Biological Adaptation in Human Societies: a ‘Basic Needs’ Approach

The groundzero premise (so to speak) of the biological sciences is that survival and reproduction is the basic, continuing, inescapable problem for all living organisms; life is at bottom a survival enterprise. It follows that survival is the paradigmatic problem for human societies as well; it is a prerequisite for any other, more exalted objectives. Although the term adaptation is also familiar to social scientists, until recently it has been used only selectively, and often very imprecisely. Here a more rigorous and systematic approach to the concept of adaptation is proposed in terms of basic needs. The concept of basic human needs has a venerable history – tracing back at least to Plato and Aristotle. Yet the development of a formal theory of basic needs has lagged far behind. The reason is that the concept of objective, measurable needs is inconsistent with the theoretical assumptions that have dominated economic and social theory for most of this century, namely, valuerelativism and cultural determinism. Nevertheless, there have been a number of efforts over the past 30 years to develop more universalistic criteria for basic needs, both for use in monitoring social wellbeing (social indicators) and for public policy formulation. Here I will advance a strictly biological approach to perationalizing the concept of basic needs. It is argued that much of our economic and social life (and the motivations behind our revealed preferences and subjective utility assessments), not to mention the actions of modern governments, are either directly or indirectly related to the meeting of our basic survival needs. Furthermore, these needs can be specified to a first approximation and supported empirically to varying degrees, with the obvious caveat that there are major individual and contextual variations in their application. Equally important, complex human societies generate an array of instrumental needs which, as the term implies, serve as intermediaries between our primary needs and the specific economic, cultural and political contexts within which these needs must be satisfied. An explicit framework of Survival Indicators, including a profile of Personal Fitness and an aggregate index of Population Fitness, is briefly elucidated. Finally, it is suggested that a basic needs paradigm could provide an analytical tool (a biologic) for examining more closely the relationship between our social, economic and political behaviors and institutions and their survival consequences, as well as providing a predictive tool of some value.     

Endogenous uncertainty in a general equilibrium model with price contingent contracts

Summary This paper views uncertainty and economic fluctuations as being primarily endogenous and internally propagated phenomena. The most important Endogenous Uncertainty examined in this paper is price uncertainty which arises when agents do not have structural knowledge and are complelled to make decisions on the basis of their beliefs. We assume that agents adopt Rational Beliefs as in Kurz [1994a]. The trading of endogenous uncertainty is accomplished by using Price Contingent Contracts (PCC) rather than the Arrow-Debreu state contingent contracts. The paper provides a full construction of the price state space which requires the expansion of the exogenous state space to include the state of beliefs. This construction is central to the analysis of equilibrium with endogenous uncertainty and the paper provides an existence theorem for a Rational Belief Equilibrium with PCC. It shows how the PCC completes the markets for trading endogenous uncertainty and lead to an allocation which is Pareto optimal. This paper also demonstrates that endogenous uncertainty is generically present in this new equilibrium.This research was supported in part by the Fondazione Eni Enrico Mattei of Milan, Italy, and by the National Science Council of Taiwan. The authors thank Carsten K. Nielsen for valuable suggestions.     

Zur Geschichte der Theorie des „Deficit Spending“: Der Spätphysiokrat Germain Garnier

Ohne ZusammenfassungDie Übersetzung der im Text enthaltenen Zitate aus Garniers Abrégé élémentaire des principles de l'économie politique habe ich selbst nach dem französischen Original vorgenommen. Alle übrigen Zitate, einschließlich der Kommentare Garniers zu Smiths Reichtum der Nationen, sind im Original wiedergegeben.Für wertvolle Literaturhinweise bin ich Prof. T. W. Hutchison und R. L. Meek zu tiefem Dank verpflichtet, desgleichen Sir R. F. Harrod für Anregungen und P. Sraffa für Informationen betreffend den literarischen Nachlaß und die private Bibliothek von J. M. Keynes. Selbstverständlich bin ich für die in der vorliegenden Arbeit vertretenen Ansichten allein verantwortlich.     

Mutually Destructive Bidding: The FCC Auction Design Problem

In general, synergies across license valuations complicate the auction design process. Theory suggests that a simple (i.e., non-combinatorial) auction will have difficulty in assigning licenses efficiently in such an environment. This difficulty increases with increases in fitting complexity. In some environments, bidding may become mutually destructive. Experiments indicate that a properly designed combinatorial auction is superior to a simple auction in terms of economic efficiency and revenue generation in bidding environments with a low amount of fitting complexity. Concerns that a combinatorial auction will cause a threshold problem are not borne out when bidders for small packages can communicate.     

