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A framework is indispensable in pursuing share price maximization. By making explicit many of the interdependent effects of management decisions concerning the investment and financing activities of the firm, the framework presented in this article is an ideal tool to evaluate the impact of management decisions upon the firm's stock price. [ABSTRACT FROM AUTHOR]

The author provides a response to an earlier article in this journal that criticized his work in the field of finance. The author comments on Durand's focus on statistical reliability. The author takes issue with Durand's criticism of the value of call deferment, claiming that the statistical sampling error was small. The author acknowledges that the second section of the paper presented a model, which was clearly untested, and argues that Durand cannot visit the same expectations on that model, which lacked data for testing. The author proposes that perhaps Durand's time had been better spent proposing a better solution.

The article comments on the work of M. H. Miller and F. Modigliani, who created a controversy with their ideas on capital costs. While the author concedes that this research was "internally consistent" he also believes that it was linked with traditional theory and aims to show the similarities between this research and that done by A. Barges. A hypothetical is presented in which a merchant in the U.S. considers whether or not to export and import goods from China. The businessperson is aware of the variables involved and makes his final decision on whether or not he believes that the ship will return with its cargo and on expected returns. An additional factor is how the expected return would be affected if the businessperson borrowed the money for the venture.

An accurate price forecast is crucial when deciding on a new investment proposal for capital intensive commodities. In such industries as metals, plastics, and fertilizers, the sale price is the key profitability factor. New investments are too often based on specious forecasts which use historical price trends to predict the future. Another way to forecast prices which can provide more meaningful results is presented in the article. [ABSTRACT FROM AUTHOR]

The article assesses the economic value of the investment in the doctor of philosophy (Ph. D.) degree in economics. To derive the internal rate of return to the Ph. D. in economics, conventional cost-benefit methodology is used. A five-way classification was utilized to determine the variations in the conditions surrounding graduate work in economics. These classification are: by type of employment, method of financing, length of schooling, salary and earnings as measures of income and private and social cost-and-benefit perspectives.

The article comments on an article by Arthur Carol and Samuel Parry about the economic rational of occupational choice. The authors are interested to the proposal of Carol and Parry that families should have ready access to information regarding the pecuniary returns on investments in education. However, the authors argue that the choice model is theoretically inadequate because of its failure to consider the uncertainty of receiving future returns in various occupations. They suggest a government manpower policy different from the model of Carol and Parry.

The authors describe how management might approach the problem of systematically measuring the effects of certain long-range promotional activities. Little published research exists on this widely discussed topic. A mini-case study is presented describing the approach taken by Anheuser-Busch management regarding specific aspects of the promotional measurement problem. [ABSTRACT FROM AUTHOR]

The article presents the author's comment on rate of return to the doctor of philosophy degree (Ph.D.) in economics. Calculation of rates of return by field seems to be a far more sensible approach than making estimates by degree or level of education. This is especially true for graduate education in light of the apparent overproduction of degree holders in some fields. The time required beyond a master's degree to obtain a Ph.D. in economics is estimated as three calendar years for those with fellowships and those who are privately supported and four calendar years for those who are dependent on assistantships. In addition, rate-of-return estimates are made using two and three years schooling duration, respectively. The use of a maximum of four years may be an administrator's dream, but scattered evidence suggests that successful completion of a Ph.D. may require considerably longer time expenditure. If calculation of rates of return is to improve information for decision making, especially by potential graduate students and institutions considering new graduate programs, attrition rates in various Ph.D. programs should be taken into account.

The article presents a response by Arthur Carol and Samuel Parry to a commentary on their article about the economic rational of occupational choice. Professors Lester O. Bumas and Bruno Stein go on to introduce several confusions which Carol and Parry do not believe were in the article. Bumas and Stein argue that the choice model presented by Carol and Parry is theoretically inadequate because of its failure to consider the uncertainty of receiving future returns in various occupations. Bumas and Stein believe they should jettison the model, and they may be right.

The article studies the relationship between decreasing or constant returns and concavity. The author provides a counterexample to show that the two common assumptions believed to be sufficient to imply concavity of the production function are, in reality, not sufficient. The common assumptions on single product production functions are concavity along any ray through the origin and convexity of production sets. According to the author, if homotheticity is added to the assumptions, concavity is implied.

