Showing papers in "Journal of Political Economy in 1966"

A New Approach to Consumer Theory

Abstract: Activity analysis is extended into consumption theory. It is assumed that goods possess, or give rise to, multiple characteristics in fixed proportions and that it is these characteristics, not goods themselves, on which the consumer’s preferences are exercised.

Peasants and Dualism with or without Surplus Labor

Abstract: AMARTYA K. SEN * University of Delhi T HIS paper has four objects. In the first section the economic equilibrium of a peasant family is studied. In the second section we discuss the theory of surplus labor and disguised unemployment and, more generally, the response of peasant output to a withdrawal of the working population. The third section goes into an analysis of a dual equilibrium of a partly peasant, partly capitalist agriculture. In the last section some observations are made on the efficiency of resource allocation in peasant agriculture and in share-cropping. Illustrations on the working of peasant agriculture come mostly from India, though the general framework might be of somewhat wider interest.

The Structure of a Tariff System and the Effective Protective Rate

Abstract: T HE theory of tariff structure is concerned with the effects of tariffs and other trade taxes in a system with many traded goods. It allows for the vertical relationships between tariff rates derived from the input-output relationships between products, an aspect until recently completely neglected in the literature of international trade theory. Early contributions to the theory of tariff structure, developipg the idea of the effective protective rate with respect to the policies of particular countries, have come from Barber (1955) for Canada, Humphrey (1962) for the United States, and the present author (1963) for Australia.' Johnson's (1965) exposition is the fullest available so far and also explores many implications. Empirical

The Embodiment Hypothesis

Abstract: Citation Jorgenson, Dale W. 1966. The embodiment hypothesis. Journalof Political Economy 74(1): 1-17.Published Version doi:10.1086/259105Accessed July 9, 2011 5:22:21 PM EDTCitable Link http://nrs.harvard.edu/urn-3:HUL.InstRepos:3403063Terms of Use This article was downloaded from Harvard University's DASHrepository, and is made available under the terms and conditionsapplicable to Other Posted Material, as set forth athttp://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA

The Historical Roots of the Concept of Human Capital

Abstract: IN RECENT years, economists have devoted a great deal of effort to developing and quantifying the concept of "human capital" and to applying it, through the concept of investment in the formation of human capital, to such activities as education, whether academic study or on-the-job training, migration, and medical care.' The concept of human capital, however, is by no means new. The object of this paper is to review some of the past literature, in order primarily to determine which authors treated human beings as capital, their motives for doing so, and their procedures for valuing man as capital. Although this essay is not exhaustive, it will be shown, in essence, that the concept of human capital was somewhat prominent in economic thinking until Marshall discarded the notion as "unrealistic." Economists who considered human beings or their skills as capital include such well-known names in the history of economic thought as Petty, Smith, Say,

On the Long-Run and Short-Run Demand for Money

Abstract: NE of the outstanding empirical issues today concerning the determinants of the demand for money is the relative importance of current income as compared with wealth or permanent income. This issue is sometimes phrased in terms of the relative importance of the "transactions" motive versus the "assets" motive for holding money. The "transactions" motive places emphasis on current income, while the ''assets" motive places emphasis on wealth or permanent income. One of the major weaknesses in the available theo* While responsibilities for this paper are mine alone, I am much indebted to Gary S. Becker for stimulating discussions on many points. Useful comments on an earlier draft were gratefully received from Karl Brunner, Milton Friedman, Franco Modigliani, Anna J. Schwartz, and members of seminars at the University of California, Los Angeles, and at the University of Chicago. Robert E. Lipsey has given valuable advice on wealth data. Friedman and Schwartz were also kind enough in supplying their data on permanent income and permanent price. The original version of this paper was issued as IBM Research Paper, RC-1249, April, 1964. The present version has incorporated some expository changes, thanks to the suggestions of Harry G. Johnson and a referee. Table A, "Money and Related Data," on pages 44-45 of the IBM Research Report, is omitted here; it is available to the reader on request. retical formulations of demand functions for money seems to be the failure to distinguish between long-run or equilibrium demand and short-run demand by introducing a mechanism for the adjustment of the actual stock of money to its equilibrium level.' A main purpose of this paper is to show that, by introducing a mechanism for the adjustment of actual money stock to desired stock in a theoretical formulation (thus distinguishing between a long-run and a short-run de-

