A Reappraisal of the Stagnation Thesis

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A HBAPPRAISAL OF THB STAGNATION 5HT5SIS

Irj H e b e rt L y le House

A d i s s e r t a t i o n s u b m itte d in p a r t i a l f u l f i l l m e n t o f th e r e q u ir e m e n ts f o r th e d e g re e o f D octor o f P h ilo s o p h y , I n th e D e p artm en t o f Econom ics i n th e G ra d u a te C o lle g e o f th e S t a t e U n i v e r s i t y o f loxm A ugust ? 1950

ProQuest N um ber: 10902192

All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is d e p e n d e n t upon the quality of the copy subm itted. In the unlikely e v e n t that the a u thor did not send a c o m p le te m anuscript and there are missing pages, these will be noted. Also, if m aterial had to be rem oved, a n o te will ind ica te the deletion.

uest ProQuest 10902192 Published by ProQuest LLC(2018). C opyright of the Dissertation is held by the Author. All rights reserved. This work is protected against unauthorized copying under Title 17, United States C o d e M icroform Edition © ProQuest LLC. ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 4 8 1 0 6 - 1346

«r ntie r * ^ t h a t P r o f e s s o r H ansen b e l i e v e s t h a t th e U n ite d S t a t e s h a s e n t e r e d th e u p p e r s t a g e s o f th e g ro w th c u rv e a n d m u st f a c e a d e c l i n i n g r a t e o f g ro w th i n tii© f u t u r e even I f f u l l em ploym ent l e v e l s w ere a c h ie v e d a n d m a in ta in e d *

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th e a c t u a l h i s t o r i c a l tre n d o f g ro s s n a tio n a l p ro d u c t i s o f s e c o n d a ry im p o rta n c e i n th e s t a t e m e n t o f th e th e o r y o f econom ic m a t u r i t y . -Indeed*, I t w ould b e p o s s i b l e f o r th e a c t u a l t r e n d t o b e i d e n t i c a l w ith th e p o t e n t i a l t r e n d a t f u l l em p lo y m en t, a n d y e t th e economy c o u ld be d ia g n o s e d a s m a tu re .

T h is w ould be th e e a s e I f th e f i s c a l p o l i c i e s

p u rs u e d b y th e g o v ern m en t wore r e s p o n s i b l e f o r e l i m i n a t i n g s a v i n g s — in v e s feien t ma l a d j u s tra e n ts * »\olVv I t l a ^ ev id en t> h o w e v e r, t h a t P r o f e s s o r H ansen e x p l a i n s th e d e p r e s s io n o f th e t h i r t i e s In term s o f s n I n ­ c r e a s i n g d i s c r e p a n c y b e tw ee n th e p o t e n t i a l t r e n d a t f u l l em ploym ent an d th e a c t u a l h i s t o r i c a l tre n d * V / T h is i s , n e v e r t h e l e s s , ^©mp©Mb£er*witii Hie above s t a te m e n t o f th e th e o r y o f econom ic m a t u r i t y , f o r i t o n ly n e c e s s i t a t e s th e

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t r e n d ? n d Hie " l a l s s e z f a i r e ” t r e n d h a s n o t b e e n e x p lo r e d bg b y P r o f e s s o r H a n se n . H ig g in s a p p a r e n t l y b e l i e v e s t h a t th e two t r e n d s w ould b e p r a c t i c a l l y t h e same b e c a u s e p a s t f i s c a l p o l i c y h a s b e e n both, d e p r e s s i v e a n d s t i m u l a t i v e t o econom ic a c tiv ity *

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w i t h e r c u p p e r t o r r e f u t e t h i s - g em o r a l l a a t i o n * — I f t h e r e i s an i n c r e a s i n g g a p b e tw ee n th e p o te n ­ t i a l t r e n d a t f u l l em ploym ent a n d th e " l a i s s e s f a i r e ” t r e n d , a s P r o f e s s o r H ansen c o n te n d s , c a u s e s o f t h i s -jpheaaesienen m u st be e s ta b lis h e d .

‘Hi© p r im a r y r e a s o n a d v a n c e d b y him i s t h a t ,

a t f u l l em ploym ent l e v e l s o f i n c ® e , th e in d u ce m e n t f o r p r i v a t e in v e s tm e n t i s n o t s u f f i c i e n t t o b a la n c e th e s a v in g s t h a t w i l l a c c r u e a t th e s e l e v e l s .

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f a l l s b elo w th e am ount r e q u i r e d , incom e w i l l d e c l i n e to a new p o s i t i o n w here s a v in g s a n d in v e s tm e n t w i l l be e q u a l# C o n s e q u e n tly , P r o f e s s o r H ansen m a in ta in s t h a t th e d e t e r ­ m in a n ts o f o u t p u t , c o n su m p tio n an d in v e s tm e n t, a r e to o low In r e l a t i o n

to one a n o th e r to p ro v id e a c o n tin u o u s l e v e l o f

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15 d u r i n g c y c l i c a l p e rio d s *

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c o n su m p tio n e x p e n d i t u r e s w i l l i n c r e a s e d u r in g p e r io d s o f p r o s p e r i t y a n d d e c l i n e d u r in g p e r io d s o f d e p r e s s io n * H ow ever, a s incom e i n c r e a s e s , c o i^ u n p tio n e x p e n d i tu r e s w i l l i n c r e a s e r e l a t i v e l y m ore s lo w ly ; an d when incom e d e ­ c r e a s e s , th e d e c r e a s e s I n c o n su m p tio n w i l l p ro c e e d a t a lo w e r r a t e . B ut o s f a r a s th e t h e o r y o f econom ic 212a t u r i t y i s c o n c e r n e d , i t i s th e b e h a v io r o f th e c o n su m p tio n f u n c ­ t i o n o v e r a lo n g p e r i o d o f tim e t h a t i s i m p o r t a n t .

H ith

r e f e r e n c e to t h i s lo n g - r u n b e h a v i o r , P r o f e s s o r H ansen i n t r o d u c e s s t a t i s t i c s w hich p u r p e r t - to p ro v e t h a t in th e p a s t c o n su m p tio n h a s r i s e n p r o p o r t i o n a l l y w ith in co m e. He s t a t e s : B r i e f l y th e p r o p o s i t i o n i s tha t th e c o n ­ su m p tio n f u n c t i o n ( s t a t e d fn t e r n s o f a b s o l u t e m a g n itu d e s ) h a s s h i f t e d upw ard fro m c y c lo to c y c l e , a s a . r e s u l t o f th e s e c u l a r r i s e i n p r o ­ d u c t i v i t y a n d in l i v i n g s t a n d a r d s s o a s to y i e l d *a s t a b l e r e l a t i o n b e tw ee n p e rc e n ta g e c o n ­ sumed o u t o f n a t i o n a l :?ncoraes c o r r e s p o n d in g to a g iv e n f r a c t i o n o f f u ll- e m p lo y m e n t In co m ef . . . . I n e a c h c y c l o , a s incom e r o s e from th e b o tto m o f th e d e p r e s s i o n , th e s c h e d u le r e v e a l s t h a t c o n ­ su m p tio n a l s o ro s e b u t a t a l e s s th a n p r o p o r t i o n ­ a l r a t e . From c y c le t o c y c l e , h o w e v e r, consum p­ t i o n r o s e p r o p o r t i o n a l l y w ith in c o m e . . . As lo n g ©0 c o n su m p tio n e x p e n d itu r e s I n c r e a s e i n tiie seme p r o p o r t i o n a s th e i n c r e a s e s i n p r o d u c t i v i t y an d in co m e, th e p e rc e n ta g e o f s a v in g s t h a t m u st be o f f s e t b y

16 in v e s tm e n t n e e d n o t become h i g h e r ,

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t h e t h e s i s c o n c lu d e s t h a t p r i v a t e in v e s tm e n t o u t l e t s a r e d e t e r i o r a t i n g , a c r u c i a l p a r t o f th e th e o r y o f econom ic

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m a t u r i t y i s th e s t a b i l i t y o f th e h i s t o r i c a l co n su m p tio n ! _func t i o n . P r o f e s s o r H ansen p ro c e e d s t o a n a ly z e th e p o s s i ­ b i l i t i e s o f m change i n th e lo n g - r u n c o n su m p tio n f u n c t i o n . H is c o n c lu s io n i s

t h a t i t i-ay be a l t e r e d -b^ c u r r e n t i n s t i A ^ /r- - \ t u t i o n a l d e v e lo p m e n ts , b u t n o t i n a way oonetuei v e - to th e

m itltgft-t i o n 11o f th e s a v in g s - i n v e s tm e n t p ro b le m .

Ih e g ro w th

o f i n s t i t u t i o n a l i z e d p e r s o n a l s a v in g an d o f c o r p o r a te s e l f - f i n a n c i n g f*re c i t e d b y him a s f a c t o r s t h a t would te n d t o re d u c o th e c o n su m p tio n f u n c t i o n . He p o i n t s to th e g ro w th o f l i f e

in s u r a n c e com­

p a n ie s i n r e c e n t y e a r s a s th e p rim a ry f a c t o r i n th e i n c r e a s e in i n s t i t u t i o n a l i z e d p e rs o n a l s a v in g s .

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l i f e in s u r a n c e p a t t e r n i n t h e U n ite d S t a t e s a t th e p r e s e n t tim e i s th e le v e l-p re m iu m p l a n , th e l i f e

in s u r a n c e com panies

d u r in g th e p e r i o d o f g ro w th a c c u m u la te r e s e r v e s f o r f u t u r e paym ents to p o l i c y h o l d e r s .

P r o f e s s o r I-fensen b e l i e v e s t h i s

in e f f e c t c o n s t i t u t e s f o r c e d s a v in g s on th e p a r t o f i n d i v i d u a l

17 p o l i c y h o l d e r s , a n d ’W ill te n d to ro&ue© th e p r o p e n s i t y to consum e*

S o c i a l I n s u r a n c e p ro g ra m s , P r o f e s s o r Hansen m a in ­

t a i n s , -w ill a l s o te n d t o havo t h i s e f f e c t on th e r e l a t i o n h e tw e e n c o n su m p tio n an d in co m e.

B a s i c a l l y th e s e p ro g ram s

> a/> o s.* 2 1 2 ,7 3 0 1 5 ,7 0 9 21,5842 8 ,7 8 3 4 0 ,1 2 2 6 1 ,8 9 5 8 1 ,1 9 9 7 9 ,1 2 7 6 9 ,9 5 2

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80 79 78 79 03 86

K u z n e ts , Sim on, I« atio n a 1 P ro d u c t S in c e 1 0 6 9 , p . 1 1 8 .

b y K u z n e ts w ith r e s p e c t to c a p i t a l f o r m a tio n a n d n a t i o n a l p r o d u c t fro m 1 8 6 9 -1 9 3 8 .

ib e f i g u r e s in c l u d e b o th c o r p o r a t e

and in d iv id u a l s a v in g . Y^ith th e e x c e p tio n o f th e l a s t two d e c a d e s , t h i s d a ta i n d i c a t e s t h a t c o n su m p tio n e x p e n d ! tu r o s w ere a lm o s t a c o n s t a n t p r o p o r t i o n o f incom e d u r in g t e n - y e a r p e r io d s from 1869.

Hie r i s i n g t r e n d i n th e p e r c e n ta g e o f c o n su m p tio n

e x p e n d i tu r e s d u r in g th e p e r i o d s 192 4 -3 3 and 192 9 -3 8 can be e x p la in e d b y th e m a g n itu d e a n d d u r a t i o n o f th e d e p r e s s io n o f th e * t h i r t i e s " when c y c l i c a l f a c t o r s a f f e c t e d th e s e c u l a r tre n d . I t i s d i f f i c u l t to Ju d g e w h e th e r o r n o t K u z n e ts 1 d a ta i s ' e n t i r e l y r e l i a b l e .