This article studies the returns to investment in the graduate education of doctor of philosophy degree (Ph.D.) academicians in the U.S. The alternative income of Ph.D. faculty is an estimate of the income of bachelor's degree holders taken from an extensive survey of salaries in occupations open to the degree holders. The economic condition of all faculty employed by institutions of higher education in the country, is discussed. Lastly, this study investigates the effects of graduate school dropouts on their computed social rates of return.

This article discusses the use of risk premiums as an aid to understanding the consumer's life cycle decisions. By supposing the consumer to maximize a lifetime utility function subject to an intertemporal budget constraint in which incomes are replaced by their certainty equivalents, the individual's planned consumption at any future date will shift up or down. Thus, consumer would be indifferent between receiving the risk and receiving the cash equivalent. Lastly, introducing uncertainty via a stochastic income receipt, which the consumer can spend or invest at a non-stochastic interest rate, is important.

This article focuses on railroad costs, return to scale and excess capacity. Investment in railroad trackage is not easily varied with traffic levels. This fact, brought about both by public regulation and by the inherent indivisibility of the railroad plant, poses problems in estimation of railroad cost functions from cross-section data. In this article, a model is developed making short-run costs a function of both traffic and plant investment. The model is then estimated over a cross section of railroads, and a long-run cost envelope is derived from the estimated short-run relationship. In this model study, two separate types of output are specified, gross ton-miles of freight service and gross ton-miles of passenger services. The model developed herein estimates two types of potential scale economies in the railroad industry, returns to traffic density and returns to firm size. The results indicate substantial unexploited economies of traffic density for most railroads, but constant long-run returns to scale.

This article focuses on advertising, profits and corporate tax revisited. In the previous issue of the journal "The Review of Economics and Statistics," L.W. Weiss, an author, estimated the overstatement or understatement of profit and rate of return which result from the corporation income tax rule permitting firms to write off long-lived advertising expenditures in the year in which they are incurred. The purpose of this article is to introduce those improvements and revise the estimates of reported and true profits and rates of return for the U.S. Internal Revenue Service's(IRS) minor industries and 10 large advertisers used in the previous study. T. R. Stauffer, a economist, has developed a very sophisticated analysis of biases in accounting profits. He concluded that the bias introduced by the expensing of advertising depends not only on growth and depreciation rates but on the time profile of cash flow associated with fixed capital outlays and on the ratio of non-depreciable working capital to fixed capital as well.

This article specifies a comparative statics model that can be embedded in a dynamic framework, and discusses the properties of the specific model proposed herein. Macroeconomics is concerned to a great extent with studying the properties of comparative statics models that are simple the short-run equilibria of dynamic models. A detailed analysis of a short-run model whose variables in IS-LM space are output and the market yield on equity has been presented. The outcomes obtained are completely consistent with the comparative statics results well-known to macroeconomics, although the results obtained here are more intricate than the ones normally derived because added factors, such as the effect of changes in the real value of money in the disposable income term, are considered. It is also demonstrated that as a larger number of factors are taken into account and more variables are made endogenous, the probability of the model being stable is enhanced. Finally, this model has the advantage that it can be taken as it stands and placed in a dynamic framework. This possibility of integration indicates that the standard models studied in macroeconomics, if viewed as momentary equilibria of dynamic models, are consistent.

The Lockheed Airline System Simulation is discussed as a step-by- step evaluation of the economics of different ways of routing passenger travel demand. Interacting items that are discussed include forecast passenger traffic demand, persistence of demand, purpose of travel, passenger preferences toward fare and speed, aircraft characteristics, flight frequency, route interaction, and competitive and regulatory influences. Also discussed are specific uses of the simulation program during the design of the supersonic transport. The first use is in determining the optimum SIST size, speed and sonic boom characteristics. The impact of a refined SST on the air transport environment is then discussed. This latter subject is presented in terms of airplane requirements, load factors, airline earnings and airline return on investment. [ABSTRACT FROM AUTHOR]

Focuses on the move of the author to compute and analyze rate of return. Claim of the author on the lack of attention given to the rate of return; Role of rate of return as basis of determining changed needs of investor and consumer; Use of any rate of return as payment for three services: interest, assumption of risk, and the cost of raising capital; Emphasis of the author of the desirability of a flexible rate of return.