The Optimal Provision of Public Goods in a System of Local Government

Abstract: I. THE PROBLEM R ECENT developments in the theory of public goods have resulted in an improved understanding of the distinguishing economic characteristics of public goods compared with private goods,2 and of the difficulties they create for collective decision-making in an individualistic society,3 but they still have not led to a general reconsideration of the concept of "the government" as a single-centered ecision-making unit.4 In reality, government is a fragmented, multicentered decision-making sector in which the decisions of each governmental unit affect and are affected by the decisions of the others. This article sets forth a theoretical structure designed to take

Primary Products and Economic Growth: An Empirical Measurement

Abstract: from capital and other factors. We will suppose that the prices of both products, pw and pg, are exogenously determined, pw, = p the world price of wheat, and pa-pa, the world price of gadgets plus transportation cost and the Canadian tariff.5 For both products 4 The confusion that can arise through a failure to pose counter factual questions is well illustrated by a segment of the recent work of Caves and Holton (1959, chap. iv). They develop a short-run econometric model of the Canadian economy based on annual observations and find exports to be a reliable predictor of changes in aggregate income lagged one year. This is in accord with the widely held belief that, if an autonomous sector of aggregate demand changes, then an induced sector of aggregate demand will move in the same direction. Given the long-run allocation of resources to staple production, such a model may be a test of the short-run sensitivity of income to changes in export demand. It is not, however, a test of the staple theory of economic development for it gives no clue as to how much higher per capital income is as a result of this allocation rather than the next best alternative. Without careful interpretation, such a test will exaggerate the economy's dependence on a single export for its real income. I To avoid complications introduced by exchange rates, gold flows, and the like, we can imagine a universal world paper currency. 318 E. T. CHAMBERS AND D. F. GORDON Canada is presumed to supply too little to affect the world price. The maximizing conditions in the two industries will be

The Demand for Money by Households, Money Substitutes, and Monetary Policy

Abstract: DEESPITE the extensive literature on the demand function for money, there remain several open questions. First, what collection of assets corresponds most closely to the theoretical concept of money-should the concept be confined to currency plus demand deposits or should it be extended to include other liquid assets, such as time and savings deposits at commercial banks? Second, what interest rate or rates represent the most appropriate measures of the opportunity cost of holding money? Most of the dispute in this area has centered on the problem of choosing between a shortand a long-term interest rate. Very little attention has been given to the possibility of using other rates, for example, the yield on equities. Third, the relative importance of income and wealth as constraints in the demand function is still an outstanding issue. Fourth, how quickly do decision units adjust their money balances to changes in market variables? Fifth, to what extent does the speed of adjustment depend on the variable that caused the disturbance? Final-

Some Evidence on the Demand for Money

Abstract: I ALTHOUGH the demand function for money balances has been subject to a great deal of empirical investigation in the last few years, much remains to be done on establishing its exact nature. In this paper, I present the results of some recent work on this matter. As is usually the case, it is much easier to describe the statistical results of the study than to give them any firm economic interpretation. They are as follows. Permanent income is a better explanatory variable for the demand for money, no matter whether money is defined to include or exclude time deposits, than is either measured income or nonhuman wealth. Time deposits alone, however, are best explained by non-human wealth. Despite this latter fact, the stability of the demand function for money is improved by including time deposits in the definition of money. These results seem to throw light on three crucial issues in monetary theory. They suggest that inasmuch as wealth

The Rate of Interest and the Demand for Money--Some Empirical Evidence

Abstract: r Z SEE relationship between the demand for money and the rate of I interest is a key one in macroeconomic models, and recently a fair amount of effort has been expended on investigating it empirically. However, this effort has not, on the whole, been directed solely at problems arising from the rate of interest but has generally been part of a larger attempt to investigate the nature of the demand function for money as a whole. As a result, the evidence that we have about the role of the rate of interest in this function tends to be fragmentary and hard to assess. There are at least