The Commerce D ep artm en t h a s rr

i s s u e d d a ta

th? t c o v e r th o p e r i o d from 1 9 2 9 -1 9 3 8 .

w h ile

c o n su m p tio n •e x p e n d i tu r e s a r e a p p r o x im a te ly th e same f o r t h i s p e r i o d i n e a c h o f th e s e r i e s ,

t h e r e i s c o n s i d e r a b le

v a r i a t i o n in th e e s t i m a t e o f g r o s s n a t i o n a l p r o d u c t.

The

t e n - y e a r a v e r a g e o f g r o s s n a t i o n a l p r o d u c t f o r t h i s n e rio d i s a p p ro x im a te ly e i g h t b i l l i o n d o ll? ;e s h i g h e r in th e Commerce d a t a .

I n p a r t , t h i s d i s p a r i t y may be a t t r i b u t a b l e

to s t a t i s t i c a l d is c r e p a n c ie s .

H ow ever, th e Commerce d a ta

a r e m ore c o m p le te th a n th e K u zn ets c o m p u ta tio n s .

K u z n e ts ,

w ith two e x c e p t i o n s , e x c lu d e s a l l governm ent? 1 p u rc h a s e s o f g ro ss n a ti o n a l p ro d u c t.

G ro ss a d d i t i o n s to g o v e rn m e n t

c o n s t r u c t i o n a r e c o n ta in e d in th e d a t e , a s w e ll a s a n

55 a d d i t i o n o f a n am ount e q u rtl to th© p e r s o n a l ta x e s o f C in d iv id u a ls . I t i s a p p a r e n t , t h e n , t h a t t h e s e tv o s e r i e s p ro n o t c o m p a ra b le .

C o n s e q u e n tly , t h e r e i s l i t t l e

e v id e n c e

a v a i l a b l e c o n c e m in g th© r e l i a b i l i t y o f K u z n e ts T d a t a . B ecause t h i s m a t e r i a l i n d i c a t e s t h a t th e r e l a t i o n o f c o n ­ su m p tio n e x p e n d i tu r e s to g r o s s n a t i o n a l p r o d u c t lias b een n e a r l y c o n s t a n t s i n c e 18 6 9 , i t n a y bo c o n c lu d e d the t a v a i l a b l e e m p ir ic s 1 e v id e n c e su b s t a n t i a t o e th e H ansen fo r m u la ­ t i o n o f th e lo n g - r u n c o n su m p tio n f u n c t i o n . B e la ti o n to C y c l i c a l C o n sisap tio n * u n c tio n H ansen d o es n o t o f f e r an e x p la n a t i o n a s t o May t h e t y p i c a l b e h a v io r o f c o n su m p tio n f u n c t i o n d u r in g th© c y c le ( t h e r a t i o o f c o n su m p tio n to Income i n c r e a s e s a s incom e f a l l s an d v ic e v e r s a ) does n o t h o l d f o r lo n g - r u n s e c u l a r c h a n g e s i n in eo m e.

Sam uels on a f f o r d s a p a r t i a l

e x p l a n a t i o n o f t h i s d i f f e r e n c e i n b e h a v io r . V ihatever th e c o n c e p t o f o v e rs a v in g I s su p p o se d t o m ean, i t c e r t a i n l y do es n o t im ply t h a t a t th e same l e v e l s o f r e a l incom e m odern communi­ t i e s consume l e s s th a n th e y u s e d t o . Hr t h e r i s th e r e v e r s e t r u e . H ot o n ly d o e s c o n su m p tio n *-t th© sam e incom e l e v e l s i n c r e a s e s e c u l a r l y , b u t o u r ru d im en t a r y s t s t i s t i c a l da ta I n d ie s te th a t i n e a c h d e c a d e f o r th e ha I f - c e n t u r y p r i o r to 1929 a b o u t th e same p e rc e n ta g e o f n a t i o n a l i n ­ come u se s a v e d . S in c e n a t i o n a l Income was i n ­ c r e a s i n g r a p i d l y th r o u g h o u t t h i s p e r i o d , th e m o st p l a u s i b l e e x p la n a t i o n o f t h i s i s to be

56

fo u n d i n th e h y p o t h e s i s t h a t o u r e n la r g e d s c a l e o f w a n ts was c a u s in g an upw ard s h i f t i n th e c o n su m p tio n f u n c t i o n a t ah o u t th e same r - t e 8S Im p ro v em en ts in ouo p r o d u c tio n p o te n ­ t i a l , y i e l d i n g a s t a b l e r e l a t i o n b e tw ee n p e r ­ c e n ta g e consum ed o u t o f n a t i o n a l in cccie c o r ­ r e s p o n d in g t o a g iv e n f r a c t i o n o f f u l l ompl ryjnen t in c ome . ' R e c e n t s tu c l ?.03 by D u e se n b e rry c a s t a d d i t i o n a l 8 l i g h t on t h i s p ro b le m . He f o r m u la te s th o h y p o th e s is t h r t th© c y c l i c a l b e h a v io r o f th e co n su m p tio n f u n c t i o n i s d e ­ p e n d e n t n o t o n ly on c u r r e n t in co m e, b u t a l s o on p a s t in co m e.

T h u s, he d i s a g r e e s w ith d a n s e n , who c o n s id e r s

c u r r e n t incom e a s th e s i n g l e v a r i a b l e on w h ich ch an g es i n c o n su m p tio n d e p o n d .

The p r o p o s i t i o n o f f e r e d by

D u e se n b e rry i s a s f o l l o w s : I f a f a m i ly h a s a c e r t a i n incom e Yo and t h i s incom e i s h i g h e r th a n an y p r e v i o u s ly a t t a i n e d , i t w i l l s ^ v e same am o u n t. This am ount w i l l be a f u n c t i o n o f Incom e S o « F (Y o ). i f i t s income i n c r e a s e s th e same f u n c t i o n w i l l h o l d . B ut i f a f t e r an i n c r e a s e , incom e f a l l s to th e o r i g i n a l l e v e l , i t s s a v in g w i l l be 'l e s s th a n F (Y o ). I f th e f a m i l y fs incom e a n d s a v in g p ro low th r o u g h ­ o u t , i t w i l l h a v e a d e f i c i t a f t e r d ie f a l l in in c o m e . I f . th e f a m ily i s i n a h i g h e r b r a c k e t i t w i l l s im p ly s a v e l e s s a f t e r th e f a l l in I n ­ come. I f th e f a m ily i s in a h i g h e r b r a c k e t i t w i l l s im p ly sa v e 1©3S a f t e r th e i ’n income th a n i t d i d b e f o r e th e increase D u e se n b e rry r e c o n c i l e s th e s h o r t - r u n b e h a v io r o f th e c o n su m p tio n f u n c t i o n w ith th e s e c u l a r r e l a t i o n s h i p b y d i f f e r e n t i a t i n g th e b e h a v io r o f i n d i v i d u a l s when f a c e d by r a p i d c h a n g e s i n in c o n e , a s I n a c y c l e , an d when Income

57

i d u n d e r g o in g a alo w a n d f a i r l y s t e a d y grow th*

In p e rio d s

when Incom e i s r i s i n g , D u e se n b e rry b e l i e v e s , th e f i r s t a d ­ ju s tm e n t t h a t p e o p le e x e c u te i s to I n c r e a s e s a v in g s a t a f a s t e r r a t e th a n th e i n c r e a s e i n incom e *

I n g e n e r a l , how­

e v e r , e v e ry o n e I n c r e a s e s h i s c o n su m p tio n b y some am ount* H e n ce , a n I n d i v i d u a l f i n d s t h a t , i n c o m p a riso n to h i s n e ig h ­ b o r s , h i s p o s i t i o n w i t h r e s p e c t to go o d s I s e s s e n t i a l l y unchanged. H ow ever, a c c o r d in g to D u e se n b e rry , a fu n d a m e n ta l m o tiv e o f i n d i v i d u a l s i s t o e l i m i n a t e u n f a v o r a b le c o m p a ri­ so n s w ith a s s o c i a t e s w ith r e s p e c t to l i v i n g s t a n d a r d s . th e n , th e i n c r e a s e in incom e lias done l i t t l e

If,

to c o r r e c t

t h i s a d v e r s e c o m p a ris o n , th e i n d i v i d u a l w i l l b e m o tiv a te d to r e l i n q u i s h some o f h i s

I n c r e a s e d s a v in g s i n o r d e r to

i n c r e a s e h i s c cmsu m p tio n f u r t h e r .

O ther p e o p le w i l l do th e

same t h i n g and s a v in g s w i l l r i s e u n t i l th e y r e a c h an e q u i ­ l i b r i u m , w h ic h i s c h a r a c t e r i s e d b y a p r o p o r t i o n a l I n c r e a s e i n c o n su m p tio n a s Incom e i n c r e a s e s f u r t h e r .

T h is e q u il i b r i u m

r e p r e s e n t s th e b a la n c i n g o f th e i n d i v i d u a l ’s d r i v e f o r h i g h e r p r e s e n t c o n su m p tio n rn d th e d e s i r e t o o b ta in f u t u r e w e lfa re by s a v in g s . D u e se n b e rry th u s b e l i e v e s tfoa t i n c r e a s e s o r d e ­ c r e a s e s I n c o n su m p tio n e x p e n d ! t o r e s , i n s h o r t ; « r io d s o f

tim e , may b e a t s lo w e r r a t e s th a n i n c r e a s e s o r d e c r e a s e s in

In c o m e .

I n th e c a s e o f a r i s i n g in co m e, a d ju s tm e n t l a

e v e n t u a l l y made a n d c o n su m p tio n once a g a in becom es © c o n ­ s t a n t p r o p o r t i o n o f Income* D u e se n b e rry h a s o f f e r e d a p l a u s i b l e e x p la n a t i o n o f tli© b e h a v i o r o f c o n su m p tio n e x p e n d itu r e s d u r in g b o th c y c l ic a l and s e c u la r p e r io d s .

M o re o v e r, h i s h y p o th e s is

a p p e a rs to bo i n a c c o rd a n c e w ith th e s t a t i s t i c ? ; ! date, w ith r e s p e c t to both, c o n d i t i o n s .

H ow ever, h i s e x p la n a tio n a s

to why c o n su m p tio n e x p e n d itu r e s h av e v a r i e d p r o p o r t i o n a l l y w ith incom e s in c e 1869 i s c o n s i d e r a b ly d iffe x * e n t from t h a t a d v an c ed b y S am uels o n . She l a t t e r a p p a r e n t l y s u b s c r i b e s to th e p o s i t i o n t h a t th e c y c l i c a l c o n su m p tio n f u n c t i o n h a s s h i f t e d upw ards p e r i o d i c a l l y i n th e p a s t .

I h i s i n c r e a s e in th e c o n su m p tio n

f u n c t i o n was c a u s e d , a c c o r d in g to Sam uels on, by th e ^ e n ­ l a r g e d s c a l e o f w a n ts ” o f c o n su m e rs.

P re su m a b ly , lie r e f e r s

p r i m a r i l y to th e I n t r o d u c t i o n o f new p r o d u c t s , s u c h a s th e a u to m o b ile , w hich o c c u r re d «-• t v a r i o u s tim e s d u r in g t h i s p e rio d .