Risk Aversion, Intergenerational Equity and Climate Change

The paper investigates a climate-economy model with an iso-elastic welfare function in which one parameter measures relative risk-aversion and a distinct parameter measures resistance to intertemporal substitution.We show both theoretically and numerically that climate policy responds differently to variations in the two parameters. In particular, we show that higher but lower leads to increase emissions control. We also argue that climate-economy models based on intertemporal expected utility maximization, i.e. models where = , may misinterpret the sensitivity of the climate policy to risk-aversion.     

From “tax state” to “debt state”

The paper is motivated by Joseph A. Schumpeter's The Crisis of the Tax State. It inquires whether the buildup of government debt in peacetimeprosperity is a threat to the stability, existence or creation of viable tax states. The paper begins by setting out Schumpeter's conception of the tax state and the nature of recent political-economic events which have reinvigorated the concept. Next the paper sets out some simple debt dynamics and sketches a debt-induced business cycle arising from heavy reliance on debt finance in peacetimeprosperity. Finally, the paper assesses threats to the tax state in light of recent work on path dependence and positive feedback. An attempt is made to throw some light on whether the plethora of new, and often small, states spawned by the demise of communism can be viable tax states.Essay on Government, the Tax State and Economic Dynamics submitted to the Third Schumpeter Prize Competition.     

Implementation of college admission rules

Summary We consider both Nash and strong Nash implementation of various matching rules for college admissions problems. We show that all such rules are supersolutions of the stable rule. Among these rules the lower bound stable rule is implementable in both senses. The upper bound Pareto and individually rational rule is strong Nash implementable yet it is not Nash implementable. Two corollaries of interest are the stable rule is the minimal (Nash or strong Nash) implementable solution that is Pareto optimal and individually rational, and the stable rule is the minimal (Nash or strong Nash) implementable extension of any of its subsolutions.We wish to thank Professor William Thomson for his efforts in supervision as well as his useful suggestions. We are grateful to the participants in his reading class, workshops at Bilkent University, University of Rochester, and in particular Jeffrey Banks, Stephen Ching, Bhaskar Dutta, Rangarajan Sundaram and an anonymous referee for their helpful comments.     

Learning for Innovation and the Skill Premium

The computer revolution took very long to pay off in productivity growth in the computer-using sectors. The relative wage of skilled workers, however, has risen sharply from the early days of the computer revolution onward. As skilled workers wages reflect their productivity, the two observations together pose a puzzle.This paper provides a micro-based explanation for the long diffusion period of the computer revolution. The general equilibrium model of growth zooms in on the research process and provides an explanation for sluggish growth with booming relative wages of the skilled. Technological progress in firms is driven by research aimed at improving the production technology (innovation) and by assimilation of ideas or principles present outside the firm (learning). A new General Purpose Technology (GPT) like the computer revolution generates an initial slowdown in economic growth and an increase in the skill premium.Acknowledgement I am indebted to Theo van de Klundert for suggestions and encouragement. Suggestions by Jan Boone, Bas Jacobs, Patrick Francois, Henri de Groot, Lex Meijdam, Niek Nahuis Sjak Smulders, Harald Uhlig and anonymous referees have contributed to the paper.     

Bemerkungen zur Grenzproduktivitätstheorie

Ohne ZusammenfassungMit 6 TextabbildungenDieser Aufsatz wurde als Koreferat zum Referat von Dr. E. Matzner über Beiträge der Grenzproduktivitätstheorie zur Erklärung der Einkommensverteilung im November 1965 am Institut für höhere Studien und wissenschaftliche Forschung (Ford-Institut), Wien, im Rahmen eines Seminars über Verteilungstheorie von Prof. Dr. O. Morgenstern und DDr. H. Frisch gehalten.     