The advent of the Soviet economic reforms of 1966 which are leading to a greater degree of financial decentralization of industry, has created an awareness by Soviet economists that there are shortcomings in the economic valuation of land and the determination of rent. This is particularly true for land whose value results entirely from site location for industrial development. The introduction of profit responsibility in Soviet enterprises with bonuses for managers based on profit has raised questions about economic rent as a cost factor affecting the calculation of enterprise profit. The imposition of payments to capture economic rent is a clear recognition of the need to distinguish between the success of the venture and the success of the managers, an important distinction when bonuses depend upon profit changes and the rate of return on gross assets. The value of a bonus system lies in its action as a stimulant for management to achieve established goals. Those enterprises having above normal profits and accounting rates of return by reason of favorable location or because of "technical-economic conditions not resulting from enterprise activities" are now required to pay rent.

This paper investigates the properties of a market for risky assets on the basis of a simple model of general equilibrium of exchange, where individual investors seek to maximize preference functions over expected yield and variance of yield on their portfolios. A theory of market risk premiums is outlined, and it is shown that general equilibrium implies the existence of a so-called "market line," relating per dollar expected yield and standard deviation of yield. The concept of price of risk is discussed in terms of the slope of this line. [ABSTRACT FROM AUTHOR]

THIS paper focuses on the results and implications of recent cost studies in banking. Additional materials are discussed with a view toward placing the cost analyses in perspective. The following section provides a definition of a "socially optimal" banking structure in order to indicate the possible importance of returns to scale in banking. Succeeding sections consider the cost studies individually and provide an interpretation of their findings. An addendum treats selected problems of recent banking-structure research outside the area of cost analysis. [ABSTRACT FROM AUTHOR]

In a number of recent papers [11] [12],[2] it has been shown that, for the United States, the behavior of the term structure of interest rates can be explained remarkably well by combining the "Preferred Habitat" version of the Expectation Theory with a simple and readily tractable model of the formation of expectations, a model in which expected future rates are represented by a linear function of past rates.
The purpose of the present paper is to generalize that approach and to strengthen the evidence supporting it in two major directions.
First, we endeavor to broaden and refine the earlier analysis by making proper allowance for one additional factor, which is entirely consistent with the spirit of the model but was not duly taken into account, namely the effect of expectations of future changes in the price level. Evidence is provided that this additional factor is empirically important and that by allowing for it one can obtain a significant improvement in fit as well as a reduction in the serial correlation of the residual error. Some further improvement can also be achieved by introducing a variable intended to measure the effect of changes in the uncertainty about the future course of interest rates on the risk premium.
Our second goal is to provide independent evidence in support of both the expectation theory and of our model of expectation formation and of the determinants of the risk premium, by exploring the relation between our model and the "rational expectation hypothesis". To this end we first derive expressions for the "optimal" (in the least square sense) linear forecast of all future rates, conditional upon the past history of rates of interest and rates of inflation. We show that the relation between the long rate and the history of short rates and prices which is estimated in the process of fitting our term structure equation is broadly similar to the relation that would hold if, in fact, (1) the long rate were an average... [ABSTRACT FROM AUTHOR]

In this paper, I propose a resource allocation (planning) process designed for an economy where increasing returns to scale prevail. The main feature of the process is to supplement the market mechanism by the central allocation of investment funds. It is well known that the unmodified market mechanism fails to solve optimal allocation problems, if non-decreasing returns to scale play a very important role in the economy. In order to meet the difficulty, Arrow and Hurwicz [1] introduced price speculation into a tatonnement process. Although locally convergent and informationally most efficient, their process is not entirely satisfactory especially from the motivational point of view. [ABSTRACT FROM AUTHOR]

This paper presents a decentralized planning routine—i.e. an iterative procedure for solving the problem of finding an optimal short-run plan for a centrally-planned economy. Earlier publications in this area group neatly into two distinct categories: those where the centre quotes prices for goods and services, and those where it proposes quantitative allocations. The routine to be outlined below falls into neither of these categories. It can be given different institutional interpretations, one involving a mixture of price and command planning and bearing an appealing resemblance to the mixture of materials balances and markets actually used in certain planned economies, and the other partially resembling the market socialism of Lange, Arrow and Hurwicz. [ABSTRACT FROM AUTHOR]