H en ce, a c c o r d in g to Sr-m uelson, th e p r o p o r t io n o f

c o n su m p tio n to incom e w a s, on th© a v e r a g e , c o n s t a n t . D u e se n b e rry b e l i e v e s , h o w ev er, t h a t th e r e l a t i o n o f c o n su m p tio n to Incom e w i l l be c o n s t a n t u n le s s ch an g ed by tr e n d f a c t o r s , s u c h a s th e i n t r o d u c t i o n o f new p r o d u c ts . I t i s e v i d e n t , th e n , t h a t h i s e x p la n a t i o n o f the c o n s t a n t r e l a t i o n s h i p o f c o n su m p tio n to incom e I

th e p a s t would

n e c e s s i t a t e th e a s su m p tio n t h a t e i t h e r (1 ) s u c h t r e n d f a c t o r s d i d n o t o p e r a t e i n th e p a s t o r h a d n e g l i g i b l e i n f l u e n c e on th e c o n su m p tio n f u n c t i o n , o r (2 ) th e f a c t o r s te n d in g to w a rd s an i n c r e a s e d c o n su m p tio n f u n c t i o n w ere o f f s e t b y o t h e r f a c t o r s t h a t te n d e d to r e d u c e th e p ro p e n ­ s i t y to consum e* The I s s u e , th e n , betw een th o s e two e x p la n a tio n s i s th e im p o rta n c e o f th e t r e n d f a c t o r s on th e co n su m p tio n fu n c tio n . s tru c te d

I n c o n n e c tio n w ith t h i s , D u e se n b e rry h a s c o n ­ p.

v e ry p e r s u a s iv e c a s e th e t tr e n d f e e t o r s , s u c h

a s th e i n t r o d u c t i o n o f new p r o d u c t s , u r b a n i z a t i o n , age c o m p o s itio n o f th e p o p u la tio n an d th e d i s t r i b u t i o n o f in co m e, hove h a d l i t t l e n e t i n f lu e n c e on th e c o n su m p tio n f u n c t i o n i n th e p a s t*

10

N e v e r t h e l e s s , h i s e x p la n a t i o n

c a n n o t be a c c e p te d a s a law o f consum er b e h a v io r f o r s h o r t and lo n g p e r io d s o f tim e , s i n c e th e d a ta a v a i l a b l e i s s t i l l v e ry lim ite d .

As new d a ta a p p e a r , i t i s e n t i r e l y p o s s i b l e

t h a t q u i t e a d i f f e r e n t e x p la n a t i o n w i l l b e f o r tl team ing. A I n c l i n i n g C onsum ption Pune ti o n A lth o u g h K u z n e ts ’ d a ta i n d i c a t e t h a t a g g r e g a te c o n su m p tio n Sirs b een a c o n s t a n t p r o p o r t io n o f incom e in th e p a s t , P r o f e s s o r Hanson b e l i e v e s th.?: t th e r e a r e c e r t a i n t r e n d s o c c u r r i n g a t th o p r e s e n t tim e w hich w ould d e c r e a s e

60

tli© con grumpt i o n f u n c t i o n .

F o r a few d e c a d e a , a t l e a s t ,

n o t o n ly w i l l t h e r e be l a r g e r am ounts o f a b s o l u t e s a v i n g s , a c c o r d in g t o K&nsen, b u t t h e r e w i l l a l s o be an i n c r e a s i n g p r o p o r t i o n o f incom e i n th e fo rm o f s a v i n g s . f a c t o r s s t r e s s e d by P r o f e s s o r H ansen « r e ( l )

filie two th e gro w th o f

i n s t i t u t i o n a l i s e d p e r s o n a l s a v i n g s , and (2 ) th e g row th o f c o r p o r a t e s a v in g s i n th e form o f r e t a i n e d e a r n i n g end d e ­ p re c ia tio n re s e rv o s . I n o r d e r to p r o p e r l y a n a ly z e t h i s a rg u m e n t o f P r o f e s s o r H a n se n , o t h e r f a c t o r s t h a t racy a f f e c t th© c o n ­ su m p tio n f u n c t i o n m u st b e c o n s i d e r e d ,

th e r e f o r e , in a d d i­

t i o n to th e two f a c t o r s m e n tio n e d by P r o f e s s o r H ansen, t h i s a n a l y s i s w i l l a l s o encom pass th e e f f e c t upon th e p r o p e n s i ty to consum e o f (1 ) ch an je s i n th e d i s t r i b u t i o n c f in c erne, (2 ) c h a n g e s i n th e i n t e r e s t r a t e ,

(5 ) i n c r e a s i n g u r b a n i z a ­

t i o n , (4 ) th e i n t r o d u c t i o n o f new p r o d u c t s , an d (5 ) th e c h a n g in g a g e c o m p o s itio n . I n s t l t u t I o n a l i z e d P erso n e 1 S a v in g s The p rim a ry d e v e lo p m e n t in t h i s f i e l d h a s been th© trem en d o u s .growth o f l i f o

in s u r a n c e .

The a s s e t s o f

A m erican l i f e in s u r a n c e com panies w ere s l i g h t l y l e s s th a n t h r e e b i l l i o n d o l l a r s in 1 9 0 6 , b u t by 1947 th e y h a d i n c r e a s e d t o o v e r 51 b i l l i o n d o l l a r s . I n c r e a s e i n th e s i z e o f l i f e

11

T h is s u b s t a n t i a l

in s u r a n c e com panies u n d o u b te d ly

h a s h a d s n e f f e c t on th e p a t t e r n o f p e r s o n a l s a v in g s *

61

"The s i g n i f i c a n t f e a t u r e o f l i f e in s u r a n c e I s th e .t i t c u s t o m a r il y in v o lv e s a s a v in g s p ro g ram .

The u se

o f th e lev© 1 -prem ium p la n r e q u i r e s th e p o l ic y h o l d e r to pay a prem ium t h a t n o t o n ly w i l l c o v e r th e c o 3 t f o r p u re i n s u r a n c e (w h ic h w ould be low when th e p o l ic y h o l d e r i s young a n d th e m o r t a l i t y ra t© f o r h i s g ro u p i s lo w ) , b u t a l s o w i l l accum ula t e n r e s e r v e to be u s e d I n c o v e r in g p u re in s u r a n c e c o s t s when th e p o l i c y h o l d e r becom es e l d e r l y * W ith H ie g r e a t d e v e lo p m e n t o f l i f e in s u r a n c e th e a c c u m u la tio n o f r e s e r v e s h a v e p ro v id e d s. l a r g e am ount o f s a v in g s a v a i l a b l e f o r in v e s tm e n t.

G eren

12

h a s made a r e c e n t

s tu d y c o n c e r n in g th e g ro w th In n e t s a v in g s made by p o l i c y ­ h o l d e r s i n l i f e in s u r a n c e c o m p a n ie s.

The r e s u l t s o f t h i s

I n q u i r y w ith r e s p e c t to i n c r e a s e d n o t s a v in g s a r e p r e s e n te d in T a b le I I .

G eren com putes th e new s a v in g s by d i f f e r e n ­

t i a t i n g b e tw ee n th e flo w o f fu n d s from p o l ic y h o l d e r s to life

in s u r a n c e com panies a n d th e flo w o f fu n d s fro m i n s u r ­

a n c e com panies t o p o l i c y h o l d e r s .

I n c lu d e d in th e fo rm e r

a r e premium p a y m e n ts, i n t e r e s t on a c c u m u la te d s a v i n g s , *nd re p a y m e n t o f p o l i c y l o a n s .

The flo w from in s u r a n c e com­

p a n ie s to p o l ic y h o l d e r s in c lu d e s d e a th b e n e f i t s , m a tu re d endow m ents, a n n u it y p a y m e n ts, s u r r e n d e r s , d i v id e n d s , p o lic y l o a n s , an d th e a d m i n i s t r a t i v e s e r v i c e s o f th e c o m p a n ie s. The s t a t i s t i c s in T able I I i n d i c a t e t h * t th e n e t s a v in g s o f l i f e I n s u r a n c e com panies i n c r e a s e d t h r e e - f o l d

62

‘S able I I A n n u a l H e t S a v in g s o f P o llc y tx o ld e rs In L i f e I n s u r a n c e , 192 0 -4 0 ( m illio n s of d o lla r s )

Y ear

S a v in g s

Y ear

S a v in g s

1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930

§

1931 1932 1933 1934 1935 1936 1937 1938 1939 1940

J

S o u rc e :

595 463 575 677 764 959 1 ,0 5 2 1 ,1 9 2 1 ,3 2 5 1 ,0 7 5 968

750 278 814 1 ,2 8 3 1 , G46 1 ,8 0 9 1 ,7 0 0 1 ,6 4 6 1 ,7 7 5 1 ,6 5 2

G e re n , P a u l, ” ilie C o n tr ib u tio n o f L if e I n s u r a n c e to tb e S a v in g s S tr e a m ,51 J o u r n a l o f P c l it i c e .1 Economy, 5 1 :5 4 , F e b r u a r y , 19-45-

63

fro m 1920 t o 1940#

K u z n e ts e s t i m a t e s t h r .t d u r in g th e same

p e r i o d g r o s s an d n o t c a p i t a l f o r m a tio n d e c l in e d * 13

T his

p r o v id e s r u d im e n ta r y p r o o f t h a t l if © I n s u r a n c e s a v in g s h a v e becom e an i n c r e a s i n g p e r c e n ta g e o f t o t a l s a v i n g s . Commerce 14 * _ d a ta d i s c l o s e t h a t g r o s s s a v in g s w ere a p p r o x im a te ly Hie same in 1929 a n d 1 9 4 0 , w h ile T ab le I I i n d i c a t e s , t h ^ t l i f e in s u r a n c e s a v in g s w ore 600 m i l l i o n d o l l a r s g r e a t e r in 1940 th a n in 1929*

H ence, i t i s a p p a r e n t th s t lif © in s u r a n c e

s a v in g s r e l a t i v e to t o t a l s a v in g s becam e l a r g e r d u r in g t h i s p e rio d . Th5s , h o w e v e r, d o e s n o t d e m o n s tra te t h a t th e g ro w th o f l i f e

in s u r a n c e s a v in g s te n d s t o c r e a t e a d e c r e a s ­

in g t r e n d i n th e p r o p e n s i ty t o consum e.

To p ro v e t h i s , i t

w o u ld be n e c e s s a r y t o show t h a t i n d i v i d u a l s w ould hav e s p e n t m ore i f t h e r e h a d boen no l i f e I n s u r a n c e d e v e lo p m e n t. T h ere i s n o lenown s t a t i s t i c a l d a ta t h a t c a n d e v .o n s tra te th is .

A p r i o r i r e a s o n i n g w ould a p p e a r t o su b s ta n t i a fce th e b e l i e f t h a t th e d e v e lo p m e n t o f l i f e I n s u r a n c e c r e a t e s a te n d e n c y to w a rd s a d e c r e a s i n g co n su m p tio n f u n c t i o n .

Th©

s t u d y o f c e r e n i n d i c a t e s t h a t a 1 though th e t o t a l s a v in g s o f low Incom e g ro u p s a r e n e g a t i v e , t h e i r l i f e in s u r a n c e s a v in g s a re p o s itiv e .

M o re o v e r, w h ile th e pex’centag© o f s a v in g s

i n c r e a s e d a s t h e f a m i l y ’s p o s i t i o n :tn th e Income d i s t r i b u ­ t i o n im p ro v e d , l i f e I n s u r a n c e s a v in g s re m a in e d .‘a p p ro x im a te ly

64 cons te n t .

F u r th e r m o r e , I n 1 9 3 5 -3 6 , f a m i l i e s the. t e a rn e d

u n d e r two th o u s a n d d o l l a r s a c c o u n te d f o r o n ly n in e p e r c e n t o f t h e t o t a l s a v in g s b u t 45 p e r c e n t o f th e l i f o in s u r a n c e s a v i n g s , w h ile th o s e u n i t s t h a t e a rn e d o v e r to n th o u s a n d d o l l a r s t a l l i e d 59 p e r c e n t o f th e t o t a l s a v in g s b u t o n ly f o u r p e r c e n t o f th e l i f e in s u r a n c e s a v i n g s . T h ese f i n d i n g s a r e s i g n i f i c a n t f o r th e p e r io d I n v o lv e d .

H ow ever, th e y a r c b a s e d on th e S tu d y o f Consumer

P u rc h a s e s made b y th e H .S . -^ureau o f Labor* S t a t i s t i c s in 1 9 3 5 -3 6 .