Monetary policy and price level determinacy in a cash-in-advance economy

Summary The paper considers the determinacy of the equilibrium price level in the cash-in-advance monetary economy of Lucas and Stokey (1983, 1987), in the case of deterministic fundamentals. The possibilities both of a multiplicity of perfect foresight equilibria and of sunspot equilibria are considered. Two types of monetary policy regimes are considered and compared, one in which the money supply grows at a given exogenous rate (that may be positive or negative), and one in which the nominal interest rate on one-period government debt is pegged at a given non-negative level. In the case of constant money growth rate regimes, it is shown that one can easily have both indeterminacy of perfect foresight equilibrium and existence of sunspot equilibria; indeed, in the case of negative rates of money growth (as called for by Friedman (1969)), both types of indeterminacy necessarily occur. On the other hand, sufficient conditions for uniqueness of equilibrium (and non-existence of equilibria other than a deterministic steady state) are also given, and a class of cases is identified in which a sufficiently high rate of money growth guarantees this. Thus there may be a conflict between the aims of choosing a rate of money growth that results in a high level of welfare in the steady state equilibrium and choosing a rate that makes this steady state the unique equilibrium.) In the case of the interest rate pegging regimes, sufficient conditions are given for uniqueness of equilibrium (and impossibility of sunspot equilibria), and it is shown that these necessarily hold in the case of any low enough nominal interest rate. Thus the nominal interest rate peg allows simultaneous achievement of price level determinacy and a high level of welfare in the unique (steady state) equilibrium.In this paper I consider the consequences of alternative choices of the monetary policy regime for the determinacy of the rational expectations equilibrium value of money, and in particular for the existence or not of sunspot equilibria, i.e., rational expectations equilibria in which fluctuations in the price level occur in response to random events that represent no change in economic fundamentals, simply due to self-fulfilling revisions of people's expectations. I am interested in particular in making the point that a consideration of the complete set of possible equilibria associated with a given policy regime may alter one's evaluation of the relative desirability of alternative policies, relative to the conclusion that one might reach if one considered only a single possible equilibrium associated with each policy regime (perhaps a unique equilibrium involving a minimum set of state variables). In view of this I give particular attention to policy regimes of types that have sometimes been advocated as ways of reducing the inefficiency associated with a rate of return differential between money and other financial assets, and show that policies that might otherwise be desirable (policies that make possible a more desirable equilibrium than would otherwise be possible) can have the unfortunate consequence of rendering equilibrium indeterminate and making possible equilibrium fluctuations in response to sunspot events.Two classes of policy regimes are considered in particular: on the one hand, alternative constant rates of growth or contraction of the money supply, financed through lump sum taxes or transfers, with zero net government assets at all times; and on the other, alternative constant nominal interest rate pegs, to be maintained through open market operations between money and interest-bearing debt, with an exogenously fixed level of net transfer payments. The first class of policies is considered because of Friedman's (1969) well-known proposal that a constant contraction of the money supply of this sort would be welfare improving. I find that while thestationary equilibrium associated with the Friedman regime achieves the maximum possible level of utility for the representative consumer, and while the level of utility associated with stationary equilibrium may be monotonically decreasing in the rate of money growth, lower rates of money growth (in particular, rates near that called for by Friedman) are associated with indeterminacy of equilibrium and the existence of sunspot equilibria, while these problems need not arise in the case of higher rates of money growth.The second class of policies is considered because they represent an obvious alternative approach to the elimination of the same rate of return differential with which Friedman is concerned. Achievement of permanently low nominal interest rates through a simple interest rate peg is not often advocated; one reason is that it is often asserted that such a policy must result in price level indeterminacy. In fact, I find that if the interest rate pegging regime is properly specified, it results in aunique rational expectations equilibrium, regardless of the level at which interest rates are to be pegged. Thus not only does the interest rate peg not result in price level indeterminacy but it allows nominal interest rates to be maintained permanently at a level lower than that which can be obtained through a policy regime of the first sort without creating price level indeterminacy. It would hence appear, at least in the case of the kind of economy modeled here, that interest rate pegging is a more reliable way of trying to reduce the inefficiency associated with consumers being forced to economize on liquidity.This paper represents a revision of Woodford (1988). I would like to thank Leonardo Auernheimer, Buz Brock, Willem Buiter, Peter Howitt, Teh-Ming Huo, David Laidler, David Levine, Bennett McCallum, and an anonymous referee for helpful comments, and the National Science Foundation for research support.     