Some Economic Costs of Exchange Control: The Turkish Case

Abstract: ANNE 0. KRUEGER* University of Minnesota O NE of the most persistent and difficult problems confronting the Turkish government over the past decade has been a deficit in the balance of payments. The Turkish lira, despite the devaluation of 1958, is overvalued (at TL9 = U.S. $1). In order to keep its international obligations within the limits imposed by foreign exchange availability, the Turkish government has adopted a variety of measures to restrict imports and capital outflows and to encourage exports and capital inflows. Major emphasis has been placed on import restriction rather than export promotion. In recent years, the Turkish government has become increasingly concerned with accelerating economic growth. Its foreign-exchange problem has come to be viewed primarily in relation to development planning, since Turkey is dependent on imports of many capital and intermediate goods. Exchange control is used as an instrument of development planning, and development planning in turn is geared, at least in part, to alleviating the foreign-exchange problem. As a consequence, the exchange control * The research for this paper was undertaken for the Agency for International Development. I am indebted to the many individuals in the agency who were very helpful in their comments and in enabling me to obtain the basic data. The views expressed in this paper, however, are those of the author and do not necessarily reflect hose of the agency. Professors James M. Henderson and Harry G. Johnson made many constructive suggestions on an earlier draft of the manuscript. system is important, not only in affecting current economic activity, but also in influencing Turkish economic growth. This paper is concerned with the evaluation of the economic costs of the Turkish exchange control system. The empirical work is based upon primary data gathered in 1965 for a relatively small sample of Turkish manufacturing firms. The Turkish manufacturing sector accounts for about 13 per cent of the country's Gross Domestic Product and 8 per cent of its exports. A large fraction of Turkish manufacturing activity consists of processing Turkish raw materials' and producing light consumer goods for the home market. However, the first Turkish Development plan.2 placed emphasis on manufacturing, and especially import substitution, as the means of accelerating economic growth. The stated targets in the period of the first plan were a 7 per cent annual rate of growth in income and an 11.5 per cent rate of growth for manufacturing (Government of Turkey, 1962, p. 124). The emphasis given to im-

Stock Market Margin Requirements

Abstract: IN MY judgment," maintained William McChesney Martin, Jr., Chairman of the Board of Governors, Federal Reserve System, "we can never under the present margin regulations have the same result that occurred in terms of a financial crash in 1929 through undermargined accounts, low margins resulting in a financial debacle."' A widely used elementary economics textbook claimed, "Margin requirements have exercised an important restrictive influence on security speculation, as contrasted with the uncontrolled period of the late 1920's... Nearly everyone agrees that Federal Reserve margin requirements exercise a healthy restraint on speculative stock purchases in a boom" (Bach, 1963, p. 116). But what evidence is there that margin requirements have the effects claimed? At the December meetings of the American Economic Association, George J. Stigler, in the Presidential address, called on economists to test their assumptions that state regulation of private activity has indeed been successful (Stigler, 1965). This article brings together some data on the efficacy of margin requirements. While the figures can only be considered preliminary, and more data should be collected to test margin requirements, the data that are available and presented here indicate that not one of the aims of the legislation establishing margin requirements has been accomplished.2

A Regional Test of the Heckscher-Ohlin Hypothesis

Abstract: HERE are currently two important theories of comparative advantage Las a basis for international or interregional trade. The first to be developed is the classical doctrine of comparative costs, which stems from Ricardo (1951, chap. vii) and Mill (1929, pp. 574606).1 More recently, the so-called Heckscher-Ohlin Theorem has received extensive study as an alternative theoretical basis for trade (Heckscher, 1919, 1949; Ohlin, 1933).2 Regarded as empirical propositions potentially useful for predicting the course of a nation's (region's) development, the two theories diverge because they offer different explanations of the basis for comparative advantage. Specifically, the comparative-cost doctrine holds that a country (region) possesses a comparative advantage in producing those commodities in whose production its "real" labor costs (in the

Present Values of Lifetime Earnings for Different Occupations

Abstract: IN RECENT years there have been a number of attempts to use social rates-of-return to determine what has been the contribution of education to economic growth and what share of a nation's resources should in the future be devoted to education (see Schultz, 1963, and Hunt, 1964). The approach has been severely-and I believe correctly-criticized (Vaizey, 1958; Eckaus, 1964; and Wilkinson, 1965). However, we should not be in haste to discard completely the use of ratesof-return or present discounted values in our analysis of economic-educational problems. Private rates-of-return or present discounted values as yet have not received the attention they deserve.' The purposes of this paper are, in fact, to examine discounted returns for several specific occupations and for various levels of educational attainment within these occupations and to review the meaning and significance of our observations. Of particular interest is the suggestion that individuals may be responding to differences in expected net lifetime earnings, discounted at some common exter-

The Value of the Call Option on a Bond

Abstract: Publisher Summary Almost all corporate bonds and some government and municipal bonds have call provisions. This call provision gives the issuer the option of buying back his bonds from whoever is holding them at a stated time and price. The call price is typically above par and declines as maturity approaches. Frequently, call is not permitted until several years after the bond has been issued. The call option has value to the issuer for several reasons and this chapter outlines these reasons. The most significant source of value of the option to the issuer is the ability it gives to refinance the issue in the future if interest rates should fall. This chapter explores this aspect of the value of the option and highlights two models. In one of the models, the future price of the bond is assumed to be known and in the other model, the probability distribution of the future price is assumed to be known and to obey certain conditions.

