Showing papers in "Economica in 1955"

Seven Centuries of Building Wages

Abstract: The secondary sources exist from which to construct a fairly continuous record of the money wage-rates of building craftsmen and labourers in southern England, typically in Oxford, from the later thirteenth century to the present day. Some apology is due for piecing and patching with secondary sources, when the primary materials are probably there for more detailed and solid work; but the magnitudes and epochs of the main movements are not in doubt, and the results which can be won from what is immediately accessible seem worth setting out for the sake of their grand perspective. The changes of seven centuries can be surveyed together in Fig. 1, and are set out period by period in Fig. 2. The data are in Table I.

The Nature and Role of Originality in Scientific Progress

Abstract: We set great store on originality in economics. Cournot was a great economist because he was original; Mill was not a great economistonly a great expositor-because he was not original. At times the attitude is carried to such extremes that we admire a man for his original and ingenious absurdities: he has a seminal mind. Even when we stop short of this curious perversity, we like to associate each eminent economist with the doctrine he originated. Jevons-marginal utility; Walras-general equilibrium; Marshall-quasi-rents, long and short run; Wicksteed-Euler's theorem; Pigou-private and social marginal products; Thunen-/ap; and so it goes on. If we cannot associate a catchword with the man, we are inclined to deny him originality. Originality is decidedly a fine virtue, and I have no desire to praise the mind that devotes itself exclusively to an almost incestuous admiration of earlier wisdom. But originality is a more complicated virtue than most discussion seems to recognize, and its role in the progress of science is not easy to state or to assess. It is to these matters that this essay is devoted.

Statistical Calculations of Tax Burdens

Abstract: In recent years there has been a number of attempts in this country, the U.S.A., and elsewhere to estimate the redistributive effects of all taxation. Our objects in this paper are to examine the logical assumptions behind these calculations and to try to assess their validity. Some of the estimates have been more ambitious than others and have tried to deal with the expenditure, as well as the revenue, side of government activity. Although our arguments are of general applicability to both sides of the accounts we shall not specifically refer to the expenditure aspects, except in Section V. We shall, moreover, confine ourselves to the principal direct and indirect taxes, such as income taxes and excise taxes, without going into the ramifications of other forms of taxation. This is partly because these taxes are usually the most important, but also because they are on the whole simpler to analyse and therefore anything we have to say will most probably apply a fortiori to other taxes. In I we shall try to summarise the ways in which the authors of these papers have grappled with their problems and the justifications they give for their assumptions and methods; in II and III we shall look closely at indirect taxes; in IV we shall turn to direct taxes, and in V we shall offer some general reflections on these calculations.

The Accountant's Contribution to the Trade Cycle

Abstract: It is well known that changes in the price-level can alter the accountant's figures for cost and profit. A firm's inputs are normally charged in accounts at their acquisition price; and so-unless inputs and sale are simultaneous-the cost side of a revenue account must reflect an earlier price level than the revenue sale. When prices are rising, accounting costs tend to be low relative to replacement costs, and so profit looks large; when prices are falling, accounting cost is relatively high and profit small. Perhaps we may-rather tendentiously -use the phrase " historic cost error " to describe the gap between accounting profit and the profit figure that would be found if inputs were charged at the replacement prices ruling at sale dates. This latter profit may be called " corrected profit ". The historic cost error has been widely advertised during the post-war inflation, mainly by businessmen who feel their taxes-based on accounting profit-to be unreasonably high. But it has other aspects of importance, and notably its possible influence on the trade cycle.' Its alternate overand under-statement of profits seems likely to affect the size of the cycle-in particular, through its influence on mental attitudes, on the supply of credit, and on policies of consumption and investment. II

The Transfer Problem: A Note on Criteria for Changes in the Terms of Trade

Abstract: The transfer problem is a perennial problem in the theory of international trade, which has given rise to a voluminous literature. Recently Professor Samuelson has surveyed this literature in an exhaustive investigation of the classical two-country two-goods transfer problem,' in the course of which he has derived criteria for determining the direction of change in the transferring country's terms of trade. The purpose of the present note is, first, to demonstrate that Professor Samuelson's criteria may be derived by a simple argument requiring no geometrical or mathematical analysis ;2 second, to raise some doubts about the sharpness of the contrast between Professor Samuelson's terms-of-trade criteria in the cases of " real" and " artificial " obstacles to trade, and to present general criteria which comprise both cases. The argument incidentally provides a new support for the classical presumption that the terms of trade will turn against the transferor, and sheds some light on the influence of transport costs on the problem. The simplest approach to the transfer problem is to consider the effect of the transfer on the demand for the transferor's export good at constant (pre-transfer) prices. The effect of a transfer will be to decrease the transferor's demand, and increase the transferee's demand, for the transferor's export good.3 If the net effect is an increase in the quantity of the transferor's good demanded, the transferor's terms of trade will have to turn in its favour to restore trade equilibrium, and vice versa. This result follows from two assumptions of the model: identity of total income and expenditure, from which it follows that (at constant prices) an increase in demand for one commodity is accompanied by a reduction in demand for the other, so that we need only consider the demand for one commodity; and market stability, from which it follows that excess demand for a commodity must be eliminated by an increase in its relative price. Since the relationship between the prices of the same good in the two markets is assumed to remain fixed in each of the cases studied, it does not matter in which market the terms of trade are measured; and since changes in production will depend on changes in the terms of trade, it does not matter whether we assume production in each country fixed or variable.