I t I s p o s s i b l e t h a t th e b e h a v io r e x h i b i t e d d u r in g

t h i s l i m i t e d p e r io d o f tim e i s n o t c h a r a c t e r i s t i c o f o t h e r p e r io d s * N e v e r t h e l e s s , I t a p p e a rs p l a u s i b l e t h a t Hie m a jo rity of l i f e g ro u p s.

in s u r a n c e s a v in g s come from low income

W ith o u t th e a v a i l a b i l i t y o f s u c h a s y s te m a tiz e d

s a v in g s p ro g ra m , I t i s d o u b tf u l i f th e s e Lini t s w ould h av e saved.

But a s G eren h a s s t a t e d , " th e i n s t i t u t i o n o f l i f e

i n s u r a n c e h a s s e i s e d upon an e le m e n ta l n e e d , d in n e d i t i n t h e e a r s o f p r o s p e c t i v e p o l i c y h o l d e r s , in f u s e d I t w ith m o ra l a n d r e l i g i o u s s a n c t i o n , a n d f i r m l y e s t a b l i s h e d I t 15 a s a p a r t o f th e m o r e s ." C o n s e q u e n tly , th e s e i n d i v i d u a l s in a s e n s e e r e p r a c t i c a l l y f o r c e d to sav e i n o r d e r t o p r o ­ t e c t p a s t s a v in g s .

T able I I v;ould b e a r t h i s o u t , f o r even

In 1932 n e t s a v in g s o f l i f e in s u r a n c e com panies wore 278 m illio n d o lla r s .

85 O f f s e t t i n g t h i s te n d e n c y to w a rd s s d e c l i n i n g t r e n d i n t h e p r o p e n s i t y to consum e would be th e p r e s s u r e p l a c e d on i n d i v i d u a l s to p r o v id e t h e i r own r e s e r v e s f o r c o n ti n g e n c i e s *

H ow ever, t h e o n ly i n d i v i d u a l s who would a p ­

p e a r to b© a b l e to do t h i s w ould be u p p e r in c cane g ro u p s who •a c c o u n t f o r r e l a t i v e l y s m a ll am ounts o f l i f e i n s u r a n c e s a v in g s .

G eren r e a c h e s th e c o n c lu s io n t h a t l i f e

in s u r a n c e

w ould o p e r a t e to re d u c o th e p r o p e n s i t y to consum e.

T h is

c o n c l u s i o n a p p e a r s to b e p r o b a b l e , a t l e a s t a t th e p r e s e n t tim e .

E v e n t u a l l y , l if © in s u r a n c e com panies w i l l p ay o u t

e a c h y e a r , i n b e n e f i t s a n d c o s t s , am ounts e q u a l to t h e i r a n n u a l prem ium r e c e i p t s a n d in v e s tm e n t incom e. q u e n t l y , th© n e t s a v in g s o f l i f e g r a d u a lly d e c lin e .

C onse­

in s u r a n c e com panies w i l l

T h e r e f o r e , i n th© f u t u r e , d ie downward

p r e s s u r e t h a t l i f e in s u r a n c e i s e x e r t i n g on fe e p r o p e n s i ty t o consum e w i l l b e rem o v ed .

A se c o n d form o f i n s t i t u t i o n a l i z e d p e r s o n a l s a v ­ in g s t h a t may a f f e c t th e p r o p e n s i ty to consume i s fe e r e c e n t d e v e lo p m e n t o f s o c i a l in s u r a n c e p ro g ra m s.

The p l a n s , b a s e d

l a r g e l y on p r i v a t e in s u r a n c e p r i n c i p l e s , r e s u l t in an a c c u m u la te d r e s e r v e .

Commerce d a ta

'shown in* Tsbl© I I I )

i n d i c a t e t h a t th e n e t a d d i t i o n s to t h e s e fu n d s h a v e shown a n upw ard t r e n d in r e c e n t y e a r s . D u rin g th e p e r io d o f r e s e r v e a c c r e t i o n , w hich i s o c c u r r i n g a t th e p r e s e n t ,

th e r e i s r, l a r g e e x c e s s o f s a v in g

over d is s a v in g .

W hether t h i s a c e m u l a t i o n o f s a v in g w ould

te n d t o r e d u c e th© p r o p e n s i t y to consum e c a n n o t be a n sw e re d w ith c e r t a i n t y .

The a rg u a is n t f o r su c h a b e l i e f w ould

p o i n t t o tii© f a c t t h a t c o n t r i b u t i o n s may b© made by em­ p lo y e e s a n d e m p lo y e rs fro m fu n d s th a c w ould h av e o th e rw is e b e en s p e n t on c o n s m p t i o n g o o d s.

I f su c h i s th e c a s e ,

P r o f e s s o r H ansen i s c o r r e c t in a s s e r t i n g

th a t s o c ia l in ­

s u r a n c e i s a f a c t o r I n i n c r e a s i n g th e p r o p o r t io n o f incom e sav ed • On th e o t h e r h a n d , i t may b e a rg u e d t h a t s u c h a d e v ic e a s s o c i a l s e c u r i t y may re d u c e th e i n c e n t i v e o f i n d i ­ v i d u a l s to a c q u i r e p r o t e c t i o n e i t h e r by a c c u m u la tin g t h e i r own r e s e r v e s o r p a r t i c i p a t i n g i n a p r i v a t e I n s u r a n c e p ro g ram . Two f a c t o r s may b e c i t e d t h a t would w eaken t h i s l a t t e r a r ­ g u m en t.

F i r s t , a s in th e c a s e o f p r i v a t e i n s u r a n c e , t h e r e

i s a g a in an e le m e n t o f f o r c e d s a v i n g s .

I t I s p r o b a b le t h a t

many o f th e lo w e r-, ncome em ployees w ould n o t hav e s u f f i c i e n t i n c e n t i v e to p r o v id e f o r t h e i r own f u t u r e s e c u r i t y i f th e r e w ero no s u c h I n s u r a n c e p r i n c i p l e .

S e c o n d ly , once an i n d i ­

v i d u a l p a r t i c i p a t e s in a s o c i a l in s u r a n c e p ro g ram , h e n a y b e s p u r r e d to su p p le m e n t th© f u t u r e b e n e f i t o f t h i s program b y e n g a g in g In p r i v a t e in s u r a n c e p l a n s .

To th e e x t e n t t h a t

t h i s i s th e c a s e , s o c i a l in s u r a n c e w ould te n d t c f u r t h e r I n ­ c r e a s e th e c u r r e n t n e t s a v in g s o f l i f e in s u r a n c e c o m p a n ie s.

67

H o t A d d itio n to th e R e se rv e s o f Feelers 1 , S t a t e a n d L o c a l S o c i a l I n s u r a n c e F unds 1 9 2 9 -4 6 (m illio n s of d o lla r s )

Y ear

F e d e re 1

1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946

$

S o u rc e :

101 99 89 72 58 49 62 281 1 ,4 5 2 1 ,0 8 4 1 ,1 4 5 1 ,1 8 0 1 ,7 8 8 2 ,4 5 9 3 ,7 0 3 4 ,3 3 5 4 ,7 1 4 3 ,5 5 6

To ts 1

S t a t e and L o c s l $

62 69 73 81 84 93 103 107 124 137 150 160 168 178 192 207 223 237

§

163 168 162 153 144 142 165 388 1 ,5 7 6 1 ,2 2 1 1 ,2 9 5 1 ,3 4 0 1 ,9 5 6 2 ,6 3 7 3 ,8 9 5 4 ,5 4 2 4 ,9 3 7 3 ,3 0 3

D e p a rtm e n t o f Commerce, " N a tio n a l Income an d P ro d u c t S t a t i s t i c s o f th e U n ite d S t a t e s , 1 9 2 9 4 6 , ” S u rv e y c f C u r r e n t B u s in e s s , J u l y , 1 9 4 7 , p . 23.

68

•Hie a u t h o r b e l i e v e s t h a t s o c i a l an d p r i v a t e i n s u r a n c e p ro g ram s would te n d to re d u c e th e p r o p e n s ity to consum e.

I t m u st b e a d m i t t e d , h o w e v e r, t h a t t h e r e i s no

s t a t i s t i c a l e v id e n c e a v a i l a b l e w h ic h w i l l a b s o l u t e l y s u p ­ p o r t o r d is p r o v e t h i s o p i n io n . C o r p o r a te S a v in g s P r o f e s s o r H ansen c o n te n d s th? t th e d e v elo p m e n t o f d e p r e c i a t i o n a c c o u n tin g o f c o r p o r a t i o n s , a n d t h e i r p r a c t i c e o f r e t a i n i n g e a r n i n g s , may be f a c t o r s te n d in g to w a rd s r e d u c e d c o n su m p tio n f u n c t i o n .

Of th e tw o, h e a p ­

p a r e n t l y c o n s i d e r s d e p r e c i a t i o n a n d d e p l e t i o n a llo w a n c e s th e m ore s i g n i f i c a n t . D e p rec io t io n a c c o u n tin g i s d e s ig n e d to r e c o v e r th e c o s t s o f c a p i t a l f a c i l i t i e s

t h a t a r e w e a rin g o u t .

H en ce, th e m a jo r o f f s e t s o f th e s e r e s e r v e s a r c r e p la c e m e n ts , n e v e r t h e l e s s , i t i s e n t i r e l y p o s s i b l e t h a t a p o r t io n o f t h e s e a c c o u n ts n a y be a v a i l a b l e f o r n e t in v e s tm e n t.

Is

P r o f e s s o r H ansen s t a t e s , MHewly b u i l t p l a n t and e q u ip m e n t w i l l n o t n e e d to bo r e p l a c e d f o r xa*ny y e a r s and som etim es e v en d e c a d e s , y e t th e a n n u a l d e p r e c i a t i o n a llo w a n c e s on su c h e q u ip m e n t w i l l be a v a i l a b l e y e a r b: y e a r f o r e x p a n ­ s i o n . " 1*5 I n a d d i t i o n , d e p r e c i a t i o n a llo w a n c e s p re u s u a l l y b a s e d upon o r i g i n a l c o s t and * ro computed on a s t r a i g h t

lin e b a s is -

I h ls r e s u l t s in a r e l a t i v e s te a d in e s s of

d e p re c ia tio n c h a rg e s .

T a b le IV I l l u s t r a t e s

th is s t a b i l i t y .

C o n s e q u e n tly , In p e r i o d s o f f a l l i n g p r i c e s , d e p r e c i a t i o n a c c o u n ts may a llo w b u s i n e s s e s to r e p l a c e e q u ip m e n t and h a v e so m e th in g l e f t o v e r .

On th e o t h e r h a n d , In p e r io d s

o f r i s i n g p r i c e s th e a c c o u n tin g a llo w a n c e s m ig h t n o t c o v e r th e t r u e econom ic d e p r e c i a t i o n .

'T h e re fo re , d e p r e c i a t i o n

a c c o u n ts p r o v id e fLinds a v a i l a b l e f o r r e p la c e m e n t, a n d , ©t t im e s , f o r n e t c a p i t a l e x p e n d ! t u r e s .

B e fo re th e c o n c lu s io n

c a n be r e a c h e d t h a t th e s e a llo w a n c e s te n d to re d u c e th e p r o p e n s i ty to consum e, two c o n d i t i o n s m u st be s a t i s f i e d . I n th e f i r s t p l a c e , i t i s n e c e s s a r y to p ro v e t h a t th e u se o f d e p r e c is t i o n a c c o u n tin g i s a r e l a t i v e l y r e c e n t d e v e lo p m e n t.

I f i t h a d b een f u l l y d e v e lo p e d In th©

n i n e t e e n t h C e n tu r y , ev en th o u g h i t

th e n te n d e d to re d u c e

th e c o n su m p tio n f u n c t i o n , i t c o u ld n o t be view ed a s a co n ­ t r i b u t i n g f a c t o r I n a r e c e n t t r e n d to w a rd s © re d u c e d p ro p e n 17 s i t y to c o n s u s e . -Pa b r i e a n t p r o v id e s a p a r t i a l a n sw er to th is q u e s tio n .