Convention, Social Order, and the Two Coordinations

The word coordination has two meanings, and thesemeanings are often conflated. One meaning, associated with ThomasSchelling, is seen in situations like choosing whether to driveon the left or the right; the drivers must coordinate to eachother's behavior. The other meaning, associated with FriedrichHayek, means that a concatenation of activities is arranged soas to produce good results. Along with the Schelling sense ofcoordination comes the notion of convention, such as drivingon the right. Some conventions are consciously designed; othersemerge without design (or are emergent). Along with the Hayeksense of coordination comes the notion of social order. Somesocial orders, such as the skeleton of activities within thefirm or within the hypothetical socialist economy, are consciouslyplanned. Other social orders, such as the catallaxy of the freesociety, function without central planning (or are spontaneous).Distinguishing between the two coordinations (and, in parallelfashion, between convention and social order) clarifies thinkingand resolves some confusions that have arisen in discussionsof coordination and spontaneous order. The key distinctionsare discussed in the context of the thought of, on the one hand,Menger, Schelling, David Lewis, and the recent path-dependencetheorists, and, on the other hand, Smith, Hayek, Polanyi, Coase,and the modern Austrian economists. The paper concludes witha typology that encompasses the several distinctions.     

Negative externalities and welfare improving preference changes

When the over-consumption of open access resources and congestible public goods generate negative externalities and social welfare losses, many individuals and environmental advocacy organizations offer as an alternative nongovernmental solution the adoption of new ecology sustaining preferences. This paper shows that exogenously inducing a change in preferences and the adoption of new externality internalizing preferences, which increase an individual's marginal rate of substitution between a private good and a good whose consumption imposes external costs on others, not only reduces the aggregate output of the negative externality but also produces an economic state that is socially superior to the initial state. Because it is based on both the initial and new preferences, the social superiority welfare criterion makes possible meaningful welfare comparisons of economic states generated by preference changes. A computational general equilibrium model is then used to simulate preference changes and to calculate the resulting allocative and welfare effects. The computer simulations reveal that important factors in the attainment of a socially superior state include (i) the particular characteristics of an individual's negative externality reaction function, (ii) the magnitude of the preference change, and (iii) the number of individuals changing preferences.     

Power,luck and the right index

Summary We have pointed out the theoretical drawbacks of the traditional indices for measuring a priori voting power inasmuch as they are implied in considering the coalition value a private good. This criticism caused us to view the coalition outcome as a public good. From this aspect and additional considerations with respect to power, luck, and decisiveness, we obtained a story describing the characteristics of an adequate measure of a priori voting power. These characteristics were found to be fulfilled by an index presented by Holler (1978). Through the above analysis this index has received its theoretical justification. An independent view of this index was then provided by means of an axiomatic characterization. This characterization makes possible abstract comparison of the index with previously established private good indices.While we have restricted our attention to simple games, the index presented can be generalized to provide a value on games in characteristic function form. We leave this topic for future conideration.     

Incentive compatibility and the quantity-setting competitive firm under demand uncertainty

This paper examines the tie between the popular black box neoclassical quantity-setting firm under demand uncertainty and a firm with a rudimentary but explicit employee relation organizational structure in which workers are offered fixed wages for following management directives. Surprisingly, the quantity-setting firm unambiguously mimics optimal employment relation hiring and work rules when the contract is incentive-compatible ex post. The attitude toward risk is shown to be the key determinant of whether or not the quantity-setting firm replicates the optimal employment relation contract when ex post incentive-compatibility is relaxed.     

The dynamics and revealed preference of status-quo optimality

Summary In a preceding companion paper, a static model of individual decision making was proposed that, due to imprecise perceptions, induces simple and inertial behavior at equilibrium (status-quo optimal) points. This paper addresses two complementary issues. Firstly, it studies the learning dynamics induced by the model and shows that its well-defined limit behavior ranges from status-quo optimal to fully optimal, depending on the underlying features of the problem. Secondly, the paper characterizes the behavioral implications of the model and compares them with those derived from standard decision-theoretic frameworks. Specifically, it is shown that, from a Revealed-Preference perspective, status-quo optimal behavior may be identified with that rationalizable by an acyclic preference relation, possibly intransitive.     

Kaldorian dynamics in an open economy

In this paper, we formulate a Kaldorian business-cycle model in a small open economy. We consider the possibility of capital mobility, and both the system of fixed exchange rates and that of flexible exchange rates are studied. We investigate how changes of the parameter which represents the degree of capital mobility affect the dynamic characteristics of the model. Some numerical simulations are performed based on the analytical model.     