The article discusses about the second crisis of economic theory-is related to the first crisis-the great slump of the thirties. The main orthodox reaction to the slump was the argument that wages were too high. The strangest of all is to set up a model o

The article focuses on the results of a study on the link between "rate of return" and research and development expenditures in a production function setting. Although the tenuous nature of the Cobb-Douglas type of production function was originally indicated by two independent studies in the early 1960's because of its predominance in use, the estimates are obtained by both a covariance model and by the use of a production function of the Cobb-Douglas type. For each set of variables two types of production functions were estimated. In one there is a general constant and seventeen specific constants one for each firm, and alternatively ten time constants, one for each year. It is called as Type I formulation. In the other, there is only one general constant term. It is called as Type II formulation. Of course, both use combined cross-section and time series data. The article presents data related to regression results of Type I and Type II formulation. To conserve space, firm and time constants are not included in this data.

In a recent article, economist Robert J. Lamer made an invaluable study of the extent of management control among the 200 largest nonfinancial corporations in 1963 and compared his findings with the 1929 study by economists A.A. Berle and G.C. Means. Lamer obtained data for the 200 largest nonfinancial corporations from annual reports. This list is composed of firms primarily engaged in manufacturing, mining, merchandising, transportation, and electric, gas, and pipeline utilities. Banks, insurance companies, and investment companies are excluded. Size is measured in terms of book assets although this overstates the relative size of transportation and utility companies. The author concludes that while Lamer's study which corroborates the Berle-Means thesis of increasing management control in the U.S. economy is an important contribution, two of these management-related variables with which he was concerned-type of control and change in size do not appear to explain very much of the variation in profit rates among the 200 largest non-financial companies included in his sample.

The purpose of this article is to prove that an increase in the price of a factor of production may increase short-run profits in a competitive industry. A rise in factor prices lowers equilibrium output but increases profits per unit. The net effect on total profits is likely to be positive sufficiently often so as not to reduce the paradox to a mere curiosum. A corollary of the paradox is that profits no longer are a good signalling device. Assume that an industry is initially in long-run equilibrium. Since the analysis of higher factor prices was a short-run analysis, the number of firms and quantity of capital in an industry were assumed constant. Larger absolute profits, therefore, mean a higher rate of return, which would induce entrants. However, assuming the relative increase in factor prices is permanent, the long-run supply curve shifts upward, and equilibrium output of the industry falls. If firms' isoquants are homothetic with respect to their origins, a higher price for a factor does not change the optimum firm size.

In a world of certainty, efficient allocation of capital would be evidenced by equality of the yield for all forms of investment, waiving certain complications in comparing differing time-shapes of yield streams. And, since in such a world expectations would always be borne out, the equality of yields would be true both prospectively and retrospectively. One must note first, however, that in a world of uncertainty, the equilibrating market forces can only work on the prospective returns to investment. There are two possible sources of difficulty here. First, prospects or anticipations are not ordinarily observable and, second, in a world of uncertainty the returns anticipated are multivalued . The article develops and compares alternative formulations of the investor's attitude toward multivalued returns, the question of how anticipations about such returns may be made operational for the purpose of direct empirical testing will not be considered here. The article concludes that the formulation of investment choice under uncertainty in terms of time-state preferences, with the assumption of risk-aversion does seem to promise progress toward harmonizing the bewildering diversity of market yields.

The study of capital and interest has come to be viewed as a branch of monetary theory. No doubt interest is, in some degree, a monetary phenomenon. Young economists who first make the acquaintance of capital and interest through their work in monetary theory often seem to believe that interest is mainly a monetary phenomenon. The well-informed economist has known that interest is rooted mainly in the productivity of investment and the economy's preference for present over future consumption. The effective exposition of this truth has never been easy, and for the last thirty years pedagogical progress has been distressingly slow. Monetary theorists now have a large bag of elegant tricks that demonstrate how changes in the money supply and liquidity preference can affect the interest rate. Advocates of the so-called "real" theory of interest must fall back on a set of teaching aids. There may be merit in describing a pedagogical device that allows the essential properties of capital and interest to be simply conveyed. The essential properties of capital, income, consumption, investment, capital growth, time preference, and capital productivity can be set forth in many ways.