The Immigration of Scientists and Engineers to the United States, 1949-61

Abstract: F EW policy issues have stirred as much emotional reaction and as little empirical work as the alleged large-scale migration of scientists and engineers from the rest of the world to the United States during the last decade. This paper is an attempt to put together various available scraps of empirical information on the basis of which an informed picture of the magnitude of the "brain drain" to the United States can be formed. We have considered the theorectical implications of the emigration of the highly skilled for the welfare of the remaining population elsewhere (Grubel and Scott, 1966). In this paper we will exploit the data which the U.S. National Science Foundation, with the help of the U.S. Immigration and Naturalization Service, has recently collected and published in three pamphlets (National Science Foundation, 1958, 1962, 1965). In these sources are contained the numbers of scientists and engineers who emigrated to the United States between 1949 and 1961. For the years 1957-61 the data indicate the countries of last residence of these migrants; for 1961-62 the data distinguish the immigrants' countries of birth and of last residence.

Business Pricing Policies and Inflation Reconsidered

Abstract: IN AN article in this Journal, H. J. DePodwin and R. T. Selden (1963) concluded that their correlation analyses of concentration and 1953-59 price changes were adequate evidence to "put the administrative inflation hypothesis to rest." In fact, however, a more thorough examination of the same data seems to support the administrative-inflation hypothesis, at least for the period they considered. At the same time, a similar analysis for the early 1960's suggests that administered inflation may have been a temporary phenomenon which called for little special public policy.

Unemployment, Production Functions, and Effective Demand

Abstract: E hegemony of neoclassical theory was destroyed in 1936 by Keynes, I who nevertheless retained much neoclassical analysis. Now, thirty years later, most economists have two separate tool kits to deal with interdependent systems-one relating to effective demand and unemployment and the other to microeconomic behavior under assumed conditions of full employment. Indeed, within four years of publication, one of the General Theory's major neoclassical microeconomic suppositionsthat the real wage should decline as employment increased-was brought into question by the empirical articles of Dunlop (1938) and Tarshis (1939). Econometric model builders and others concerned with empirical reality dropped most of the production-function-labormarket elements of the General Theory and concentrated their efforts on a better understanding of demand-e rpenditure equations. In this paper I will sketch out a modest re-formulation of effective demand, labor-market relations, and production functions. This will serve to link in a more observable fashion neoclassical supply-and-demand considerations at full employment and effective demand at less than full employment. Involuntary unemployment, according to this approach, depends mostly on production-function attributes in a manner first suggested by Vanek (1963)1 and the Keynes-Lerner hypothesis about price-wage adjustment, having little to do with the Keynesian \"money-illusion\" labor-supply schedule. The important elements are familiar and straightforward.

The Economic Effects of State Monopoly of Packaged-Liquor Retailing

Abstract: THE analysis of governmental experiments with the control and management of economic enterprise can yield information that is of general economic interest, besides being useful for the political assessment of the experiment itself. Yet such experiments have been little studied.' State monopoly of packaged-liquor retailing has special advantages for research of this kind. Sixteen states have state monopoly systems, and they may be compared to the states that have completely privately owned retail distribution systems.2 Throughout the analysis we shall consider each state as a separate observation, and we shall not weight by size of state. Calculated means will be means of state means. This presents no problems in inter

The Welfare Costs of Disequilibrium Exchange Rates

Abstract: JOHN C. HAUSE* University of Minnesota O NE consequence of pegged exchange rates that seems to have escaped systematic analysis is the loss in economic welfare brought about by attempts to maintain the exchange rate at disequilibrium levels by variations in official foreign-exchange holdings. If a country has an overvalued currency, it may deal with the excess demand for foreign exchange by imposing direct controls, by depleting official reserves, or by a combination of these policies. Since the welfare losses from resource misallocation induced by direct controls are widely understood, this paper will ignore trade restrictions and will concentrate on the losses brought about by fluctuations in official exchange holdings. Transitional losses due to employment and price changes when a large, sharp change in the exchange rate occurs will not be examined. These losses may be very important empirically and should be analyzed in any complete discussion of the relative merits of floating exchange rates and an \"adjustable peg.\" This article is less ambitious in scope and seeks to explore the losses that still arise when full employment is maintained. Section A contains the theoretical analysis of the losses, while Section B applies the analysis to a recent Argentine experience.

