Journal Article A Theory of the Wage-Price Process in Modern Industry Get access Otto Eckstein Otto Eckstein Harvard University Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 31, Issue 4, October 1964, Pages 267–286, https://doi.org/10.2307/2295899 Published: 01 October 1964

Introduction, 56. — I. The “ideal” criterion under perfect competition, 57. — II. Capital rationing: the SMP criterion in a closed economy, 59; correcting market prices to reflect social values, 60; the interest rate in the SMP criterion, 63. — III. Modifying the rate of capital accumulation: the MGC criterion, 65. — IV. The interest rate in development planning, 74. — V. Some extensions of the analysis, 79; the optimal interest rate for the SMP criterion, 79; multiple rationing: investment criteria in the open economy, 81. — VI. Some limitations of the analysis, 83; population still an exogenous variable, 83; income distribution assumed satisfactory, 83. — VII. Concluding comments, 84.

ing case for the introduction of Capital Budgets could be made if we could gradually evolve a concept of capital expenditures which would include both physical assets and investment in human capital, as two types of investments in economic growth. A case can be made for the introduction of Capital Budgets for such agencies as the Post Office where the existence of a chronic perpetual deficit may unduly inhibit the approval of substantial capital expenditure items which would improve efficiency. Also, in the case of FHA, FNMA, and other agencies which are required to operate programs on a self-sustaining basis, the separate financing of capital expenditure by means of bonds with redemption dates in alignment with the rate of depreciation of these assets may well be considered, provided their financial operations are geared into the Treasury program for debt management and the general economic situation. The point to be made here is that scope for the useful adoption of capital budgeting in the Federal Government is considerably more limited than proponents of the idea allow, and that, with the exceptions mentioned above, no real economic purpose would be served by the introduction of a separate Capital Budget. However, it would be highly useful if projects could have separate classifications for investment in physical assets and in human capital, but would regard all such expenditures as investments in economic growth. More education concerning the merits of the proposed Program Budget as well as the two supplementary statements is necessary, not only as regards Congress, but also -and ultimately perhaps even more important in order to create a better informed public opinion. It is essential that Congress and the general public have a clear idea of the different functions of each of these concepts. Public and Congressional approval of the necessary changes will come more quickly if the various figures shown as Budget out-turns, depending on which of the three concepts has been employed, could be reconciled without too much strain in a similar manner to the process involved when the average citizen reconciles his bank statement at the end of each month. It is felt that the adoption of these improvements would put us in a much better position to make economic policy decisions on the basis of economic and fiscal data, and would facilitate a more efficient allocation of our resources. Businessmen could make their investment decisions with the full knowledge of government programs for a number of years ahead while economists could make their recommendations with a greater degree of confidence and such recommendations would gain a greater measure of Congressional and public acceptance.

Otto Eckstein, The Problem of Higher College Tuition, The Review of Economics and Statistics, Vol. 42, No. 3, Part 2. Higher Education in the United States: The Economic Problems (Aug., 1960), pp. 61-72

(3) WA = R1Pne + 1 _ R A n R2U, where pe is the forward-looking expectation and f31 is the credibility coefficient (or degree of belief) attached to the model and the announced policy rule. Total expectation is the weighted sum of the forwardand backward-looking beliefs. In the case of the simplest monetaristrational expectations viewpoint, P, =1, and pe = m*, where m* is the announced monetary target (with the trend in velocity offset by the economy's natural rate of growth). Aggregate supply price will be