The article highlights that the problem of risky investment decision has both normative and positive aspects. Looked at normatively, the question relates to finding the appropriate technique of analysis-for individuals, firms, or government agencies-to use in evaluating risky investment alternatives. Looking at the problem positively, one may ask that why do the mean experienced yields in different risk-classes of securities diverge, even when average yields for the different risk-classes are calculated over many individual securities and over long time-periods to eliminate random effects. The article examines the positive aspect, the major explanations that have been offered for the yield divergences and attribute them either to imperfections of capital markets or to market premiums for risk bearing. On the normative side, it attempts to show how the criterion of maximizing present value-now generally accepted, despite some recent heresies, as the guiding principle for evaluation of riskless investment alternatives, must be modified or generalized when risky investments are considered. In brief, the article tries to indicate the appropriate rate of discount to use, in the present-value formula, to allow for uncertainty of return as well as futurity of return.

Specialization is the essence of economic life and this is the particular aspect of specialization which authors John C. Gurley and Edward S. Shaw (G-S) have undertaken to analyze. In the absence of distribution effects, the necessary conditions for rendering a monetary system determinate is that there be an exogenous fixing of some nominal quantity and some rate of return. It follows that if we were to extend the argument to an economy with both inside and outside money it would suffice to fix the quantity of outside money and its rate of return. In such an economy the price level would be determinate even if the central bank were to fix nothing, and operate solely in accordance with the principle of profit-maximization subject to the restriction that the quantity of outside money is fixed. It is unfortunate that G-S have so strongly tied their discussion of central bank policy with that of the conditions necessary to achieve a determinate price level. The analysis of central bank policy should concentrate on the behavior such a bank can adopt with reference to such decisions as open-market purchases of bonds in order to bring about desired changes in a determinate price level and in other variables of the economic system.

This article focuses on the possibility of the rate of interest falling to zero short of free services. Cycles can be explained along lines such as those of Keynes and Schumpeter, by tendencies for innovations and hence investment to be bunched in near equilibrium situations, by increasing investment risk as a boom progresses by contagions of optimism and pessimism, and by principles, more or less well accepted from Keynesian theory, such as the multiplier and acceleration principles, inventory cycles, movements toward increased saving as a boom reaches its peak and so forth. These now familiar principles can be added to undoubted conditions of diminishing returns to investment caused by temporary fixities of factors of production in the short run, when possibilities of technical change are limited. As for the secular long run, it may well be that virtual diminishing returns to investment holds despite possibilities of technical change because of, laggard movements of consumption in an increasingly wealthy society, causing effective demand to be insufficient to make investment at rising levels profitable, combined with increasingly monopolistic and oligopolistic tendencies in maturing capitalism which may inhibit price adjustments, resource shifts, innovations and hence capital investment.

IN The Rate of Interest (1907), Irving Fisher introduced the concept of the rate of return,[2] a concept which has remained a prominent feature of ail but the most abstract expositions of neoclassical capital theory. For more than fifty years its usefulness as a component of a theoretical system was not challenged on logical grounds. However, the demonstration by Dr. Pasinetti a that an entire economy may be capable of reswitching, and the subsequent exploration of the consequences by himself and others,[4] has precipitated a thorough cleansing of capital theory, causing the abandonment of widely-held suppositions, and it is inevitable that the Fisherian approach should be subjected to fresh scrutiny. Recently Dr. Pasinetti himself has re-examined the concept of the rate of return, in the course of commenting on two pieces by Professor Solow which make reference to it.[5] And it might seem that Dr. Pasinetti's conclusions are uncompromisingly adverse to the Fisherian theory of the rate of profit. For he states (on p. 529 of his article) that the rate of return is "devoid of any autonomous theoretical content," unless one chooses to use the words "rate of return" as a synonym for "rate of profit," in which case "one cannot obviously pretend to use the notion of rate of return to explain the rate of profit." But a careful reading of Dr. Pasinetti's article reveals that in fact he is not engaged in attacking the Fisherian theory of the rate of profit at all. Instead, his objective is to demolish any suggestion that a "Fisherian" concept of the rate of return could be used to resurrect John Bates Clarke's parable of the determination of the rate of profit, which he has so recently overturned.[6] However, the development of Dr. Pasinetti's argument is such that it might generate misunderstanding about the nature of his objective. The intention of the present paper is to demonstrate that Dr. Pasinetti's criticisms cannot be construed as criticisms of the Fisheri... [ABSTRACT FROM AUTHOR]