"Operation Twist": A Mistaken Policy?

Abstract: DURING the past few years the Federal Reserve authorities, the Council of Economic Advisors (1965, pp. 68-69), and many academic economists have supported \"operation twist.\" It is held that higher short-term interest rates stem the outflow of gold by inducing a flow of short-term balances to the United States and that lower long-term interest rates stimulate investment, moving the economy closer to full employment. Whether or not the objectives of balance of payments equilibrium and full employment are made compatible by means of operation twist is an empirical question. I shall argue that the empirical assumptions justifying operation twist are weak at best and may, in fact, involve positive error. Let us initially assume that a given \"twist\" (that is, a sale of $1 billion in shortterm securities and a purchase of $1 billion in long-term securities by the Federal Reserve) has an equal and opposite effect on interest rates, raising short-term interest rates by the same percentage that long-term interest rates are reduced. In this case proponents of operation twist argue that aggregate investment will increase, with shortterm investment (inventory) being restricted by a smaller amount by higher shortterm interest rates than long-term investment (fixed assets) is stimulated by lower loncr-term rates1

The Information Value of Demand Equations and Predictions

Abstract: HE objective of conventional demand theory is to describe, for some commodity i, i =1 . . .1, n the quantity bought, qi, as a function of income, In, and prices, pi, . . . , pn. Income, m, is identified with total expenditure z piqi. If we succeed in performing this task, the value shares, wi = piqi in, are described as well-defined functions of vi and the p's. Each of these shares should be non-negative; their sum should be 1. We shall never succeed in performing this task completely, since there will be unexplained residuals in all demand equations. An obvious question then is: If our success is not 100 per cent, how great is it? How great is the success if we compare it with naive methods, such as no-change extrapolation, which do not use any sophisticated demand theory at all? Also, it should be remembered that the usefulness of demand equations is frequently limited by imperfect forecasts of income and price changes. The only thing which classical demand theory has to say about these variables is that it considers them to be exogenous. So there is the additional question: What remains of the value of a demand equation when imperfect exogenous estimates are substituted? The purpose of this article is to present a measure, based on information theory,

Factor-Intensity Reversals in International Comparison of Factor Costs and Factor Use

Abstract: THE role of two assumptions inthe factorproportions theory of trade -common production functions and strong factor intensity-is well known. B. S. Mlinhas performed two tests of the strong factor-intensity hypothesis and found that factor-intensity reversals \"take place in the empirically relevant range of relative factor prices\" (1963, pp. 95-96).2 Both of Mlinhas' tests refuted strong factor intensity; hence \"we have to live with these facts of reversals\" (1963, p. 49). This paper argues that Minhas' second test is inconclusive, for reasons that also call into question the decisiveness of his first est. Minhas wrote: \"another fairly extensive test of the 'strong factor-intensity' hypothesis is presented below.... If ... whatever the ratio of wage rate to capital cost, the optimal ratio of capital to labor in any given industry i is always greater or less than in any other industry j ... then . . . in any two countries with widely different relative costs of labor and capital, the rankings of industries according to capital intensity must exactly match\" (1963, p. 39). The rankings by capital intensity of 20 U.S. and Japanese industries did not exactly match: \"In fact, the two orderings are so dissimilar that even the null hypothesis of zero rank correlation between them is not rejected at the 0.10 level . . . the relative factor-intensities do in fact change in re-

Built-in Flexibility of Taxation and Automatic Stabilization

Abstract: With given tax rates, changes in income lead to changes in the same direction in tax revenues. In this way built-in flexibility of taxation arises. The effect of this built-in flexibility is to lower the multiplier;' the percentage by which the multiplier is reduced (or some related measure) is commonly taken to represent the stabilizing effect of built-in flexibility.2 This approach ignores the dynamic structure of the system for it merely involves a