The Engineer's Approach to Economic Models

Abstract: In an important book' recently published, Professor Tustin has given an account of the way in which an engineer looks at economic systems. His book is, inevitably, difficult reading for anyone not used to applied mathematics. Economists will need some urging and encouragement if they are to attempt to follow Professor Tustin's line of argument. The purpose of this article is to provide the encouragement; it is an economist's approach to the engineer's approach.2 Part of the difficulty lies in the fact that the kind of mathematics an economist usually acquires is " pure " mathematics, concerned more with basic concepts and methods than with the details and the short cuts of applied mathematical techniques. It follows for example that the economist is looking for broad principles and for general solutions. About the most concrete question he asks is on the lines: for what ranges of values of the marginal propensity to save and of the power of the accelerator does an economic model show damped oscillations ? On the other hand, an engineer like Professor Tustin is skilled in applied mathematics; he knows and uses all the tricks which have been found profitable in practical problems. This is reflected in the exposition of his book. He goes out of his way to explain some things (e.g. vector algebra) which are fairly familiar to an economist with mathematical training. At the same time he does not always explain the short cuts he is taking so that, in following him, the reader tends to find himself facing a blank wall. He uses the jargon of applied mathematicians, and some of their more specialised concepts, without much warning. He scatters around terms such as the " fundamental " and the " modes " of oscillation, or "in-phase" and " quadrature" components, and concepts such as "convolution integrals " appear out of the blue. His account of the Laplace Transform is so dispersed through the text-and in quite involved geometrical and graphical terms -that it provides no real substitute for a formal treatment (as given in simple terms in a book like Jaeger's An Introduction to the Laplace Transformation). The point is that these are difficulties many of which Professor Tustin can hardly be expected to have anticipated, and which can be overcome by hard reading and re-reading of the text. The economist should first try his hand at drawing, for particular economic models, the kind of schematic diagram of the closed-loop type used by engineers. A model consists of a set of equations relating certain variables; the various " legs " of a schematic closed-loop diagram

Competition in the Retail Grocery Trade 1850-1939

Abstract: This article outlines the principal events in the development of competition in the retailing of groceries and provisions between 1850 and 1939. Special attention is given to price competition, both because it was a marked and pervasive feature of business behaviour during the major part of the period and also because price competition (or its absence) figures prominently in present-day discussions on the nature of competition in retail markets. The treatment in this article is non-statistical. It is not possible to express the extent or severity of price competition in quantitative terms; and statistics which might have been useful to illustrate parts of our historical account are not available.2 In the course of our discussion we refer to several of the attempts of organised grocers to regulate and reduce competition because they give some indication of the severity and character of competition at different times during the period covered. However, we do not present a history of organisations of retail grocers. It must suffice here to mention that during the second half of the nineteenth century numerous local associations of grocers were formed for a variety of reasons, and that the Federation of Grocers' Associations was founded in 1891. Among its many functions the Federation was from the beginning concerned with measures for the control of competition, though neither its activities nor those of the local associations had any appreciable effect on the course or intensity of competition.3 1 We acknowledge, with thanks, research assistance provided by the Economics Research Division of the London School of Economics. 2 For example, there are no time series of gross margins on particular lines or in the grocery trade (however defined) generally. J. B. Jeffery's recent study, Retail Trading in Britain 1850-1950, 1954, provides estimates of the shares of the trade handled by the main types of retail undertakings since 1850. Such statistics, though interesting in themselves, are of limited significance for our study of competition. The market influence of successful new types of firm was far greater than that suggested by the share of the trade handled by them. Moreover, the usual classification of retail undertakings for statistical pu-poses necessarily fails to take account of several characteristics which are imporiant for the study of market behaviour (e.g., age of firm, price policy and range of merchandise handled). In particular the category which usually includes all retailers other than co-operative societies, department stores or multiples contains a heterogeneous collection of firms which did not have uniform pricing policies, methods of operation or attitudes towards competition. 8 The associations and the Federation in the main represented the self-styled "legitimate " trade which, however, is not easy to' define. Roughly, it referred to retailers who practised the more traditional or established methods of business, and who felt most keenly the impact of the emergence of new types of competitor or of novel methods. Since what was customary or established changed with the years, the nature of legitimate tra'de also changed.

Consumers' Behaviour and the Conditions for Exchange Stability

Abstract: The proposition that the exchange rate will be stable if the sum of the elasticities of import demand of the home and foreign (" rest of the world ") country respectively exceeds unity, rests on the following assumptions: (a) that each country's elasticity of aggregate supply is infinite and that its output contains no import component, so that imports consist of final goods only; (b) that trade is initially balanced; (c) that, for any given national money income, aggregate money expenditure remains constant irrespective of price changes. Other assumptions, which are usually taken for granted, are those of a constant budget surplus, constant money wages, a neutral influence of income redistribution on the parameters of the consumption function, and a perfectly elastic supply of money (bonds), making for a credit system which performs no independent restrictive function. One can drop one or more of these restrictive assumptions and examine the consequences. In recent years the fashion has been either to drop the whole lot-in the process, however, throwing overboard, into a vast sea of coefficients, the baby as well as the bathwater-or, when the dropping was selective, to jettison assumption (c) while retaining all the others. This paper falls exclusively in the latter category, and encompasses, therefore, within its purview only four writings out of the vast literature on exchange stability: those of A. C. Harberger,' S. Laursen and L. A. Metzler,2 W. F. Stolper3, and A. C. L. Day.4 Except for one or two passing references to the variation of investment outlays, all these writings allow only for changes in consumption expenditure. The dropping of assumption (c) affects, therefore, the consumption component of aggregate expenditure, but not the investment component. In fact, to ensure rigorous consistency, it is necessary to assume not only that investment outlays are constant, but also that they are confined to domestic goods, whose prices [by assumption (a)] do not change, so that the volume of investment is constant too. The plan of this paper is to set out the relationship between the various conditions for exchange stability formulated by the above