He e s t i m a t e s th ? t d e p r e c i a t i o n and de p ie t i o n

a llo w a n c e s r o s e from 2*5 b i l l i o n d o l l a r s In 1020 to 5 .1 b i l l i o n d o l l a r s I n 1929 and re m a in e d betw een f o u r and f i v e b i l l i o n d o l l a r s u n t i l 1937, w hich was th e l o s t y e a r f o r w h ich f i g u r e s w ero g i v e n .

A1 th o n g

h i s d a ta in c lu d e th e

d e p r e c i a t i o n a n d d e p l e t i o n a llo w a n c e s f o r o i l b u s i n e s s e n t e r p r i s e s a n d , h e n c e , a r e n o t s t r i c t l y a p p l i c a b l e to

70

T able IV

C a p i t a l C onsum ption A llo w a n c e s , C o rp o ra te R e ta in e d E a r n in g s a n d C o r p o r a te P r o f i t s A f t e r T axes 1929-46 t r i l l i o n s of D o lla rs )

Y ear 1929 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 S o u rc e :

a

C a p ita l C onsum ption A llo w a n c e s21 8 ,6 3 7 8 ,5 6 9 8 ,1 3 6 7 ,4 8 9 7 ,0 7 0 7 ,0 4 3 7 ,1 9 3 7 ,5 0 7 7 ,7 9 2 7 ,8 0 8 7 ,9 1 4 8 ,2 5 0 9 ,1 0 2 9 ,7 4 0 1 0 ,3 8 8 1 1 ,5 7 3 1 1 ,8 8 4 1 0 ,8 4 0

U; id i 8 t r ib u te d C o r p o r a te P ro fits

C o rp . P r o f i t s A f te r Ifeixes

2 ,4 5 4 - 3 ,1 5 6 -5 ,4 1 4 -6 ,0 0 9 -2 ,4 4 8 -1 ,6 7 1 - 712 - 396 - 119 - 936 1 ,1 6 2 2 ,3 1 3 4 ,7 9 9 5 ,0 1 8 5 ,7 8 5 5 ,0 4 9 3 ,9 9 8 6 ,7 0 0

8 ,1 8 8 2 ,3 1 8 -1 ,2 7 9 -3 ,3 9 0 - 360 917 2 ,1 0 0 4 ,1 6 9 4 ,5 65 2 ,0 4 2 4 ,8 2 1 6 ,2 1 3 9 ,1 5 5 9 ,2 0 8 1 0 ,1 2 5 9 ,6 3 5 8 ,6 7 5 1 2 ,2 2 5

D e p a rtm e n t o f Commerce, "Ha t i o m l In c orae end P ro d u c t S t a t i s t i c s o f th e U n ite d S t a t e s , 1 9 2 9 4 6 ," S u rv e y o f C u r r e n t B u s in e s s , J u l y , 19 4 7 , p . 21*

The C a p i t a l C onsum ption A llow ance A cco u n t o f th e D ep artm en t o f Commerce i n c l u d e s u n in c o r p o r ? te d e n te rp ris e .

71 c o r p o r a t i o n s , I t seem s J u s t i f i e d t o a s s e r t t h a t d e p r e ­ c i a t i o n a c c o u n ti n g a ssu m ed i n c r e a s i n g im p o rta n c e In t h i s p e rio d * S e c o n d ly , i t re m a in s u n p ro v en t h a t t h i s d e v e lo p ­ m en t h a s r e s u l t e d i n a d e c r e a s i n g c o n su m p tio n r a t i o *

IP

d e m o n s tr a te t h i s c o n c l u s i v e l y , i t w ould be n e c e s s a r y to show t h a t d e p r e c i a t i o n a c c o u n tin g p r o v id e s m ore s a v in g s th a n w o u ld b e th e c a s e i f t h e r e w ore no p r o v i s i o n f o r c a p i t a l c o n s u m p tio n , a n d , h e n c e , th o s e am ounts would be d i s t r i b u t e d a s d iv id e n d s to s t o c l h o l & e r s .

'Ihe c o r p o r a t io n

w ould b e d e p e n d e n t upon th e c a p i t a l m a rk e t f o r r e p la c e m e n t e x p e n d itu re . su c h a s t u d y .

P r e s e n t s t a t i s t i c a l te c h n iq u e s do n o t p e rm it I t d o e s a p p e a r r e a s o n a b l e , h o w ev er, to

assu m e t h a t i f d i s t r i b u t e d e a r n in g s w ere en h an ced by t h i s a m o u n t, e s p e c i a l l y d u r in g d e p r e s s i o n s , a p a r t o f th o s e fu n d s w ould b e consum ed.

Ih e i n f l e x i b i l i t y o f d e p r e c i a t i o n

a ll o w a n c e s , c o n t r a s t e d w ith th e b e h a v io r o f th e c y c l i c a l p r o p e n s i t y to consum e, w ould d e f i n i t e l y s u g g e s t t h i s . l e s s im p r e s s iv e th a n H a n se n fs arg u m e n t t h a t th e d e v e lo p m e n t o f d e p r e c i a t i o n a c c o u n tin g may te n d t o re d u c e th e c o n su m p tio n f u n c t i o n i s h i s c o n te n ti o n t h a t c o r p o r a t e r e t e n t i o n o f e a r n in g s may a c c e n t u a t e t h i s t r e n d . tia lly ,

t h i s a rg u m e n t i s a s f o l l o w s :

E ssen ­

72 Ti© grow th, o f c o r p o r a t e e n t e r p r i s e and c a p i t a l in v e s tm e n t h a s b e e n v e r y —r a p i d in t h i s c o u n t r y . I t i s , th e r e f o r e , n o t u n n a tu ra l th e t our c o r ­ p o r a t i o n s s h o u ld h a v e fo rm ed th e h a b i t o f r e ­ i n v e s t i n g a l a r g e p e r c e n ta g e o f n e t p r o f i t s much l a r g e r th a n i n c o u n t r i e s e x p e r ie n c in g a s lo w e r e x t e n s i v e g ro iv th . And once t i l l s h a s becom e e s t a b l i s h e d p r a c t i c e , i t c a n n o t be e x ­ p e c t e d t h a t th e p o l i c y w ould q u i c k l y b e c h a n g e d , ev en th o u g h a s lo w in g down o f e x te n s i v e e x p a n ­ s i o n j u s t i f i e d th e r e t e n t i o n o f a s m e ll e r p r o p o r t i o n o f e a r n in g s # T h is 's t a t e m e n t s u g g e s ts t h a t H ansen may b e l i e v e t h a t th e p r i n c i p a l r e a s o n t h a t r e t e n t i o n o f e a r n in g s may c o n t r i b u t e to s a v i n g s - i n v e s tm e n t m a la d ju s tm e n ts i s n o t t h a t i t te n d s to r e d u c e th e c o n su m p tio n f u n c t i o n , b u t r a t h e r t h a t c u r r e n t c o r p o r a t e p r a c t i c e d o s s n o t a d j u s t to d e c l i n ­ i n g I n v e s tm e n t o p p o r t u n i t i e s b y t a k i n g s t e p s ( d i s t r i b u t i n g a l a r g e r p r o p o r t io n o f p r o f i t s )

t h a t c o u ld r e s u l t i n an

i n c r e a s e d p r o p e n s i t y to c o n s m e . The Commerce d a t a in. T a b le IV i n d i c a t e t h a t u n ­ d i s t r i b u t e d p r o f i t s a re a h ig h ly f l e x i b l e so u rc e of s a v in g s . Prom 1 9 3 0 -3 0 th e y w ere n e g a t i v e , b u t s i n c e t h a t t i n e i t a p p e a rs t h a t r e t e n t i o n o f e a r n in g s h a s become an I n c r e a s i n g p e r c e n ta g e o f t o t a l p r o f i t s .

I t i s d i f f i c u l t to c o n c lu d e

fro m th e s e f i g u r e s , h o w e v e r, t h a t t h i s s h o r t - p e r i o d t r e n d in u n d is tr ib u te d p r o f i t s c o n su m p tio n f u n c t i o n .

te n d s tc

d e c re a se th e h i s t o r i c a l

Iv o n i f i t c o u ld be dem onstr* te d

th a t th is in c re a s in g r a t i o of u n d is trib u te d p r o f its r e s u lt© ’ i n s m a l l e r a b s o l u t e am ount o f co n su m p tio n th a n i f

th a t

73 Incom e h a d b e e n d i s t r i b u t e d , i t w ould seem t h a t th e a p ­ p a r e n t f l e x i b i l i t y i n th e r e t e n t i o n o f e a r n i n g s w ould m in im iz e a n y te n d e n c y to w a rd a r e d u c e d c o n su m p tio n f u n c t i o n . C hanges i n th e D i s t r i b u t i o n o f Incom e T h ere i s v e r y l i t t l e i n incom e d i s t r i b u t i o n .

e v id e n c e c o n c e rn in g c h an g e s 19 Jo h n so n h a s show n, by u se o f

incom e t a x d a t a , t h a t t h e r e was l i t t l e

change In Income

d i s t r i b u t i o n b e tw ee n th e y e a r s 1914 and 1933.

H ence, t h i s

f a c t o r c o u ld n o t h a v e a f f e c t e d th e c o n su m p tio n f u n c tio n d u r in g th e s e y e a r s . Hie r e I s some i n d i c a t i o n t h a t d u r in g th e l a s t d e c a d e incom e i n e q u a l i t i e s have b e en r e d u c e d .

T able V

show s t h a t th e d i s t r i b u t i o n o f Income in 1947 was s l i g h t l y l e s s c o n c e n t r a t e d th a n i t was b e f o r e W orld War I I .

H iis

a f f o r d s s c a n t b a s i s f o r a ssu m in g th e o th e r e i s a tr e n d to w a rd a r e d u c t i o n i n i n e q u a l i t i e s o f in co m e.

T h ere i s

r e a s o n to b e l i e v e t h a t th e l e s s c o n c e n tr a te d incom e d i s ­ t r i b u t i o n may b e o f a te m p o ra ry n a t u r e . The d e c l i n e i n incom e c o n c e n tr a ti o n fro m th e d e p r e s s io n p e r i o d to th e Im m ediate p rew ar and to" th e p o s t w ar p e r i o d I s m o st p ro b a b ly due to th e v i r t u a l e l i m i n a t i o n o f unem ploym ent, w hich r a i s e d th e s h a r e o f Income o f lo w e r and m id d le g ro u p s ♦ The i n c r e a s e i n th e number o f f a m i­ l i e s w ith m ore th a n one e a r n e r and th e r e l a ­ t i v e I n c r e a s e ir: f a m in c a n e a r e a l s o s i g n i f i ­ c a n t f a c t o r s . Farm fa n i l i o s 1 c a s h in c a n e i s lo w e r on th e a v e r a g e th a n th a t o f o t h e r fa m i­ l i e s , b u t th e d i s p a r i t y lia s b een n a rro w e d in th e p o s tw a r p e r i o d . 20

74

T ab le V P e r c e n t o f Money In co m e, B e fo re and A f t e r Tax. H eceivod By E ach F i f t h o f th e R a t i o n 's F a m i l i e s , Hanked by S is o o f In co m e, 1 9 3 5 -3 6 , 1941 and 1947^

F a m ily U n its Hanked fro m L o w est t o B e fo re Tax H ig h e s t Incom e 1 935-36 1941 1947

A f t e r Tax 1935-36° 1941 1947

L ow est F i f t h

4 .0

3 .5

4 .0

5 .7

4 .3

Second F i f t h

8 .7

9 .1

9 .8

9 .5

1 0 .4

T h ird F i f t h

1 3 .6

l o . l)

1 5 .4

1 5 .9

1 6 .2

F o u r Hi F i f t h

2 0 .5

2 2 .5

2 2 .8

2 3 .2

2 2 .8

H ig h e s t F i f t l i

a b c S o u rc e :

5 3 .2 1 0 0 .0

4 9 .6 4 8 .2 1 0 0 .0 1 0 0 .0

4 7 .7 46*3 1 0 0 .0 1 0 0 .0

I n c l u d e s s i n g l e p e rs o n f a m i l i e s L i a b i l i t y f o r th e F e d e r a l P e r s o n a l Income Tax D ata n o t a v a i l a b l e f o r th e s e y e a r s

Econom ic K e n o rts o f th e P r e s i d e n t . 1949 e d i t i o n , p p ." VTzsg: --------------------------------------------

75 Even i f , h o w e v e r, t h i s s h o u ld r e p r e s e n t a t r e n d to w a rd s © r e d u c t i o n i n th e i n e q u a l i t i e s o f in co m e, t h e e f f e c t o f t h a t c h an g e d d i s t r i b u t i o n on th e c o n su m p tio n fu n e tio n i s u n c e r ta in .