The Welfare Costs of Exchange-Rate Stabilization

Abstract: T HIS article is concerned with the welfare costs to a country, to the rest of the world, and to the world as a whole, of the stabilization of the country's exchange rate in the face of fluctuations in its domestic price level relative to the foreign price level. Such stabilization is effected by the accumulation and decumulation of exchange reserves. In real terms, a surplus in the trade balance used to finance the accumulation of reserves involves a transfer to the rest of the world; and, conversely, the use of reserves to finance the trade deficit involves receipt of a transfer from the rest of the world. If countries are assumed to maintain full employment, it must also be assumed that they follow the domestic policies required to effect such transfers. Specifically it must be assumed that the surplus country arranges to reduce domestic expenditure below the full-employment income level sufficiently to create the excess of income over expenditure required to finance the transfer, and the deficit country arranges to increase domestic expenditures above the full-employment income level sufficiently to create the excess of expenditure over income required to dispose of the transfer. Analytically, the problem of the welfare costs of exchange-rate stabilization in the face of variations in the domestic relative to the foreign price level is equivalent to the problem of the welfare costs of deliberate destabilization of the exchange rate for the purpose of acquiring and disposing of foreign-exchange reserves when the relationship of domestic to foreign prices would otherwise be constant at the equilibrium (balanced-trade) level. This is the way the problem is formulated here. For simplicity it is assumed that the world consists of only two countries, each of which produces a single good, the price of which is constant in terms of domestic currency. Full employment is assumed to be maintained in each by the levying of taxes or the distribution of subsidies so calculated that, whatever the exchange rate, the demand for domestic output from domestic and foreign sources just exhausts the full-employment supply; government surpluses are assumed to be invested in the currency of the other country, and deficits to be financed by the sale of foreign exchange. (It may equally well be assumed that the governments buy and sell currency through sales and purchases of gold.) The exchange rate is assumed to be fixed by the government of the country under analysis ("country 1," the rest of the world being "country 2"). The analysis consists in contrasting two policies, assumed to prevail over a two-period sequence. The first ("policy 1") is maintenance of the exchange rate at the same equilibrium (balanced-trade) level in both periods, this level being assumed for mathematical 1 The problem considered in this article was first posed and analyzed by John Hause ("The Welfare Costs of Disequilibrium Exchange Rates," J.P.E. LXXIV [August, 1966], 333-52). Hause employs a partial equilibrium approach, which suppresses the "absorption" or "transfer" aspects of international disequilibrium; the analysis presented here was worked out to remedy this deficiency.

The Keynesian Revolution in Sweden

Abstract: THROUGHOUT the thirties Sweden enjoyed a reputation for being the first country to make use of an \"active\" fiscal policy to deal with unemployment. Many countries faced with falling tax revenues and rising relief expenditures stumbled into budget deficits, but Sweden embarked on this course consciously. In 1932 the Social Democrats came to power armed with a bold program for combatting unemployment by means of loan-financed public works. This program was initiated by the Finance Bill of 1933, in which the principle of aiming at an annually balanced budget was formally abandoned in favor of achieving balance over the period of the business cycle. At a time when most developed nations were suffering from similar problems, the Swedish experiment attracted a good deal of attention from abroad.' While frustrated advocates of expansionary measures living in less adventurous countries tended to overestimate the contribution made to recovery by Swedish fiscal policy, in Sweden itself, even among the spokesmen for the Social Democrats, a more balanced view prevailed (see Ohlin, 1935, pp. 498-511, 670-99; M6ller, 1938, Montgomery, 1938; Wigforss, 1938). While the spending program was consistent in direction, its scope was limited; it did not get under way until strong external forces were already at work; it was geared to the problem of cyclical unemployment and did not,

The Balance of Payments in Review

Abstract: THE balance-of-payments statistics of the United States have received a thorough examination at the hands of a distinguished committee chaired by Edward MI. Bernstein in a report submitted to the United States government in the spring of 1965.1 The committee was asked to review "basic conceptual problems, problems of presentation and analysis, and technical statistical problems" pertaining to the balance of payments. The committee produced an excellent document, useful not only to government officials but also to all users of balance-of-payments statistics. Its Report follows several other valuable reports on U.S. government statistics that bear on measuring economic developments and interpreting them for the formulation of economic policy. The National Bureau of Economic Research submitted a report on the national accounts in 1957 (NBER, 1957), the Stigler report on price statistics appeared in 1961 (NBER, 1961), and the Gordon report on unemployment statistics was released in 1962 (President's Committee To Appraise Employment and Unemployment, 1962). These excellent reports not only aid in pursuit of the tenet of American economics,