Die fluktuation der Arbeitskräfte

Zusammenfassung Es konnten vier Typen der Fluktuation isoliert werden, die neben persönlichen Komponenten für die Fluktuation der Arbeitskräfte maßgebend sind. Ein Teil der Fluktuation geht auf das Ausprobieren des Arbeitsplatzes — angesichts der Unvollkommenheit der Information — zurück (Probe-Fluktuation). Die Wechselneigung ist daher bei Personen mit kurzer Betriebszugehörigkeitsdauer sowie jüngeren Arbeitskräften (20 bis 30 Jahre) relativ hoch.Eine weitere Form der Fluktuation ist die Reaktion der Arbeinehmer auf Unterschiede in den Nettovorteilen verschiedener Arbeitsplätze (Lohn-Fluktuation). Die Arbeitskräfte wandern per Saldo aus Niedrig- in Hochlohnbetriebe, aus Klein- in Großbetriebe und aus schrumpfenden in expandierende.Das Bestehen eines dualen Arbeitsmarktes impliziert, daß benachteiligte Arbeitskräfte (Ungeschulte mit geringem betriebsspezifischem Training) häufig kündigen, während begünstigte Arbeitskräfte (Geschulte) relativ selten wechseln (Hilfskräfte-Fluktuation). Tatsächlich ist die Wechselneigung von Ungeschulten und Arbeitern (vor allem im industriell-gewerblichen Sektor) weit überdurch-schnittlich. Die Zahl der Wechselfälle wird neben der Wechselneigung durch die alternativen Beschäftigungsmöglichkeiten bestimmt (Konjunktur-Fluktuation). Die Fluktuation schwankt so deutlich mit der Anspannung auf dem Arbeitsmarkt, daß sie als Anspannungsindikator angesehen werden kann.die Branchenunterschiede in verschiedenen Maßzahlen der Fluktuation lassen sich im wesentlichen auf die dargestellten vier Fluktuationstypen zurückführen. (Zur Messung des Arbeitsplatzwechsels empfiehlt es sich, Verbleibenswahrscheinlichkeiten der betrieblichen Zugänge und dienstalterspezifische Fluktuationsraten zu errechnen.)

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Summary There are four main features of labour turnover. A substantial part of turnover is due to job shopping in view of imperfect information. Therefore, workers with short job tenure and younger employees (20–30 years) reveal a high propensity to quit. Another type of quit behaviour is the reaction of workers to differences in the net advantages of various jobs. The employed move from the low wage to the high wage sector, from small to largescale enterprises and from shrinking to expanding firms. The existence of a dual labour market implies that disprivileged workers (with low general and specific training) quit frequently and privileged workers rarely change the job. In fact, the turnover rate of white-collar workers and persons with higher formal education is far below average. The actual level of labour turnover does not only depend on the propensity to quit but also on the alternative job opportunities. Voluntary quits are so closely related to the tightness of the labour market that they can be regarded as a labour market indicator. Regression analysis shows that the differences in various measures of turnover are essentially due to these four features of turnover. (For measurement of labour turnover it is recomended to use the probabilities of a batch of entrants to survive certain points in time. as well as job tenure-specific turnover rates.)

     

Public-Choice Analysis of a New International Organization: The International Sea-Bed Authority

The usefulness of the public-choice approach for a better understanding of international organizations can be demonstrated by applying it to the analysis of the structure and functions of a new international organization, the International Sea-Bed Authority, established in 1994, after two decades of negotiations under the auspices of the United Nations, with the aim to control the oceans' mineral resources beyond the limits of national jurisdictions (which have been proclaimed by the U.N. Assembly common heritage of mankind). First, the reasons for establishing this organization, whose basis is the common heritage of mankind nature of ocean resources, are examined under two aspects: 1) definition and protection of property rights; 2) environmental control of sea-bed mining activities. Secondly, the organization's decisionmaking system is presented, including such features as the assembly, council with chamber voting, finance committee with decision by consensus, features that balance the voting power of members and protect those countries that bear the financial responsibility for the budget. Finally, some comments are offered about more general aspects of the theory of international organizations: the bureaucracy (and diplomacy) of these organizations as well as the interdependence among international organizations, which opens the way to forms of international logrolling and makes it advisable for countries not to exit from these organizations, even when they have no primary interest in them.     