U n t i l r e c e n t l y , i t was b e li e v e d t h a t a

l e s s c o n c e n t r a t e d incom e d i s t r i b u t i o n w ould d e f i n i t e l y i n ­ c r e a s e t h e p r o p e n s i t y to consum e.

P e s t incom e s t u d i e s

h a v e shown t h a t p e o p le i n th e lo w e r incom e b r a c k e t s sp e n d a l a r g e r f r a c t i o n o f t h e i r incom e th a n do p e o p le i n th e u p p e r incom e b r a c k e t .

21

H en ce, i t w ould seem l o g i c a l t h a t

i f incom e w ere t r a n s f e r r e d from th e u p p e r incom e b r a c k e t s to th e lo w e r incom e b r a c k e t s , th e c o n su m p tio n f u n c t i o n 22

w ould be i n c r e a s e d me t e r i e l l y . ^

H iis a rg u m e n t, h o w e v e r, assum es t h a t th e m a r g in a l p r o p e n s i t y t o consume o f th e p o o r i s h i g h e r th a n t h a t o f th e r i c h .

L u h e ll

th e re I s l i t t l e

23

h a s mode a s t u d y w h ich i n d i c a t e s t h a t

d i f f e r e n c e in th e m argin© 1 p r o p e n s i ty to

consum e b e tw ee n th e r i c h and th e p o o r .

I f t h i s i s th e

c a s e , i t w ould a p p e a r t h a t a le s s e n e d c o n c e n t r a t i o n o f incom e w ould n o t r a i s e th e co n su m p tio n f u n c t i o n to a n y g re a t e x te n t. C hanges i n th e H ate o f I n t e r e s t A c h a n g e in th e r a t e o f i n t e r e s t may a l s o a f f e c t th e c o n su m p tio n f u n c t i o n .

Ifeble VI i n d i c a t e s t o t

th e re

h a s b e e n a downward t r e n d i n th o i n t e r e s t r a t e s i n c e 1 9 2 9 .

76 3he e f f e c t o f t h i s t r e n d on t h e con s w a p tio n f u n c t i o n , how­ e v e r , i s e x tr e m e ly u n c e r”fcain.

T here a r e a p p a r e n t l y no

e m p i r i c a l d a ta a v a i l a b l e on t h i s q u e s t i o n . On a p r i o r i g ro u n d s , a d e c l in e i n th e r a t e o f i n t e r e s t w ould a p p e a r to h a v e o p p o s in g e f f e c t s on th e c o n s w a p tio n f u n c t i o n .

In th e f i r s t p l a c e , a lo w e re d r? t e o f

i n t e r e s t c o u ld c o n c e iv a b ly r a i s e th e c o n su m p tio n f u n c t i o n . A f a l l i n t h e i n t e r e s t r a t e c o u ld e n c o u ra g e p u rc h a s e s on th e i n s t a l l m e n t p la n f o r d u r a b le consum er g o o d s.

T h is

c o u ld c a u s e co n su m ers to p u rc h a s e m ore c o n su m p tio n goods th a n t h e y w ould h a v e p u rc h a s e d i f th e i n t e r e s t r a t © load n o t d e crea se d .

I n a d d i t i o n , a lo w e re d r a t e of I n t e r e s t m ig h t

d is c o u r a g e p o t e n t i a l l e n d e r s to re d u c e t h e i r own c o n su m p tio n I n o r d e r to i n c r e a s e t h e i r a b i l i t y t o l e n d .

A g a in , t h i s

w ould te n d to i n c r e a s e th e r a t i o o f co n su m p tio n e x p e n d i t u r e s . To th e e x t e n t th r t p e o p le a r e m o tiv a te d to sav e i n o r d e r t o b u ild , up a c e r t a i n am ount o f w e a l t h , h o w e v er, a d e c l i n e i n th e i n t e r e s t ra t© w ould d is c o u r a g e c o n su m p tio n . Ihore s a v in g s would be r e q u i r e d in o r d e r to a c h i eve th e s a n e a c c u m u la tio n .

T t a p p e a rs im p o s s ib le to d e te rm in e w hich o f

th e s e o p p o s in g f o r c e s w ould p r e d e f i n e t e in i t s o f f e e t upon th e c o n su m p tio n f u n c t i o n . I n c r e a s e d U rbanize, t i o n The movement fro m fa rm s to c i t i e s n r y te n d to a l t e r t h e c o n su m p tio n f u n c t i o n .

T h is s h i f t in p o p u la tio n

77

Tnbl© VI

C o r p o r a te Bond Y ie ld s a n d C o m io rcla 1 Loan B a te s , S e l e c t e d Y e ars 1 9 29-1948 ( p e r c e n t p e r ,_innum)

H igh G rade Co rp o ra to Bond Y ie ld s (Moody*s) A a a Bonds B a a Bonds

P e r io d

1929 A v erag e it 1955 M 1935 1957 1939 « 1941 ft 1945 ft 1945 i! 1946 n 1947 it 1948

S o u rc e :

4.73 4.49 3.60 5.27 3.01 2.77 2 .73 2.62 2 .53 2 .61 2.82

5.90 7.76 5.75 5.03 4.96 4 ♦oo 3.91 3.29 3.05 3.24 3.47

A v erag e o r R a te s C harged C u sto m ers By Banks In P r i n ­ c ip a l C itie s

5.83 4.27 2.93 2.59 2.78 2.54 2.72 2.59 2.34 2.28 2.61

Econom ic R e p o rts o f th e P r e s i d e n t , 1949 e d i t i o n , A ppendix 6 , p . T2’ST

73 d i s t r i b u t i o n h a s b e en g o in g on s i n c e th e l a t t e r p a r t o f Hie N i n e te e n t h C e n tu ry *

I n 1 8 9 0 , 65 p e r c e n t o f th e t o t a l 24 p o p u la tio n liv e d in r u r a l a re a s* By 1940, t i l l s p e r c e n t ­ a g e h a d g r a d u a l l y d e c l i n e d t o 4 5 .5 * D u rin g W orld ftpp I I , a c c o r d in g to D e w h u r s t ,^ th e r e was a d e p o p u la tio n o f f a r m s .

T h is was o c c a s io n e d b y

th e I n d u c tio n o f o v e r a m i l l i o n e n d a h a l f frrzr. men i n t o th e arm ed f o r c e s , and th e m ig r a ti o n o f an a d d i t i o n s 3. f o u r a n d a h a l f r a il l i o n to u rb a n a r e a s i n re s p o n s e to th e h e a v y demand f o r i n d u s t r i a l w o rk e rs .

C o u n te r a c tin g t h i s © f f o c t

on r u r a l p o p u la tio n h a s b e en th e gro w th o f r u r a l n o n -fa rm p o p u l a t i o n w h ic h h a s c o n tin u e d th ro u g h t h e p a s t decade* D e v h u rst e s t i m a t e s t h a t th e p r o p o r t io n c f r u r a l ( f a r . , an d n o n -fa rm ) p o p u l a t i o n w i l l d e c l i n e to a p p ro x im a te ly 4 1 .5 p e r c e n t in 1950.

fIhe g ro w th In r u r a l n o n -fa rm p o p u la tio n

was n o t e x p e c te d to co m p e n sa te f u l l y f o r th e d e c l in e In th e fa rm p o p u l a t i o n . S in c e Hie r e lias bson a _d e c l i n e in th e r e l a t i v e s i z e o f th e fa rm p o p u l a t i o n , i t may bo a rg u e d th r t t h i s te n d s t c c a u s e a n I n c r e a s e i n th e p r o p e n s i t y to consume* A r e c e n t s tu d y i n d i c a t e s t h a t th e p r o p e n s i ty to consum e, a t an y g iv e n incom e l e v e l , i s g e n e r a l l y lo w e r In th e a g r i c u l t u r a l se g m en ts o f our p o p u la tio n th an in th e u rb a n a r e a s .

26

I f th e a v e ra g e an d Hie m a r g in a l p r o p e n s i ty to sa v e i s g r e a t e r f o r the- fa rm p o p u l a t i o n , any d e c l i n e In th o r e l a t i v e s i z e

o f t h i 3 a r e a c a n bo e x p e c te d to c r e a t e a te n d e n c y f o r a r i s i n g c o n su m p tio n f u n c t i o n * e v e r,

th a t th is

D u eaen b erry h a s show n, how­

te n d e n c y c a n n o t lv vo h a d a g r e ^ t i n f lu e n c e

on Hie s p e n d in g - s a v in g s r a t i o . B u t s i n c o i t i s b e li e v e d t h a t Hie m a r g in a l p ro ­ p e n s i t y to s a v e o f f a r m e rs i s h i g h e r th a n f o r c i t y f a m i l i e s , an upw ard m ovem ent o f income w ould r n i s o th e p e r c e n ta g e o f income sa v e d by f a r m e r s more th a n f o r c i t y f a m i l i e s . I f t h e r e ­ fo r e ,, we su p nose the t In a y e a r o f a b o u t a v e ra g e em ploym ent fa rm s a v in g s ( a s a p e rc e n ta g e o f i n ­ come) would b e e r © r a t i o o f 5 to 2 to c i t y s a v ­ i n g s , we s h o u ld n o t bo f a r w ro n g . *Hnce a v e ra g e s a v in g s th ro u g h th e l a s t two d e c a d e s w ere A bout 10 p e r c e n t o f Income e x c e p t in th e w o r s t y e a r s , an d s i n c e fa rm incom e yj^ s a b o u t 10 p e r c e n t o f t o t a l in co m e, yjo itsay u s e 9*5 p e r c e n t f o r c i t y s a v in g s an d 1 4 .2 p e r c e n t f o r fa rm s a v i n g s . W eig h te d b y & f a c t o r o f 9 f o r c i t y f a m i l i e s an d n f a c t o r o f 1 f o r fa rm f a m i l i e s , t h i s w i l l g iv e a v e r a g e s a v in g s o f 10 p e r c e n t . But f i f t y y e a r s ©go fa rm income was a b o u t o n e - t h i r d o f n a t i o n a l incom e; t h e r e f o r e , i f th e t r e n d in incom e h a d c o n tin u e d and th e o t h e r tr e n d s te n d ­ in g to re d u c e s a v in g s iv- d a l s o c o n tin u e d , th e c u r r e n t a v e r a g e p e rc e n ta g e s a v e d w ould bo { 1 4 .2 p lu s 2 tim e s 9.5~}/3=l l p e r c e n t . Thus th e w e ig h t­ in g f a c t o r c a n n o t have a c c o u n te d f o r more th e n a 1 p e r c e n t change i n s a v in g s o r a b o u t a 10 p e r ­ c e n t r e d u c t i o n belo w tlio am ount w h ic h w ould o th e r w is e h a v e b een s a v e d .**7 N e v e r t h e l e s s , i t m u st be c o n c lu d e d t h a t th e t r e n d to w ard s u r b a n i z a t i o n h a s te n d e d to i n c r e a s e th e co n su m p tio n f u n c t i o n . The In t r o d u c tio n o f New P ro d u c ts The i n t r o d u c t i o n o f now p ro d u c ts rv y a l s o te n d t c ch an g e th e c o n su m p tio n f u n c t i o n .

