Showing papers in "Journal of Political Economy in 1956"

A Pure Theory of Local Expenditures

Abstract: NE of the most important recent developments in the area of "applied economic theory" has been the work of Musgrave and Samuelson in public finance theory.2 The two writers agree on what is probably the major point under investigation, namely, that no "market type" solution exists to determine the level of expenditures on public goods. Seemingly, we are faced with the problem of having a rather large portion of our national income allocated in a "non-optimal" way when compared with the private sector. This discussion will show that the Musgrave-Samuelson analysis, which is valid for federal expenditures, need not apply to local expenditures. The plan of the discussion is first to restate the assumptions made by Musgrave and Samuelson and the central problems with which they deal. After looking at a key difference between the federal versus local cases, I shall present a simple model. This model yields a solution for the level of expenditures for local public goods which reflects the preferences of the population more adequately than they can be reflected at the national level. The assumptions of the model will then be relaxed to see what implications are involved. Finally, policy considerations will be discussed.

The Baseball Players' Labor Market

Abstract: SINCE its inception in the 1870's, organized baseball has developed a market for baseball players and their services in which there is less than perfect freedom to buy and sell. In this paper I shall discuss analytically a number of market problems which are interesting because of some unusual characteristics of the baseball labor market and the organization of the baseball industry. In the labor market, monopsony is more frank and explicit and less imperfect than in the more common case, in other industries, of covert antipirating agreements. The nature of the industry is such that competitors must be of approximately equal \"size\" if any are to be successful; this seems to be a unique attribute of professional competitive sports. Before passing to the analytical questions, however, I must describe the structure of the industry and the rules of the market. The structure and the rules of the market for baseball players and their services are defined in seven documents which constitute the constitutional papers of the baseball industry. These documents are the Constitution of the National League of Professional Baseball Clubs, the Constitution of the American League of Professional Baseball Clubs, the Major League Agreement, the M ajor League Rules, the Maj or-M inor League Agreement, the Major-Minor League Rules, and the Agreement of the National Association of Professional Baseball Leagues (the minor leagues).2 The documents specify the procedures for their own amendment, and they are amended from time to time. They are enormously complex. This complexity arises, in part, from the ingenuity of club owners and business managers in doing violence to the purposes of the rules while obeying their letter. Let a rule be established proscribing a practice and inhibiting gainful action, and teams find some substitute for it, and an amended rule emerges. Complexity also arises from the effort to compromise inconsistent interests within baseball. Takeni all together, the documents I Am indebted to my colleagues and the students of the Department of Economics at the University of Chicago for challenging discussions of this topic which I have had with them. I must lay claim, however, to any errors the paper still contains. Although I have referred to a large number of different sources in the considerable literature on baseball, I have found no document so valuable by far as the Hearings before the Subcommittee on Study of Mfonopoly Power of the Committee on the Judiciary of the House of Representatives (82d Cong., 1st sess.), Serial No. 1, Part 6: Organized Baseball (Washington, D.C.: Government Printing Office, 1952). The materials collected in this volume are massive and are indispensable for the understanding of the economics of this market. The volume will be cited henceforth, for brevity, as \"Celler Hearings,\" after Congressman Emanuel Celler, the committee chairman. The companion piece to the hearings of the subcommittee is its report, Organized Baseball: Report of the Subcommittee on Study of AMonopoly Power of the Committee on the Judiciary, Pursuant to El. Res. 95, House of Representatives (82d Cong., 2d sess. [WXashinigtoii, D.C.: Governienit Prinitioig Office, 1952J). IThis (locUiiie1it ill lee referred to heniceforth as \"C(elter Report.\" 2 The Baseball Blue Book, 1955 (Fort Wayne, (1.: lBureau of the Bflue Book, 1955).