The greenhouse effect: Damages,costs and abatement

The buildup of so-called greenhouse gases in the atmosphere — CO₂ in particular-appears to be having an adverse impact on the global climate. This paper briefly reviews current expectations with regard to physical and biological effects, their potential costs to society, and likely costs of abatement. For a worst case scenario it is impossible to assess, in economic terms, the full range of possible non-linear synergistic effects. In the most favorable (although not necessarily likely) case (of slow-paced climate change), however, it seems likely that the impacts are within the affordable range, at least in the industrialized countries of the world. In the third world the notion of affordability is of doubtful relevance, making the problem of quantitative evaluation almost impossible. We tentatively assess the lower limit of quantifiable climate-induced damages at $30 to $35 per ton of CO₂ equivalent, worldwide, with the major damages being concentrated in regions most adversely affected by sea-level rise. The non-quantifiable environmental damages are also significant and should by no means be disregarded.The costs and benefits of (1) reducing CFC use and (2) reducing fossil fuel consumption, as a means of abatement, are considered in some detail. This strategy has remarkably high indirect benefits in terms of reduced air pollution damage and even direct cost savings to consumers. The indirect benefits of reduced air pollution and its associated health and environmental effects from fossil-fuel combustion in the industrialized countries range from $20 to $60 per ton of CO₂ eliminated. In addition, there is good evidence that modest (e.g. 25%) reductions in CO₂ emissions may be achievable by the U.S. (and, by implication, for other countries) by a combination of increased energy efficiency and restructuring that would permit simultaneous direct economic benefits (savings) to energy consumers of the order of $50 per ton of CO₂ saved. A higher level of overall emissions reduction — possibly approaching 50% — could probably be achieved, at little or not net cost, by taking advantage of these savings.We suggest the use of taxes on fossil fuel extraction (or a carbon tax) as a reasonable way of inducing the structural changes that would be required to achieve significant reduction in energy use and CO₂ emissions. To minimize the economic burden (and create a political constituency in support of the approach) we suggest the substitution of resource-based taxes in general for other types of taxes (on labor, income, real estate, or trade) that are now the main sources of government revenue. While it is conceded that it would be difficult to calculate the optimal tax on extractive resources, we do not think this is a necessary prerequisite to policy-making. In fact, we note that the existing tax system has never been optimized according to theoretical principles, and is far from optimal by any reasonable criteria.During the academic year 1989–90 Dr. Ayres was at the International Institute for Applied Systems Analysis (IIASA), Laxenburg, Austria.During the summer of 1989 Mr. Walter was a member of the Young Scientists' Summer Program at IIASA.     

Ein Entscheidungsmodell für Konsumieren und Sparen

Summary The present study analyses the simultaneous problem of consumption and saving by means of a consistent demand system; for this purpose the linear—expenditure—system (LES), developed by R. Stone, has been modified and used as a methodological base. Saving takes, for the sake of operationality, the character of a consumer—good and becomes an argument of the utility function. The usual neoclassical assumption of utility maximization allows the derivation of a linear expenditure system of consumption and saving (LESSC) when prices and income are given. The simultaneous LESSC-model has remarkable weaknesses, however: the assumption of certainty, the static character of the model, the disregard for major savings—motives and private expenditure on homebuiding led to bad elasticity—estimates. The assumpion of directly—additive utility functions causes furthermore collinearity between income—and price—elasticities such that the meaning of the derived elasticities is greatly reduced.The income—elasticities derived from the LESSC are positive throughout but show a remarkable variance. The calculation of the Friedman—bias demonstrates a rather strong bias due to the assumption of certainty. A modification resulted in income—elasticities of private consumption and savings of around 0,93 (unmodified: 0,88) and 1,41 (unmodified: 1,76). The demand for consumption goods of great necessity was income—inelastic whereas the demand for goods of less importance to survival was income—elastic. An analysis of income—elasticities of the disaggregated system and the relation between transitory components of consumption and income existing in Austria gave the impression that unexpected changes in income are not only reflected in saving but also in changes of the consumption—structure.The respective price—elasticites are all negative and smaller than 1. For less important consumption—goods lower price—elasticities have been measured and for easily substitutable goods higher ones. Marked crossprice—elasticities could only by discovered with clothing and food products. Generally it can be said that an increase in prices of goods of the daily needs hits both the expenditure on easily substitutable consumption goods and causes dissaving.A comparison with the elasticities calculated through OLS shows a greater reliance of LESSC—elasticities as far as data of differing aggregation levels are concerned.

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Mécanique Sociale may one day take her place along with Mécanique Celeste throned each upon the double—sided height of one maximum principle, the supreme pinnacle of moral as of physical science.