EXCHANGE rate depreciation can be used by a country either to improve its balance of payments or to stimulate domestic employment and output. But there is a conflict between these two objectives. If expansion at home is allowed, the depreciation cannot be expected to result in the trade account improvement obtainable if domestic policies to stabilize output and employment were pursued. This article discusses the extent to which the income movements that are a consequence of devaluation conflict with the goal of improvement in the trade balance. analysis of devaluation was extended to incorporate income movements in the studies by Laursen and Metzler' and by Harberger.2 Subsequent criticisms and extensions have clarified many aspects of the problem,3 especially the money-illusion that was implicit in Harberger's analysis. Emphasis in their work has been placed upon the value that must be exceeded by the of elasticities of import demand in order to insure stability in the foreign exchange market. dominant conclusion that emerged was that this sum exceeds unity if employment and output are allowed to respond to the forces set in motion by depreciation. In this paper I assume that demand elasticities exceed the critical for exchange stability, so that depreciation becomes a feasible technique for improving the trade balance, and examine the nature and extent of the dampening effect of output and employment changes on the balance of payments. This is accomplished by investigating what I call the dampening coefficient associated with output changes. Consider the improvement in the trade account with variable outputs relative to the improvement if stabilization policies are pursued. This fraction subtracted from unity is an index of the extent to which income changes have reduced the improvement in the trade account. higher the value of this dampening coefficient, the greater the cost4 to the devaluing country of output changes. Two types of dampening coefficient must be distinguished. first relates to the comparison between (i) devaluation in which all countries' outputs vary as they will and (ii) devaluation in which all countries stabilize levels of output and employment, and is a measure of the comparative importance of effects5 and income effects. It is examined in the first section of this paper. second dampening coefficient is relevant to trade policy in the devaluing country. It measures the diminution in the gains in the trade account resulting from failure to control output in the depreciating country when some specific assumption is made as to stabilization policies abroad. That is, it is assumed that decisions in the devaluing country concerning stabilization policy do not influence other countries' stabilization policies. For simplicity, I assume, in the second section of this paper, that other countries decide not to permit any fall in employment. expressions for either dampening coefficient depend upon the period of time during which the of devaluation are considered. distinction made in this paper between the short-run and long-run of currency depreciation is based upon studies suggesting dif* This paper had its origin in my doctoral thesis submitted to M.I.T. in 1955-56. It has benefited from comments by Robert Solow and Lionel McKenzie. ' S. Laursen and L. Metzler, Flexible Exchange Rates and the Theory of Employment, this REVIEW, XXXII (November 1950). 'A. Harberger, Currency Depreciation, Income, and the Balance of Trade, Journal of Political Economy, LVm (February 1950). 'For example, cf. Spraos, Consumers' Behavior and the Conditions for Exchange Stability, Economica, xxII (May 1955); Pearce, A Note on Mr. Spraos' Paper, Economica, xxii (May 1955); H. Johnson, The Transfer Problem and Exchange Stability, Journal of Political Economy, Lxrv (June 1956). 4 Cost measured in sacrificed improvement in the trade account. 6 By price effects I mean the change in the trade balance resulting from the change in relative prices, neglecting the impact of changes in aggregate outputs.

The most pervasive feature of "businessman's culture" atmosphere is change. Change, in a commercial culture equates to progress, something new, something different, is intrinsically valid. Change results in new markets, new jobs, new opportunities for investment and for profit. This enthusiasm for innovation, for obsolescence through social temperament rather than through physical necessity, is so much a part of conditioning that one hopefully embrace every new gadget, nostrum, or notion, whether social, medical, or managerial, without really critical examination. Computer systems have an important place to play in part of faculty education and ultimately in student education for management. The scope of these kinds of systems is so large that only high-speed processing systems can let one experiment with whatever ideas one dream up. One can fly businesses many times without the danger of getting hurt by crashing. One become more sophisticated in refining management games and process simulators, one will be able to deal more and more with the unpredictable's that affect business results. And will also be moving slowly toward discovering a real "science of management."

Reviews two books about accounting "Guides to Successful Accounting Practice"; "Accounting Aids to Management."

The word "reserve" has been used to describe a diversified grouping of accounts on the right-hand side of the balance sheet. The various uses and capacities in which the word serves, as well as the many different methods of its creation, have caused perplexity for a long period of time. The ambiguity of the term prompted the Committee on Accounting Procedure of the American Institute of Certified Public Accountants in 1953 to recommend to its members that only certain types of liabilities, known and unknown, be designated as reserves. The Committee on Terminology of the Institute corroborated in the limited use of the term "reserve" with the recommendation that amounts for betterments or plant extensions and for excess cost of replacement of property be included. The conditions surrounding the actual definitive processes make it difficult to draw the line between true reserves and "so-called" reserves although the Institute recommendations to accountants make clear and definite distinctions.

Introduction, 614. — I. Equilibrium growth in an open economy, 615; — aggregate relationships, 615; — equilibrium growth conditions, 619. — II. International economic dependence, 621; — relation of domestic to foreign growth rate, 621; — role of net balance of international indebtedness, 625. — III. Monetary-fiscal policy and growth, 627; — role of monetary-fiscal instruments, 627; — alternative combinations and limits, 629. — IV. Conclusions, 632.