The Welfare Cost of Inflationary Finance

Abstract: IN RECENT years several governments have been tempted to resort to open inflation as a method of financing a desired diversion of resources to the government sector of the economy, because of the apparently painless character of this method of diversion. This temptation has not always been resisted in spite of the evidence from the past that this process is not so painless as it appears at first glance. On the other hand, most economists in this country have virtually taken it for granted that this method of finance is not desirable. In many cases the governments of other countries which desired to divert a substantial fraction of

Exports and Regional Economic Growth

Abstract: THE theory of the regional economic base has been bobbing around in the literature, implicitly and explicitly, for some time.1 Its latest appearance comes as an explanatory factor in regional economic growth. In his recent article Douglass C. North has suggested that the theory of regional development which sees the region as passing through various stages-primary, secondary, and tertiary-is not adequate.2 As a substitute, North maintains that a region's growth "is closely tied to the success of its exports and may take place either as a result of the improved position of existing exports relative to competing areas or as a result of the development of new exports."3 He further points out that it is necessary to look into location theory to explain changes in the export base. The point involved is that the concept of the export base in regional analysis is called on as the major autonomous variable determining the level of regional income. The concept of the economic base has been developed largely in the works of city planners and other researchers interested in urban problems.4 As such -and this is neither slur nor praise-no attempt has been made to relate this concept to the general theory of income determination as used in

"Availability" and Other Influences on the Commodity Composition of Trade

Abstract: T HE purpose of this paper is to assess the relative importance of the various factors that influence the commodity composition of the foreign trade of the United States. The concern is with the composition of exports and imports as of a given moment in time rather than with long-run influences and tendencies. The search for influential factors is carried on first within the framework of the law of comparative advantage. It seems clear that differences in relative wages, which have frequently been stressed by the protectionists, are not generally a controlling factor. There is some evidence, however, that differences in relative output per worker are more important, particularly in determining the shares of third markets enjoyed by two countries producing similar products. The role of capital-labor scarcities, whose importance has been stressed by Professor Wassily Leontief, is also examined. It is argued that Leontief's findings that United States exports have a higher labor content and a lower capital content than United States imports can be explained better and more simply by the availability factor. In other words, goods that happen to

The Statistics of Monopoly and Merger

Abstract: T HREE quantitative studies of the monopoly problem in the United States have been made in recent years by Harberger, Kaplan, and Weston. In different ways the studies of Harberger and Kaplan tend to show that the monopoly problem is not overly serious in our economy, and Weston's study argues along a converging line that large firms are chiefly the product of internal growth, not of mergers. In the broad sweep of economic literature, studies which question the importance of monopoly are but a tiny dissent from dominant opinion: for every page of argument that competition is rampant, there are surely a thousand which suggest its imminent extinction. But these studies by serious and objective scholars do not seek to reach the golden mean by counterexaggeration; rather they seem to imply that even \"reasonable\" views have been rather one-sided. I wish to examine these statistical invitations to change our view of the economic world.

The Transfer Problem and Exchange Stability

Abstract: T HE transfer problem bulks large in the literature of international trade theory, both because international economic relations have abounded in transfer problems of various kinds and because the problem offers an attractive opportunity for the application of new theoretical techniques. The purpose of this paper is not to survey the literature' but to offer a straightforward and (it is hoped) simplified exposition of the theory of transfers in modern terms, based largely on recent literature but extending and unifying it in certain respects. In addition, it will be argued that transfer theory has a wider application than might appear at first sight and that, in particular, it can be applied directly to the problem of exchange stability. In the context of modern international trade theory, the transfer problem can be posed in either of two ways-as a real problem or as a monetary problem. More precisely, it can be approached either on the classical assumption that the economic system works so as to maintain equality between income and expenditure in each country at the level correspending to full employment of resources or on the Keynesian assumption that the economy of each country is characterized by a perfectly elastic supply of labor and commodities at a fixed wage and price level,3 so that output and income are determined by aggregate effective demand. In this paper the problem will be discussed from both approaches. On either set of assumptions, classical or Keynesian, the transfer problem can be separated into two problems for analysis. The first is whether the process by which the transfer is financed in the transferor country and disposed of in the transferee will affect each country's demand for imports (at unchanged prices) sufficiently to create the trade surplus and deficit necessary to effect the transfer. The financing and disposal of the transfer will tend to reduce the transferor's demand for goods and increase the transferee's demand for goods; both effects will tend to improve the balance of trade of the transferor and worsen that of the transferee, and the changes may fall short of, or exceed, the amount of the transfer. Unless the changes in trade balances are exactly equal to the amount of the transfer, there will remain a balanceof-payments disequilibrium which must be corrected by some adjustment mechanism. In the classical model the adjustI This paper was drafted during my tenure of a visiting professorship at Northwestern University; it has benefited greatly, though perhaps insufficiently, from criticisms of colleagues there and elsewhere in the United States and the United Kingdom.

