This study is part of a larger project that was originally conceived to examine the communications function of economics journals for the period since 1890. Research was begun in 1967 and was continued intermittently in the intervening years. The materialfocusing on the periods 1961-64 and 1970-71 was drafted in preliminary form in 1972 and in final form in early 1974. Work dealing with the earlier years remains still in progress. I wish to give my thanks to the several persons whose research assistance was indispensible over the many years of the project. They include Lawrence Cavanagh, Frederick Garzino, Shirley Chiou, Roslind Diamond, and Robert McDougal. I am especially grateful to the editors and reviewers for their comments on the manuscript. The views expressed are those of the author and not of the Federal Reserve Bank of New York.

More than twenty years ago the portfolio selection problem was stated as a parametric quadratic programming problem [3]. Since that time there has been an ongoing search for methods that would allow reductions in both the data and the computational effort required to implement the Markowitz formulation. Markowitz himself developed a special algorithm for the problem [4] Sharpe followed with his famous diagonal model [6], a linear programming approximation for the special case of mutual funds [7], and a linear programming approximation for the general problem [0]. And during this period there were substantial advances in quadratic programming computer codes. A very fast code is now widely available [1], but the size of the code itself (a listing of the annotated program runs to more than 3, 000 lines) makes its everyday use for portfolio selection somewhat unattractive.

In the evaluation of investment opportunities risk is often a primary consideration. Risk is usually not a factor of such importance, however, in the evaluation of borrowing opportunities. But when the borrowing opportunities include the borrowing of foreign currencies, then the possibility of exchange rate fluctuations during the loan period may introduce a significant component of risk. It is our purpose to develop a method for evaluating and selecting international borrowing sources in the face of exchange rate uncertainties.

In this article, the author presents a reply to the criticism of his study by researcher Thomas R. Dyckman, which discussed effects of restating financial statements for price-level changes. Dyckman has asserted that the null hypotheses tested in the author's study were false by definition, and therefore the tests performed were trivial. The author argues that this simply is not true. The null hypotheses tested were simulated investment decisions made in a given contest are the same whether based on historical-cost financial statements, current-value financial statements, or a combination of both types of statements; and these decisions, if different, are no "better" when based on any one of the information sets than when based on the other information sets. A considerable portion of Dyckman's comments concern the problems arising from the use of students in a laboratory situation. The limitations arising from these conditions are well known and are adequately acknowledged in the author's study.

This article presents a behavioral approach to transfer pricing problems. Since the transfer pricing problem only arises within a recognizable social system, be it an organization or a socialist economy, this article considers the solutions in a social system context. The paradigm developed can then be used to evaluate the usefulness and limitations of the various proposed solutions. Decentralization is one approach to organizational design. Implicit in this approach is the segmentation of the organization into various specialities. Numerous reasons are provided in the transfer price literature for decentralization. Decentralization, however, does not quite explain the process involved. A consequence of the segmentation of the organization into parts is that the behavior of organizational members will be influenced by the segmentation. Therefore, the term "differentiation" is used to include not only the segmentation of the organization into specialized parts, but also to include the consequent differences in attitudes and behavior of organizational members.

I. Discounting and conservation, 359. — II. A model for natural environmental resource allocation: the concept of effective discount rates, 362. — III. Concluding remarks, 370.