I t i s p r o b a b le th s t th e

d e v e lo p m e n t o f th e a u to m o b ile c a u se d consum ers tc sp e n d a

80

l a r g e r sum o u t o f a n y g iv e n Incom e th» n i f th ? t d e v e lo p m e n t had n o t o c c u rre d .

K u z n ets* d a ta i n d i c a t e th* t consum er

d u r a b le s w ore © l a r g e r p e r c e n ta g e o f th e t o t a l f lo w o f goods to co n su m ers d u r i n g th e !! t w e n t i e s fr th a n i n any p re v io u s 28 d e c a d e Bine© 1 8 6 9 . Dura b io s h a d m a in ta in e d s. c o n s t a n t e i g h t p e r c e n t o f t o t a l consum ers* goods u n t i l 1 9 1 9 -2 8 , when th e y I n c r e a s e d to 11 p e r c e n t .

S i g n i f i c a n t in ' t i l l s

i n c r e a s e i n th e flo v . o f d u r a b le goods was th e a u to m o b ile , w hich i n c r e a s e d fro m s e r e in th e " s e v e n t i e s 1 and " e i g h t i e s ” to 6 .1 8 p e r CGiit o f th e t o t a l flo w o f goods to consum ers 29 d u r in g th e d e ca d e o f th e ''t w e n t i e s . ” T h is i s n o t a c o n c lu s iv e d e m o n s tra tio n t h a t th e d e v e lo p m e n t o f th e a u to m o b ile i n c r e a s e d th e p r o p e n s i ty to eo n siE ie.

I t i s p o s s i b l e t h a t , w ith o u t th e a u to m o b ile , th e

same p r o p o r t i o n o f n a t i o n a l Income w ould h av e been consum ed. The c o n su m p tio n o f s u b s t i t u t e p r o d u c ts u n d o u b te d ly would h av e b een l a r g e r .

F o r e x a m p le , m ore w ould h av e b e en s p e n t

upon t r a v e l b y h o r s e e n d buggy an d b y t r a i n .

I t i s a ls o

p r o b a b le t h e .t , s i n c e t r a v e l f o r p l e a s u r e was mad© a v a i l ­ a b le to a l a r g e num ber o f f a m i l i e s b y th e a u to m o b ile , th e e x p e n d i tu r e s f o r e t h e r ty p e s o f r e c r e a t i o n viere l e s s th a n th e y o th e r w is e w ould have b e e n . n e v e r t h e l e s s , th e upw ard t r e n d o f d u r a b le s d u r in g th e " t w e n t i e s , ” i n w h ich th e p u rc h a s e o f a u to m o b ile s was a

81 s i g n i f i c a n t f a c t o r , p r o b a b ly e x o r c i s e d s a a e f o r c e to w ard i n c r e a s i n g th e p r o p e n s i t y to c o n s m e .

I t is p o s s ib le th a t

su c h new p r o d u c ts a s t e l e v i s i o n s e t s may be e x e r c i s i n g th e same I n f l u e n c e a t th e p r e s e n t tim e . C h an g in g f ge C o m p o sitio n A c h a n g in g a g e c o m p o s itio n may a l s o a f f e c t th e c o n su m p tio n f u n c t i o n . C h a p te r V .

T his f a c t o r w i l l be a n a ly z e d in

I n t h a t c h a p t e r , I t w i l l be c o n c lu d e d t h a t th e

t r e n d to w a rd s a n a g in g p o p u la tio n h a s o p p o sin g te n d e n c ie s on th e p r o p e n s i t y t o consum e.

The i n c r e a s i n g p r o p o r tio n

o f th e p o p u l a t i o n r e a c h i n g r e t i r e m e n t ag e te n d s t o I n c r e a s e th e c o n su m p tio n f u n c t i o n .

On th e o t h e r h a n d , a d e c l i n e In

th e p r o p o r t io n o f young c h i l d r e n i n th e p o p u la tio n te n d s t o make g r e a t e r s a v in g s a p o s s i b i l i t y .

F u rth e rm o re , a

p r o p o r t i o n a l i n c r e a s e i n th e p o p u la tio n who ©re in th e ag e g ro u p s j u s t b e f o r e r e t i r e m e n t age w ould te n d to re d u c e th e c o n su m p tio n f u n c t i o n .

The n e t e f f e c t s o f th o se o p p o s­

in g te n d e n c ie s c a n n o t be a s c e r t a i n e d w ith c e r t a i n t y ,

^ in c e

th e a g e c o m p o s itio n o f th e p o p u la tio n h a s n o t changed m a t e r i a l l y s s y e t , I t i s p ro b a b le t h a t th e co n su m p tio n f u n c t i o n h a s n o t b een m a rk e d ly in f lu e n c e d by t h i s f a c t o r * Co n c lu s Io n /'V © lia b le s t a t i s t i c a l e v id e n c e s u p p o r ts th e c o n ­ t e n t i o n o f th e p ro p o n e n ts o f econom ic m a t u r i t y t h a t t h e r e

82

h a s b een a e o n s t e n t r a t i o b e tw e e n c o n su m p tio n end incom e o v e r a p e r i o d o f s e v e r e 1 d e c a d e s*

I t i s a p p a r e n t the t

a n y te n d e n c y f o r t h e c o n su m p tio n f u n c t i o n to d e c l i n e In th e f u t u r e w o u ld s t r e n g t h e n th e a rg u m e n t o f th e p r o t a g ­ o n i s t s o f econom ic m a t u r i t y . A lthough, th e two f a c t o r s c i t e d b y H an sen , th e g ro w th o f i n s t i t u t i o n a l i z e d p e r s o n a l s a v in g s and th e d e v e l ­ opm ent o f d e p r e c i a t i o n a c c o u n ti n g , a p p e a r to s u p p o r t su c h s te n d e n c y , th e y nicy be o f f s e t by o t h e r tr e n d f a c t o r s .

It

i s p ro b a b le t h a t i n c r e a s e d u r b a n i s a t i o n a n d th e i n t r o d u c t i o n o f new p r o d u c ts te n d to in c r e a s e th e c o n su m p tio n f u n c t i o n . Ih© e f f e c t s o f a f a l l i n g r a t e o f I n t e r e s t and th e c h a n g in g a g e c o m p o s itio n o f th e p o p u la tio n a r e n o t c e r t a i n .

H ence,

t h e r e a r e a num ber o f f a c t o r s i n o p e r a t io n w hich a p p a r e n t l y hav e o p p o sin g e f f e c t s on th e c o n su m p tio n f u n c t i o n .

She r e

seem s to b e no c o n c lu s iv e e v id e n c e t h a t a n y one o f th e s e fa. c t o r s rire dom ina too • C o n s e q u e n tly , P r o f e s s o r Hr r is e n 1s arg u m en t c o n ­ c e r n i n g th e d e c l i n i n g c o n su m p tio n f u n c t i o n a p p e a rs to hr?ve d o u b tfu l v a l i d i t y .

T h is d o es n o t , h o w e v er, d is p r o v e th e

th e o r y o f econom ic m a t u r i t y .

As lo n g a s th e h i s t o r i c a l

c o n su m p tio n f u n c t i o n e x h i b i t s no d e f i n i t e te n d e n c y to i n ­ c r e a s e , th e a b s o l u t e ©mount o f sa v in g s w i l l c o n tin u e to

g ro w .

I f f u l l em ploym ent I s to bo m a i n t a i n e d , a l a r g e r

am ount o f in v e s tm e n t o f f s e t s w i l l b e n o d d e d .

I f , a s th e

p r o p o n e n ts o f econom ic m a t u r i t y c o n te n d , p r i v a t e i n v e s t ­ m en t o u t l e t s w i l l n o t b© s u f f i c i e n t to a b s o r b th e i n c r e a s e d am ount o f s a v i n g s , f u l l em ploym ent w i l l be m ore d i f f i c u l t to a c h ie v e a n d m a i n t a i n .

84

F o o tn o te s 1.

W ils o n , T . , "R eview o f 1Bogey o f Economic M a tu rity * b y T e rb o rg h e n d ’Econom ic S t a g n a t i o n a n d P r o g r e s s ’ b y Sw anson a n d S c h m id t,” Econom ic J o u r n a l 5 7 ; 3 5 7 -3 5 8 . S e p te m b e r, 1947• — -

2.

S ee H a n se n , A lv in H ., F i s c a l P o lic y and B u s in e s s C y c le s , C h a p te r 1 1 .

3.

I b i d . , p . 233•

4.

K u z n e ts , S im on, U a tio n a l P ro d u c t S in c e 1 8 6 9 .

5

.

D e p a rtm e n t o f Commerce, ’’n a t i o n a l Incom e an d P ro d u c t S t a t i s t i c s o f th e U n ite d S t a t e s , 1 9 2 9 -4 6 ,” S u rv e y o f C u r r e n t B u s i n e s s , J u l y , 1 9 4 7 , p p . 1 9 -2 0 .

6.

K u z n e ts , S im on, o p . c i t . , p p . 2 2 -2 3 .

7.

S am u els o n , P a u l A ., " F u l l Employment A f t e r th e War” I n P o st-W ar Econom ic P ro b le m s, e d . b y Seymour ^ a r r l s , p.

8

.

S'S •"'

D u e s e n b e rry , Jam es S . , In co m e, £ a v in g , e n d th e I h e o ry o f Consum er B e h a v io r andT irf nc om©-ConSumpt!'on- Be la tI o n s on i I \ o i r I m p lie s " tf o n s , ” I n Iv le tz le r, L lo y d A. e t a l . , In c o m e , B aploym ent an d P u b lic P o l i c y .

9.

D u e s e n b e rry , Jam es S . , " In e o m e -C o n su a p tie n R e la tio n s on I h o i r I m p l i c a t i o n s , ” o p . c i t . , p . 7 1 .

10.

D u e s e n b e rry , Jrm es S . , Incom e, S a v in g a n d th e Hie c r y o f Consum er B e h a v io r , ppV 5 5 -6 0 .

11.

Pr o c e e d in g s o f th e F o r t y - F i r s t Annua I Mee t i n g o f L if e I n s u r e no e As soc I s t i o n o r A m erica', 1 9 4 7 , y . S o.

12.

G e re n , P a u l, ” E ie C c n tr i b u t io n o f L if e I n s u r a n c e to th e S a v in g s* S tre a m ," J o u r n a l o f P o ll t i c s l Me on cany, 5 1 : 3 3 -5 2 , F e b r u a r y , lW 5~.

13.

Kuzne t s , 3 inio n , o p . c i t . , p . 50 •

14.

D ep artm en t o f Commerce, " R a ti o n a l Incom e an d P ro d u c t S t a t i s t i c s o f t h e U n ite d S t a t e s , 1 9 2 9 -4 6 ,” S u rv e y o f C u r r e n t B u s i n e s s , J u l y , 19 4 7 , p . 2 0 .

85

15.

G e re n , P a u l, o p . c i t . , p . 4 8 .

16.

H a n se n , A lv in H ., I n Tempo r a r y N a t io n a l Economic C om m ittee H e a r i n g s . P a r t 9 , p . 3S 5 9 .

17.

F a b r i c a n t , Solom on, C a p i t a l C onsum ption and A d ju s tm e n t, p p . 5 2 -3& .

18.

H a n se n , A lv in H ., 0£ . c i t . , p . 2 4 2 .

19.

J o h n s o n , N o r r i s 0 . , "The P a r e to Ls.va,Tf Review o f Sconom ic S ta t i s t i c s , 1 9 : 1 9 -2 6 , F e b ru a ry , 19^7*.