Exports and Regional Economic Growth: A Reply

Abstract: PROFESSOR TIEBOUT 's comment is a welcome addition to the literature on regional economic growth. The role of the export base in regional development requires further analysis, and Tiebout has raised some important questions that merit discussion. The bulk of his criticism of the role of the export base in regional growth hinges on one critical point at issue between us. His is a short-run analysis, in which the export base is conceived to be only one of a number of important factors in income determination. I have no quarrel with this position, but it has little relevance for my article, which was explicitly concerned with long-run economic growth. Shortperiod income determination and long-run economic growth are not the same thing. In the former case the analysis is concerned with changes in the level of employment and the variables that will affect the rate of utilization of productive factors. In this case increased business investment will result in expanded employment and income in periods of less than full employment. Such analysis, however, has little relevance for long-run economic growth, where the objective is to determine the factors that will affect the decade-to-decade changes in the real aggregate and per capita income of an area under conditions of full employment. In the latter case secular expansion comes about because of increased output per unit of resources or an increase in the supply of productive factors, or both. Historically, this increase in labor and capital has come about as a result of long-run expansion of the demand for productive factors within

Econometric Models of the United States

Abstract: IN RECENT years the federal government has assumed major responsibilities for economic stability and growth. Along with this has come increased awareness of the interrelatedness of different sectors of the economy and of the need for co-ordination of policies which had previously been debated in terms of their direct impacts on individual sectors. However, there are sharp differences of opinion about how far one should go toward formalizing the concept of interrelatedness. The traditional view appears to be that all economic relationships should be dealt with on an intuitive level -that no tangible mechanism should intervene between the raw material (individual time series) and the finished product (policy recommendations). This requires an act of faith on the part of both the giver and the receiver of economic advice. A newer view, still struggling for recognition, is that the policy implications of a host of raw time series can be made clear if they are organized into an econometric model-a system of equations which translates the concept of interrelatedness into an explicit, quantitative, reproducible form. During the last two decades, three major attempts have been made to construct econometric models for the United States. The first of these was published by Tinbergen (1939), the second by

The Limitations of Local Price-cutting as a Barrier to Entry

Abstract: CRITICS of a free-market economy often contend that freedom of entry is difficult, if not impossible, to maintain. In a nominally free-market economy, they argue, a smaller firm seeking to enter and expand will frequently face local price-cutting by large firms, firms which first use their great financial power to drive rivals from the field and then are free to raise prices to customers in order to recoup their losses. This view is very widely accepted, and, indeed, such behavior is believed by many to have been clearly established as characteristic of a capitalist economy. For example, E. A. G. Robinson writes:

Monopoly, Bigness, and Progress

Abstract: W ITHIN the last decade there has been a strong revival of interest in an old topic: the role of monopoly and big business in promoting economic progress. This revival has stemmed in large part, of course, from the stimulating reflections of the late Professor Schumpeter on what he called the process of "creative destruction. "2 His basic theme, with minor variations, has since recurred many times in economic literature, both professional and popular. It will not be repeated here, except incidentally, nor will it be subjected to close scrutiny. The main purpose of this essay is to clarify some of the fundamental issues that have become obscured in recent discussion. This calls for covering ground that, upon being revealed, is recognized as painfully familiar. But no apologies need to be offered for this, for it is precisely the familiar things that are most readily overlooked.

India and China: Development Contrasts

Abstract: F EW economic events during the coming decade will be of more importance than the comparative economic development of India and China. This article compares and contrasts the two economies as they entered upon their development programs and analyzes the two programs. It does not assess comparative performance to date; data and analyses now available provide insufficient basis for such comparison. Research now in progress is expected to make possible a later report comparing performance to date and projecting it into the future. Measured by population, China and India are the two largest nations in the world. Measured by average income, they are among the poorest. Both countries have embarked on long-term programs aimed at a significant expansion in income. Indeed, they are both well along on the initial stage of this effort: India is already drafting her second Five-Year Plan, which will begin on April 1, 1956; China's first Five-Year Plan ends in 1957. These contemporary plans with parallel objectives are being pursued in very different ways. In China the new Communist regime has formulated a program of rapid industrialization patterned largely on the Soviet model. The program is power-oriented. It is based upon centralized control over the people of China, which in turn it furthers, and it seeks the rapid expansion of the regime's international, political, and military potential. Government economic policy is dedicated to maximizing industrial output. As a means to this end, consumption is to be kept at the lowest levels compatible with domestic political stability. In contrast, Indian policy and planning derive from democratic methods. The program is largely welfare-oriented. Economic policy leaves broad scope for the private sector, freedom of consumer choice, and reI This article was completed in August, 1955, on the eve of my departure for India. I am grateful for the valuable assistance of colleagues, who made certain changes in detail after my departure; to my secretary Gerry Friedenn, who completed footnotes and prepared the final typescript; to Alexander Eckstein, who verified the accuracy of my references to his work and prepared certain additional estimates for me; and particularly to Professor E. E. Hagen, who kindly agreed to handle these matters and the arrangements of publication in my absence.

