So long as the marginal propensity to consume out of is greater than that out of profits, any rise in wage rates at the expense of profits will the aggregate marginal propensity to consume-since the marginal propensity to consume out of will receive an increased weight relative to that out of profits-thus raising the level of income that can be supported by a given level of investment and federal expenditure. And the marginal propensity to consume out of will be higher than the marginal propensity to consume out of profits so long as the average wage income is lower than the average profit income, which may be expected. This for two reasons: (1) the marginal tax rate on high incomes is higher than that on low incomes; (2) the evidence shows that the marginal propensity to consume out of disposable income is lower at higher disposable incomes. It is occasionally asserted that wise business policy would favor increasing wage rates at the expense of profits, since the consumption effect would the general level of activity and reverberate to the benefit of profits. The argument runs as in the previous paragraph until an increased level of income is proved a consequence; then the conclusion is drawn that higher aggregate profits will accompany the higher income level. Whether or not the last step of this argument is taken with tongue in cheek, it is interesting to see whether total profits can be raised through decreasing the relative profit share of income and, if they can, what the conditions are under which they may be so increased and whether these conditions may likely prevail. Mathematically it can be shown that there are conditions, extreme but not unreasonable conditions, under which the raise profits through higher wages argument is valid; the conclusions mathematically arrived at can be demonstrated verbally. The analysis here is entirely static: the values of all economic variables are assumed to be mutually determined by simultaneous solution of demand functions and economic identities. For simplicity, all functions are taken as linear. The conclusions can be stated as follows: 1. So long as government expenditure and investment are constant a rise in wage rates at the expense of profits will increase aggregate income but decrease profits, if the marginal propensity to consume out of is less than unity. 2. When we complicate our system by admitting relationships between, e.g., investment and income, or government expenditures and

THE graphic method of determining the level of income which is consistent with a consumption function and given investment is familiar to most students.1 The method is that of plotting the aggregate demand function (consumption demand function with investment superimposed vertically) against national income; the intersection of this line with a forty-five degree line through the origin indicates the level of income at which income equals assumed investment plus derived consumption. But this forty-five degree line method suffers from the disadvantage that consumption must explicitly be related to the national income or gross national product. It is common nowadays to assume that consumption is related to disposable income, and to assume as well that taxes, government transfer payments, and corporate savings are themselves related to gross national product, so that the consumption-gross national product relationship is a derived one. In the graphic solution as ordinarily presented, a change in the tax structure cannot be assumed without having the shape of the derived consumption-GNP relationship affected. So, where graphic methods are desired, an elaboration that allows separate manipulation of the tax function and the consumption function is of some advantage. This paper will present a graphic method which goes one step further than the forty-five degree line method, that is, one which portrays the solution when consumption is explicitly related to disposable income, the latter being explicitly related to the gross national product.2 The method is simple. We have two relationships, here assumed linear for convenience. One is the consumption-disposable income relationship, in the form C a + bDI, in which the parameter b measures the marginal propensity to consume. The other is the disposable income-gross national product relationship, in the form DI = c + dGNP, where the parameter d measures the marginal ratio of DI to GNP.3 Both these relationships are plotted on Chart i. Measuring GNP along the horizontal

Nobel Prize Lecture, December 8, 2005

The greenhouse effect itself is simple enough to understand and is not in any real dispute. What is in dispute is its magnitude over the coming century, its translation into changes in climates around the globe, and the impacts of those climate changes on human welfare and the natural environment. These are beyond the professional understanding of any single person. The sciences involved are too numerous and diverse. Demography, economics, biology, and the technology sciences are needed to project emissions; atmospheric chemistry, oceanography, biology, and meteorology are needed to translate emissions into climates; biology, agronomy, health sciences, economics, sociology, and glaciology are needed to identify and assess impacts on human societies and natural ecosystems. And those are not all. There are expert judgments on large pieces of the subject, but no single person clothed in this panoply of disciplines has shown up or is likely to. This article makes an attempt to forecast the economic and social consequences of global warming due to anthropogenic greenhouse gases, and attempting to prevent it.