and are more important, the longer the maturity. The main obstacle to using auctions to distribute longer-term securities has been the implicit assumption that the present method of auctioning bills must be used for them as well, as it has been in earlier experiments. The adoption of the alternative method would enable the Treasury to auction all securities issued, whatever their maturity, at a gain both to itself and to the economy.5

OUR empirical knowledge of the demand and structural interrelationships of the economy at the regional level is indeed limited. Some understanding of these interrelationships can be gained through (1) the economic baseforeign trade multiplier approach, (2) the regional interindustry (input-output) approach, and (3) various other approaches, involving linear programming and the like, which are not of concern here.' Although the interindustry approach seems superior to the base-multiplier approach for most, though not all, purposes, the real difficulty lies in translating either approach into an operational one so that meaningful estimates of these interrelationships can be generated at a reasonable cost. This is a rather unfortunate state of affairs because it means that decision makers have no firm guidelines to use in attempting to assess the impact of autonomous demand forces upon regional economies or specific sectors within them. In an attempt to at least partially remedy this situation, we have developed an alternative type of framework which, for the lack of a better name, can be called an intersectoral flows model. This model incorporates certain features of the base-multiplier approach in addition to certain features of a regional interindustry approach hopefully some of the best features of each in terms of our objectives. In designing the model, one of the main concerns was that it be operational, in the sense that the necessary data could be obtained at a reasonable cost. Thus, to the extent that this objective is achieved, the restrictions on making such studies and repeating them may no longer be so formidable. The particular region chosen for study is California and the three major subregions within the State. Since the interest here is in the model and its implementation, as contrasted with the implications for the California economy, major attention will be focused on these topics.