The Empirical Content of Ricardian Economics

Abstract: I THINK it fair to say that Ricardian economics is popularly depicted as having evolved in a state of almost complete factual ignorance. The weight of modern scholarship concurs in regarding the empirical content of Ricardian economics, whatever its character, as irrelevant to an understanding of economic thought in the half-century after Ricardo's death. To be sure, the initial postulates of the Ricardian \"vision\" are granted to have been influenced by casual observation and a variety of impressions of the contemporary scene.1 But it is held that to criticize the classical economists for not having checked their theoretical conclusions against empirical data is to expect the thinkers of a previous age to meet the rigorous standards of modern economics, and that after all is a historical fallacy. The paucity of statistical material in the period, it is said, made it impossible to entertain any but an abstract and deductive approach to economic reasoning.' In consequence, the disciples as well as the critics of Ricardo appear to have spent their energies in debating the logical imperfections of Ricardo's system and, at best, the descriptive \"realism\" of its assumptions. In short, classical economics in its Ricardian phase is considered to be a product of theoretical discussion and nothing more. Schumpeter in his History of Economic Analysis expresses himself very differently on this issue: \"The opinion-the source of so much pointless controversy -that the economic profession then neglected factual research is utterly unfounded . .. the 'classic' period fully maintained the tradition of factual research that, as we know, harks back to the sixteenth century.\"3 The skeptical reader may well question this assertion, particularly since Schumpeter does little to substantiate it. The present essay should be regarded as an attempt to explore the implications of Schumpeter's remarks. My purpose here is to show, first of all, that the body of doctrine which Ricardo bequeathed to his followers rested on a series of definite predictions about the course of economic events which were subject to empirical verification, in the strictest sense of the term. Second, I shall try to show that the statistical data and methods of the time, crude as they may have been, were adequate to test the validity of Ricardian theory, in terms of its predictive accuracy for the class of phenomena which it was intended to explain, and, moreover, that such evidence was within the purview of all the economists of the day. Lastly, I shall argue that few of the classical thinkers were willing to surrender economic propositions on the grounds that they were contradicted by the available evidence; but, I stress, this had nothing to do with lack of empirical information. 1 See, e.g., C. F. Dunbar, \"Ricardo's Use of Facts,\" in Economic Essays (New York, 1914), and Edwin Cannan, History of the Theories of Production and Distribution (3d ed.; London, 1953), esp. pp. 116-32.

