Showing papers on "Purchasing power published in 1970"

Consumers' Freedom of Choice

Abstract: Consumers' opportunities for making free choices began expanding in antiquity when barter gave way to a single commodity used as a common medium of exchange. Later coinage was developed to improve the iden? tity of money. Then mere titles to commodity money began to supplant coins, as credit extended purchasing power from those who already had money to those who could acquire it in the future. With each step in this evolution of money, trade increased and greater quantities and varieties of consumer goods became available. Property has also contributed to consumers' freedom of choice since ancient times by safeguarding the owner's right to use or dispose of what he possessed as he pleased. Although property rights have tended to restrict the rights of non-owners, they have never been absolute. For example, while the ancient Hebrews were required by the Tenth Commandment to recognize property rights, they were also enjoined to share their wealth by giving to the poor, by making free loans to the needy, and by granting debtors relief from permanent debt. Aristotle noted the extent to which property owners in Ancient Greece placed goods at the disposal of friends and shared their use with others. British Economist, Edwin Cannan, referred to limitations on property when he wrote: "A man's intelligent pursuit of his own interest gen? erally serves others besides himself simply because the institutions of society provide hedges which are generally close enough to keep him on the road."1 Down through the ages wars have disrupted trade and restricted consumer choices; yet, the trend of consumers' freedom of choice has continued upward. This is due to improvements in transportation facil? itating trade, application of power to new and better tools bringing 62

International average prices and comparisons of national aggregate production of agriculture

Abstract: “The whole question of making inter-spatial comparisons between countries is a most complicated and hazardous business” (Mr. Campion); international comparisons of a particular value aggregate between countries present a difficult problem connected with the conversion of national value aggregates into a comparable magnitude. This paper presents an alternative approach in that an internationally comparable value aggregate for each country is prepared by the international average prices of commodities which are determined simultaneously with the partial exchange rates of national currencies to a standard currency. The calculated partial exchange rates are so defined as to reflect the purchasing power of national currencies in respect of the group of commodities selected. Consequently, the resulting value aggregate for international comparison has a quantity dimension, eliminating the effect due to the different purchasing power of national currencies in which original prices are quoted. The other methods of international comparison so far being used by other research workers, such as C. Clerk and M. Gilbert and his associates, are examined in the light of the properties of the present method and the crucial differences are delineated. Using the method proposed, an international comparison is made of the aggregate value of agricultural products for 11 selected countries in the world, with sub-divisions into two regions.

Fiscal Policy, the Quantity of Money, and the Stock Market

Abstract: W HILE most economists agree today that monetary policy has some importance in controlling the economy, there is little agreement as to how important it is, or which monetary varia.ble is the key one. Pre-Keynesian economists reasoned that there was a predictable relationship between the money supply and GNP. If the quantity of money doubled, for example, for any reason, the interest rate would fall initially. The reduced interest rate would stimulate borrowing, investment and consumption while the incentive to save would be reduced. Total demand. for goods and services would thus be increased and with a constant productive capacity, prices would have to rise. Thus, once prices begin to rise, the interest rate would rise again in response to the corresponding fall in the "real" money supply. Prices would rise. until they were twice their original level, thus reducing purchasing power of the money supply to its initial value and equilibrium would be restored. The interest rate would also return to its original level, where saving and investment are equal. Economists first became disillusioned with this classical monetary theory during the depression for several good reasons. For one thing, while the money supply about doubled between 1933 and 1940, prices increased only slightly and economic activity remained in the doldrums until the vast increase in government war spending finally pulled the country out of the depression. In the quarter century since World War II, the opposite phenomenon occurred-the economy expanded at more than double the rate of money supply expansion. Most economists concluded that, contrary to earlier thinking, the relationship between the money supply and GNP was very loose (see Chart I). By the late 1940's, the economic world was ready to accept the new ideas embodied in John Maynard Keynes' book "The General Theory of Employment, Interest and Money". Keynes put great emphasis. on government spending and business investment as determinants of national income, while money supply is considered by Keynesians to be only one of the many factors which influences the economy.