The influence of the rate of interest upon investment is not a subject that calls for a venture into new and unexplored territory. Economists have been aware for a long time that a high rate of interest dampens investment and a low rate stimulates it. The elasticity of the rate of investment with respect to the rate of interest is very low, so that a drop in the rate of interest will not have a substantial influence on the rate of investment. The present article discusses the nature and relationship of the several determinants of the rate of investment; then the concept of the rate of interest itself. The author in this article suggests that both the concept of interest and the theory of its influence upon investment must be modified before they are applicable under dynamic conditions. The relationships between income and investment, particularly, that one which is embodied in the acceleration principle, has also been covered. In the traditional account of the relation between interest and investment it is necessary to go back and examine the reaction of an individual firm to changes in the rate of interest.

The article presents an analysis and definition of the theory of profit. The author says that if analysis can reveal no distinctive function among the varied relations which the employer actually sustains to business, the inevitable conclusion must be that there is no logical basis for profit as a distinctive and coordinate share in distribution. The people are living under an economic regime in which mankind is more and more consciously engaged as a unit in an organized struggle to wrest from all nature as a unit the means of well-being. Man on the one side and nature on the other remain as in primitive times the primary factors in the economic struggle; and the dependence of man upon nature is recognized for his well-being as the fundamental economic principle -a principle both universal and perpetual. The author says that the productive process is predominantly social. He says that the successive stages in the evolution of modern capitalism may be viewed as stages in the development of industrial organization. Economists have called attention to the spontaneity of industrial organization in general, have pointed out the economic benefits resulting from it, and have enlarged upon its marvelous effectiveness in keeping the markets of the world well supplied with the different kinds of consumers' goods in nicely adjusted proportions.

The rapid growth of consumer credit has created a need for improved credit control policies which result in lower total credit costs. This paper investigates one approach for achieving that objective. The credit control problem is formulated as one of developing optimal policies for an infinite horizon Markov decision model. The model utilizes standard financial data; it also requires the measurement of the costs and returns from alternative credit control policies. The Markov model is transformed into an equivalent linear program. A sample problem is solved and the resulting policies analyzed. [ABSTRACT FROM AUTHOR]

The uses of regression analysis to estimate market yield curves for U. S. Government securities are considered in this paper. Several possible regression models for this purpose are examined. It is found that models which regress either the before-tax yield or the after-tax yield of governments on the number of days remaining to maturity and the square of the logarithm of the number of days remaining to maturity can fruitfully be applied to actual market data in determining yield curves. [ABSTRACT FROM AUTHOR]

Suppose each alternative in a capital investment decision can be represented as a cash flow without uncertainty, i.e., as a sequence of m + 1 real numbers. Then the problem of which financial criterion (e.g., present value, internal rate of return, return per unit expenditure, etc.) to use for the capital investment decision is the problem of defining a preference ordering (which usually means a utility function) on the vector space of dimension m + 1. A set of axioms is proposed for the preference ordering. The axioms specify the directions of preference in case one cash flow dominates another in magnitude (at least as great in every period, greater in some period) or in time (same total revenue, but received sooner). Also, an axiom of marginal consistency is specified, i.e., one cash flow is preferred to another if and only if the difference (considered as a separate investment) is preferred to the do-nothing investment. In addition, there is an axiom of continuity. Our result is that the only consistent (i.e., consistent with the axioms) method for ranking investments according to their cash flows is to rank them according to the formula for "present value", with positive (undetermined) rates of interest, possibly different for different time periods. Finally, an axiom specifying "temporal consistency" leads to the use of a single rate of interest. The viewpoint is that an overall corporate capital budgeting problem has two aspects: (1) the determination of a criterion, and (2) the determination of that capital program which maximizes the criterion, subject to the relevant constraints, e.g., on available projects, capital markets, etc. This paper is concerned with the first aspect only. [ABSTRACT FROM AUTHOR]