The Problem of Economic Assumptions in Mathematical Economics

Abstract: IN RECENT years there has been considerable discussion of the merits of mathematical analysis in economics.' The discussion has been primarily concerned with the advantages of mathematical techniques for certain kinds of problems, the potential pitfalls in the use of these techniques, and the problem of communication between mathematical and non-mathematical economists. The mathematical economists claim the following advantages for their techniques: The assumptions on which the analysis is based are made explicit.2 The conclusions follow rigorously from the assumptions, with no necessity for heuristic arguments. The analysis is more efficient, in the sense that the conclusions are proved more directly and that it is easier to verify the steps performed in the proof. Literary economists, however, frequently have trouble determining the assumptions underlying mathematical analysis. This is because mathematical economists are more concerned about the mathematical assumptions, which are usually made clear, while literary economists are more concerned about the economic assumptions, which are frequently obscure. Literary economists consider this a very important shortcoming because they cannot make adequate use of the results of mathematical analysis unless they understand the economic assumptions involved. In addition, mathematical economists are criticized for (a) letting their mathematics run away with them, (b) making assumptions which are convenient mathematically but poor economics, and (c) concluding that mathematics are a substitute for good economics. The critics of mathematical economics, however, have in general been rather vague, which has led Professor Koopmans to complain that some of them have not "itemized [their] objections to, or insisted on asking searching questions about, particular named articles." FurI J. M. Clark, "Mathematical Economists and Others: A Plea for Communicability," Econometrica, XV, No. 2 (April, 1947), 75-78; G. J. Stigler, "The Mathematical Method in Economics," in his Five Lectures on Economic Problems (New York: Macmillan Co., 1950); P. A. Samuelson, "Economic Theory and Mathematics-an Appraisal," American Economic Review, XLII, No. 2 (May, 1952), 56-66; M. Allais, "L'Utilisation de l'outil mathematique en 6conomique," Econometrica, XXII, No. 1 (January, 1954), 58-71; D. Novick, "Mathematics: Logic, Quantity, and Method," Review of Economics and Statistics, XXXVI, No. 4 (November, 1954), 35758; P. A. Samuelson, L. R. Klein, J. S. Duesenberry, J. S. Chipman, J. Tinbergen, D. G. Champernowne, R. Solow, R. Dorfman, T. C. Koopmans, and S. E. Harris, "Mathematics in Economics: Discussion of Mr. Novick's Article," Review of Economics and Statistics, XXXVI, No. 4 (November, 1954), 359-86. 2 Allais goes so far as to say that the assumptions must be stated explicitly: "En traduisant rigoureusement toute theorie en un module abstrait, la formulation mathematique a l'inappreciable avantage de forcer l'esprit a la reflexion et a la precision. Toute hypothese introduite doit 6tre necessairement explicitee et justifie'e" (op. cit., p. 63). Samuelson says that mathematical economists are "forced to lay our cards on the table" (op. cit., p. 64). However, he implies that they are "forced" to do so only if they want to.

Some Foundations of Economic Development in the Upper East Tennessee Valley, 1850-1900. II

Abstract: South Carolina-Georgia Piedmont, the Upper East Tennessee Valley, and the Mississippi Delta.2 In the process, we have found that the earlier economic and social history of our study areas is of greater interest and importance than we had originally anticipated. It is to this historical phase of my own study that the present paper is directed. More specifically, while our major concern is with the effects of local industrial-urban development (via the factor and product markets) upon the income and productivity of the nearby agriculture, I am here in1 My list of acknowledgments is far too long to include here all of those who were kind enough to comment on the very extensive working papers of which this article constitutes a summary. However, I am particularly indebted to two historians, S. J. Folmsbee and Herbert Weaver; to two sociologists, Albert J. Reiss, Jr., and Howard W. Beers; and to the following economists: Frank T. Bachmura, Fletcher Riggs, Anthony M. Tang, C. E. Bishop, W. E. Hendrix, T. W. Schultz, Chester W. Wright, and J. M. Stepp. My research assistant, Margaret R. Sturgis, was also very helpful in rechecking all computations for accuracy before publication. Finally, I am very grateful to the Rockefeller Foundation for its grant in support of the larger project of which this research is a part. 2 The first area is being studied by Dr. Anthony M. Tang and the third area by Dr. Frank T. Bachmura. For a progress report on Tang's phase of the project see hi, \"Farm Income Differentials in the Southern Piedmont, 1860-1940,\" Southern Economic Journal, July, 1956. The original prospectus for the over-all project may be found in my article, \"A Research Project on Southern Economic Development, with Particular Reference to Agriculture,\" in Economic Development and Cultural Change, I (October, 1952), 190-95.

The Stereotypes of Classical Transfer Theory

Abstract: C USTOMAPRLY, the classical position on the transfer of unilateral payments is identified exclusively with the specie-flow, price-level-shift adjustment. Furthermore, in recent literature the classical theory has been categorically distinguished from the so-called \"modern\" transfer doctrine based on income effects and demand shifts.2 Such a differentiation appears paradoxical, since many orthodox nineteenth-century economists included income and demand in the adaptation to capital movements.3 The paradox may be resolved, however, without difficulty. In the intervening years, as tradition replaced investigation,4 the classical views on capital transfers were reduced to goldand paper-standard stereotypes.5

Controlled Inflation in Israel, 1949-54

Abstract: T HE state of Israel is an open economy faced with a unique combination of problems.2 These problems, created primarily by war expenditures, rapid economic growth, and mass immigration, gave rise to strong inflationary pressures, which reached a peak toward the end of 1951. At the beginning of 1952 the government was forced to institute stabilization measures designed to halt the inflation, which had become a serious threat to the success of many phases of the national economic program. Chart I shows several economic indicators which reflect the sharp changes in the economy following the 1952 measures. The fluctuations of these indicators appear somewhat self-contradictory at first sight. Along with a steep rise in prices (and a less steep rise in money supply) in 1952, there was a sharp rise in unemployment and a decline in the balance-of-trade deficit. All these trends, however, resulted from one consistent economic policy; they will be dealt with in subsequent sections. The purpose of this paper is twofold: first, to examine the causes, dimensions, and effects of the 1949-51 inflation in Israel and, second, to study the main

The Economic Development of Nigeria: Comment

Abstract: A REVIEW article by Mr. P. T. Bauer, tX published in the October, 1955, issue of this Journal, contains remarks critical of the report of the International Banksponsored Survey Mission to Nigeria with which I was associated.' The purpose of this note is not to join issue with Bauer and engage in a controversy (which would be of limited interest) but rather to discuss several general points that he raised.2 I believe these have a bearing on the analysis of development problems and on the formulation of policy to deal with them.

Prices of basic industrial products in the ussr, 1928-50,

Abstract: : The essay presents some results of an inquiry concerning Soviet industrial price trends for the period 1928-50 The study is one of several that are presently being conducted for various Soviet economic sectors with the common aim to derive index numbers which might be used in the deflation of some recently published current ruble national income data

Iron and Steel in the Balance of World Power

Abstract: frnSHE present East-West conflict is the contemporary manifestation of ia long balance-of-power struggle which, in a modern sense, goes back to the beginnings of the industrial revolution, 1750-1800.2 Since that period this struggle has centered increasingly around the utilization of total industrial and manpower resources. This inquiry will be concerned with the industrial resources side of the power equation.4 Further, it will be limited for the most part to just one of the essential elements in the industrialization process -the iron and steel industry.5 Specifically, it will examine the changing distribution of the world's iron and steel facilities as it is related to the balance-of-power struggle. Particular attention will be given to the problems created by the recent biopolarization of world steel capacity.6

Bulk-Purchase International Commodity Agreements

Abstract: EXPERIENCE with rather persistent inflation and two American recessions during the last eight years has stimulated a literature on the subject of international commodity agreements which differs markedly from the discussions prior to 1948. Whereas the case for commodity agreements embodied in chapter vi of the Charter of the International Trade Organization rested on the alleged necessity of controlling \"burdensome\" commodity surpluses, the new literature hails such agreements as a technique for achieving general economic stability and for encouraging the production of primary products.) Some apparent characteristics of the new discussion are (1) a contention that importing and exporting countries have a community of interest in commodity-price stabilization; (2) an intent that commodity arrangements should be part of the permanent institutional setting rather than emergency measures; and (3) support of,

Recent Developments in Brazilian Agriculture

Abstract: IN THE United States and other advanced countries most of the growth in agricultural output in recent decades has not come from additional inputs of the conventional types. Is this kind of development also characteristic of poor countries? This study, like my study of Mexico,2 was undertaken to determine the extent to which the very substantial increases in agricultural production in Brazil, a relatively poor country, have come from the use of additional land, labor, and capital. The results, like those for Mexico, strongly support the inference that developments in agricultural production in Brazil in this respect are not unlike those in the United States. In Brazil only about half the additional output of agriculture since 1925-29 is explained by additional inputs of the conventional types. Brazil's economy has a large agricultural base and an inefficient transportation system. The income of the masses is very low. Marketing practices are backward, credit for agricultural purposes is poorly organized, and agricultural production methods are certainly not modern. Labor in agriculture is aided by very little capital equipment, and the practice of monoculture and the general misuse of soil have had a marked degenerative influence on land resources. The landto-man resource ratio, previously large, has become smaller during the last few decades. These are matters of no small concern to those interested in the future of the Brazilian economy. Even so, the United Nations Economic Commission for Latin America (ECLA) reports that, while Brazil's population was 41 per cent greater in the 1945-49 period than in 1925-29, its over-all real income was 70 per cent greater.3 What role has agriculture played in the improvement of per capita income? Research centers, demonstration farms, conservation activities, and other efforts have been undertaken by the Brazilian government to increase the efficiency of agricultural production. The Basic Economy Corporation has developed some suitable hybrid corn; it also has given some attention to insect control, better hog production, ways to clear productive land with machinery, and improvements of storage and marketing services. Have efforts like these by public and private concerns to improve productive efficiency in agriculture been successful? If so, how much more output is now being produced from a given quantity of inputs than was produced a quarter of a century ago? To give a meaningful answer to these questions one must determine what part of the increase in agricultural production in Brazil can be explained (1) by the use of additional quantities of resources and (2) by other developments, including the use of more productive techniques.