When uncertainty concerning costs, revenues, and project life exists, classical measures of capital investment return are limited in value. Sensitivity analysis indicates that relatively small over estimates and under estimates create relatively large errors in the discounted rate of return for different types of return schedules. Perhaps, then, businessmen are justified in seeking other methods of project evaluation. [ABSTRACT FROM AUTHOR]

Scale efficiency in banking has found increasing returns to scale only among relatively small banks, and decreasing returns to scale among larger banks. The study showed that these results were biased by problems in the statistical techniques used and by the fact that the models ignored an important input required for the intermediation process, financial capital. When the econometric problems were solved and the relationship among size, diversification and risk was properly accounted for, there was strong evidence of increasing returns for banks up to about 500 million dollars in total assets and approximately constant returns for larger banks.

The analysis conducted by Paul W. MacAvoy, James W. McKie and Lee E. Preston on a study conducted on the proposition made by the U.S. Task Force on Antitrust Policy were studied. The economists argued that the return in industries whose four firm concentration is usually above the 70 percent level is high and persistently high. The comparison they make between the behavior of twelve high-stable concentration industries from the Stigler's list with the remaining five high concentration industries over the 1953-1957 and 1962-1966 period is invalid because of the inappropriate categorization of industries not appearing in the Task Force economists' minimum list.

The studies and data selected by professor Yale Brozen, in order to study the proposition made by the U.S. Task Force on Antitrust Policy, were analyzed. The professor argued that calculated returns of return earned by a single company are no guide to whether it has a monopoly. The analysis done by the professor focused on studies conducted by Bain, Stigler and Mann on the concentration-profitability relationship. The first problem in the type of analysis attempted was the matter of compatibility over time for the industries under analysis, the second was the relationship between concentration and the profitability of selected large firms and third was the use of firm data for the analysis.

The argument presented by professor Yale Brozen regarding the validity of the recommendations made by the Antitrust Task Force was analyzed. The Task Force on Antitrust Policy concluded that concentrated industries were able to persistently keep their rates of return above normal and recommended a public policy of deconcentration. The professor believed that the commission came to its conclusion without any evidence on how profits behaved over time. Empirical evidence taken for the periods 1947-1948 and 1953-1955 show that the rate of decline of profits is slower in concentrated industries. The analysis should in no way be interpreted as a defense of the analysis or conclusions of the Task Force Report.

This section presents abstracts of research papers on economics which were published as of June 1967. Measuring the Productivity of Investment in Persuasion recommends an approach labeled Profitometrics for determining how much to invest in advertising. Profitometrics is essentially economic and financial analysis of futurities. It focuses on future after-tax cash flows and the profit-productivity of capital and relies upon quantitative estimates. Managerial Discretion and Profit Maximizing Behavior: Some Further Comments considers the relationships among corporate organization, managerial discretion, diffusion of ownership, monopoly power, and the prevalence of profit maximizing behavior. Based on The Maintenance of Rates of Return on Capital, the conclusion is drawn that companies are reasonably successful in maintaining their rates of return on capital relative to others in their industry over periods of 2 to 3 years, but not particularly successful over longer periods. Changes in rates of return between years are thought to be comparatively small, random fluctuations. The author of The Depreciation Multiplier derives an exact formula for M in the more general case that the life times are different and possess a stationary distribution with mean and standard deviation.

This article presents abstracts of several papers published in the June 1965 issue of American Economic Review. In the article Economic Education: Aspirations and Achievements, the G. L. Bach and Phillip Saunders described the present state of economics in U.S. high schools. While the article Biased Efficiency Growth and Factor Substitution in the U.S. Economy, 1899-1960, dealt with the central issue of the form taken by increases in the efficiency of conventionally measured labor and capital inputs. In the article Regulation and Conspiracy, the Fred M. Westfield investigated the relationship between profits earned and prices paid for capital goods purchased by the privately-owned public utility firm whose rate of return is limited by a regulatory authority.

Presents several abstracts related to economics, published in the April 1963 issue of the 'Journal of Political Economy.' Inventions in the industrial research laboratory; Relationship between business pricing policies and inflation; Estimation of the internal rates of return to investment in schooling.