The Origins of Antitrust Policy

Abstract: H ANS B. THORELLI' S The Federal Antitrust Policy will establish him as one of those untiring researchers who believe that the proper way to study a subject is to burrow through every known source and if possible to discover several new ones. Following this canon, Thorelli has thoroughly examined the materials on the history of the Sherman Antitrust Law before 1903. He has read all the English common-law cases on monopoly and restraints of trade; all the congressional debates on the Sherman Act between 1888 and 1903, and all the party declarations and presidential addresses; all the Department of Justice files on antitrust cases; and all the judicial opinions. He has read surprisingly much of the periodical literature on the trust question and of the secondary materials on related problems in political, economic, and intellectual history. He is not the first to have used these materials, or even the first, as Corwin Edwards claims in a flattering foreword, to have used the Department of Justice archives-they had been exploited earlier at least by Cummings and McFarland and by Walton Hamilton and Irene Till. Nevertheless, he is the first to have done all this so comprehensively, and, since he quotes at very great length from very many documents, his work will be an invaluable sourcebook for future scholars. But it is a compendium that must be used with extreme caution. The attempt to set down all the facts, or as many as possible, has at times led Thorelli to treat as facts what are at best broad guesses or vaguely remembered rumors. He states, on the authority of Allan Nevins, that AttorneyGeneral Olney let the E. C. Knight case go

Agricultural Surpluses for Economic Development

Abstract: E Food and Agriculture Organization of the United Nations (FAO) has exercised much leadership in studying problems of scarcity as well as problems of abundance. The idea of using agricultural surpluses produced in developed countries to finance economic development in underdeveloped countries seeks to contribute to the solution of both problems at the same time. In its June, 1955, meeting at Rome, FAO's Committee on Commodity Problems reviewed this general idea; the review was based on a report by a special FAO mission which visited India in late 1954. This interesting study, made under the leadership of Mordecai Ezekiel, is a timely contribution to the discussion of surplus disposal and related problems. It is an analysis by mature students who kept one eye trained on the economics of the problem and the other on practical politics. To the economist the results of the analysis are no revelation. Its value lies in the practical importance of presenting these results in a form which men of action can understand; of basing them on factual surveys that exemplify the cogent conclusions of theory; and of orienting them toward providing "informed guid-ance" for those who must make policy decisions in this field. Yet it is only too likely that men of action will derive little encouragement from the study for bold and quick decisions. This likelihood is partly due to the nature of the problem. A comment on some of the highlights of the study might well start with a word about some aspects of our own surplus problem and surplus-disposal legislation. Under Title I of the Agricultural Trade Development and Assistance Act of 1954 (Public Law 480), which authorizes the sale of surplus agricultural commodities for foreign currencies, two crucial conditions must be fulfilled: (1) these exports must be in addition to what we could otherwise export for dollars; and (2) they must not "impair the traditional competitive position of friendly countries by disrupting world prices of agricultural products." These two requirements can be met only if our surplus disposal is for additional consumption: consumption which would not otherwise take place and which would therefore be a function of the very application of Public Law 480, Title I. How can additional consumption abroad -in the sense just indicated-be brought about? The possibilities are: (1) by expansion of real income in importing countries; (2) by displacement of other countries' marketing or by displacement of other commodities in consumer expenditure; and (3) by expansion of wholesale demand abroad for long-term stockpiling. It is under point 1 that the idea of using surpluses to finance economic development arises, and this is the point germane to the study under review.' In the more prosperous countries of our world it is clear that the income elsasticity of demand for surplus-type agricultural products is very low. The increase in income that could be generated in developed countries through exports for local currency (even if all of it were to be returned to the 1 A review note of Uses of Agricultural Surpluses To Finance EconomicDevelopment in Under-developed Countries: A Pilot Study in India ("FAO Commodity Policy Studies," No. 6 [Rome, Italy, June, 1955]). This note expresses my personal opinions and does not necessarily reflect officially accepted views. 2 Point 3 is also related to the use of surpluses for economic development. In fact, I consider it a most important use in this context (see also n. 3 below).