20.

Econom ic R e p o rts o f th e P r e s i d e n t , 1949 E d i t i o n , pp. 9 1 -9 2 .

21.

S e e , f o r i n s t a n c e , h a v e n , M a u ric e , H a ro ld G. M oulton a n d C l^ r k Vmrbur t o n , A m erica 1s C an cel t y to Consum e: an d Hie N a t io n a l Resom^cea P la n n in g BosrHT Consumer E xpend1 t u r e s in th e U n ite d S t a t e s .

22.

S e e , f o r e x a m p le , H a n se n , A lv in H ., o p . c i t . , p p . 2 9 8 -2 9 9 .

23.

L u b e l i , H a r o ld , " E f f e c t s o f R e d i s t r i b u t i o n o f Income on C o n su m e rs1 E x p e n d i t u r e s A m e r i c a n Economic Review. 3 8 : 1 5 7 -1 7 0 , M arch , 1 9 4 7 . ~

24.

D ew h u rst a n d A s s o c i a t e s , A m erica fs R eeds an d R e so u rce s, p . 40.

25*

I b i d *, p . 4 0 .

26.

H etio n © 1 R e so u rc e s P la n n in g B o ^ rd , F a m ily E x p e n d itu re s i n th e U n ite d S ta t e a , p . 8 .

27

D u e s e n b e rry , Jam es S . , orp . c i t . , p . 6 2 .

28.

K u z n e ts , Sim on, o p . c i t . , p . 1 0 6 .

29.

D u e s e n b e rry , Jam es S . , o p . c i t . , p . 59*

’IW 'IM'IH

mmmmmrn

«t e o f g ro w th In p o p u l a t i o n .

'Hie p l a u s i b l e h y p o ­

t h e s i s i s t h a t th e lo n g - te r m t r e n d i n th e r a t e o f p o p u la tio n g ro w th i s dow nw ard, b u t i t i s s u b j e c t to f l u c t u a t i o n s and te m p o ra ry r e v e r s a l ,

I h e s e d e v i a t i o n s a r e c h i e f l y due t o

c h a n g e s i n econom ic c o n d i t i o n s . A c c e p tin g t h a t p e r t o f th e s t a g n a t i o n h y p o t h e s is t h a t m a i n t a i n s th e s e e u l a r t r e n d o f p o p u la tio n g ro w th h a s b e e n f a l l i n g d o es n o t s u b s t a n t i a t e th e d em o g ra p h ic a s p e c t s o f th e t h e o r y .

I t m u st b e d e m o n s tr a te d t h a t a d e c l i n e in

th e r a t e o f g ro w th he a a n u n f a v o r a b le e f f e c t upon th e l e v e l s o f In co m e.

Does a d e c l i n e i n th e r a t e o f p o p u la tio n

g ro w th te n d to re d u c e th e c o n su m p tio n f u n c t i o n and d e p re s s p r i v a t e in v e s tm e n t o p p o r t u n i t i e s ? P o p u la tlo n Growtli a n d th e C onsum ption F u n c tio n P r o f e s s o r H a n se n ’s a rg u m e n t c o n c e rn in g p o p u la tio n g ro w th i s n o t p r i m a r i l y d e p e n d e n t upon th e c o n su m p tio n f u n c ­ tio n .

N e v e r t h o l e s s , i t i s c l e a r tlxnt he b e l i e v e s t h a t c u r ­

r e n t p o p u la tio n d e v e lo p m e n ts may be te n d in g to re d u c e th e p r o p e n s i t y to consum e•

He s t a t e s :

I n th e g r e a t t r a n s i t i o n , h o w e v er, from a r a o i d l y g ro w in g p o p u la tio n to a s t a t i o n a r y p o p u la tio n (w h ich we a r e now e x p e r i e n c i n g ) , th e p r o p o r t io n o f c h i l d r e n (ow ing to th e e x t r a o r d i n a r i l y r a p i d

98 d e c l i n e o f th e b i r t h r a t e ) i s s m a l l , ¥ h J l e we h a v e n o t r e a c h e d th e p o i n t w here th e p r o p o r t io n o f aged i s v e ry la r g e . Thus vm h a v e r e c e n t l y b e e n p a s s i n g th ro u g h a p h a se i n w h ich th e ag e d i s t r i b u t i o n c l e a r l y te n d s to r a i s e th e s a v in g s f u n c t i o n , a n d t h i s h a s i n t e n s i f i e d , th e s a v i n g s i n v e s tm e n t p ro b le m * 15 The p r im a ry e f f e c t t h a t th e d e c l i n i n g r r te o f g ro w th o f p o p u l a t i o n may h a v e on th e c o n su m p tio n f u n c t i o n i s th ro u g h t h e c h a n g in g a g e c o m p o s itio n o f th e p o p u l a t i o n . One o f T er b o r g h 1s p r i n c i p a l c r l t i e ism s o f th e p o p u la tio n a rg u m e n t o f th e p r o p o n e n ts o f econom ic m a t u r i t y i s

th a t a

d e c l i n e i n th e ra t© o f g ro w th o f p o p u l a t i o n , a lth o u g h i t may r e d u c e in v e s tm e n t o p p o r t u n i t i e s , w i l l te n d t o lo w e r IS th e r e l a t i v e m a g n itu d e o f s a v i n g . As fe e g ro w th r a t e d e ­ c l i n e s , th e p e r c e n ta g e o f p e rs o n s a t th e r e t i r e m e n t age, becom es g r e a t e r a n d g r e a t e r . tio n a lly d is s e v e rs .

E l d e r l y p e o p le a r e t r a d i ­

T h e ir incom e may d e r iv e from a n n u i t i e s ,

l i q u i d a t i o n o f s t o c k s , bo n d s an d s a v in g s a c c o u n ts —a l l o f w h ic h te n d to I n c r e a s e th e p r o p o r t io n o f incom e consum ed a n d to a b s o r b a p o r t i o n o f th e s a v in g s o f th e econoray* ”I n s h o r t , d e c l i n i n g p o p u la tio n g ro w th te n d s b o t h to r e d u c e th e volum e o f s a v in g a n d th e p r o p o r t io n o f t h i s re d u c e d 17 voltene a v a i l a b l e f o r c a p i t a l f o r m a t i o n ." I f i t c a n be e s t a b l i s h e d t h a t a d o m in a n t m o tiv e o f a l l s a v in g s i s f o r th e p u rp o se o f f u t u r e l i q u i d a t i o n s , an I n c r e a s i n g a g in g o f th e p o p u la tio n n a y have a c o n s i d e r a b le

99 e f f e c t on th e p r o p e n s i t y to consum e % Unf o r tu n a to l y , tin©r e la l i t t l e

e v id e n c e c o n c e rn in g th o Im p o rts n ee o f t h i s m o tiv e

f o r s a v in g s .

H ow ever, a r e c e n t s t u d y by th e F e d e r a l R e se rv e

S y stem s u g g e s t s t h a t i t may b e th e m o tiv e f o r a l a r g e p a r t o f th e s a v i n g s . fthen a s k e d t h e i r p u rp o s e in s a v i n g s , a b o u t t h r e e o u t o f f i v e s p e n d in g u n i t s m e n tio n e d m o tiv e s w h ic h can be c l a s s i f i e d u n d e r th e g e n e r a l h e a d in g o f S e c u r i t y 1. O ld a g e , i l l h e a l t h , unem ploy­ m e n t, a n d g e n e r a l p r o t e c t i o n a g a i n s t a 1r a i n y d a y 1 come u n d e r f e i s h e a d . O ld a g e an d i l l h e a l t h t o g e t h e r w ere s p e c i f i c a l l y m e n tio n e d f a r m ore f r e q u e n t l y th a n unem ploym ent, p e rh a p s i n ­ d i c a t i n g t h a t p e o p le e x p e c t l i t t l e unem ploym ent o r t h a t th e y no lo n g e r c o n s i d e r p ro te c t i o n a g a i n s t u n e m p lo y iie n t a n I n d i v i d u a l r e s p o n s i b i l i t y . On th e b a s i s o f t h i s in c o m p le te e v id e n c e , i t may be c o n c lu d e d f e a t th e a g in g o f th e p o p u la tio n w i l l mean t h a t t h e r e w i l l b e m ore p e o p le i n th e s o c i e t y who w i l l be l i v i n g on th e f r u i t s o f p a s t s a v in g s a n d no lo n g e r m o tiv a te d to sav e f o r r e tir e m e n t re a s o n s .

T h is w ould i n d i c a t e f e e t a

d e c l i n e i n th e r a t e o f p o p u l a t i o n g ro w th may i n c r e a s e f e e p r o p e n s i t y to consum e. One f a c t o r lia s b e e n e m itte d in t h i s d i s c u s s i o n o f t h e ago d i s t r i b u t i o n o f th e p o p u l a t i o n .

As th e r a t e o f

g ro w th d e c r e a s e s , t h e r e w i l l bo a s m a lle r p r o p o r t io n o f c h i l d r e n in f e e p o p u l a t i o n .

S in c e young c h i l d r e n s r e n o t

e a r n e r s , b u t dep en d upon t h e i r p a r e n t s to s u p p o r t t h a n , a r e d u c t i o n i n t h i s com ponent o f p o p u la tio n te n d s to make

100 g r e a t e r s a v in g s a p o s s i b i l i t y .

S h o re l a no c o n c lu s iv e

e v id e n c e t h a t th e a b i l i t y o f p a r e n t s w ith, l e s s c h i l d r e n to s a v e m ore o r t h e i r In c one w l l j become a n a c t u a l i t y .

In ­

d e e d , f a m i l i e s w ith l e s s e r num bers o f c h i l d r e n may u s e t h e i r i n c r e a s e d a b i l i t y to sa v e to prom ote t h e i r c o n su m p tio n s ta n d a rd s .

I t i s n o t im p ro b a b le t h a t one o f th e c a u s e s o f

th e f a l l i n g p o p u l a t i o n g ro w th i s th e d e s i r e on th e p a r t o f th e e x i s t i n g p o p u l a t i o n tc a t t a i n a n d m a i n t a i n a h i g h e r 19 s ta n d a rd o f liv in g # t h e r e f o r e , I t a p p e a r s j u s t i f i a b l e to c o n c lu d e t h a t th e i n c r e e s e In th e p r o p o r t io n o f th e p o p u la tio n beyond r e t i r e m e n t a g e h a s a m ore s i g n i f i c a n t e f f e c t on th e s a v in g s c o n su m p tio n p a t t e r n th a n th e r e d u c t i o n In th e p o r t i o n o f c h ild re n .

An a n a l y s i s o f th e a c t u a l ag e d i s t r i b u t i o n o f th e

p o p u l a t i o n w ould i n d i c a t e , h o w e v e r, t h e t n e i t h e r o f th e s e f a c t o r s , a s y e t , c a n h av e h a d a g r e ^ t i n f lu e n c e on th e c a n s u ir p tlo n f u n c t i o n .

A lth o u g h , a s h a s b e e n I n d i c a t e d , th e

p r o p o r t io n o f o o r .u la tio n o v e r 60 lied i n c r e a s e d b y 1 9 4 0 , i t h a s n o t becom e l a r g e ,

I2s tim a te s f o r 1950 i n d i c a t e t h a t

p r o p o r t i o n h a s i n c r e a s e d s l i g h t l y from 10#4 p e r c e n t to 11*6 p e r c e n t d u r in g th e p a s t d e c a d e .

20

The p r o p o r t i o n o f c h i l d r e n in th e p o p u la tio n h a s d e c l in e d m ore r a p i d l y .

I t h a s boon a r g u e d , h o w e v e r, t h a t

t i l l s f a c t o r lira l e a s o f f o c t on th e c o n su m p tio n f u n c t i o n th a n

101 th e p r o p o r t i o n o f t h e p o p u l a t i o n beyond r e t i r e m e n t age* F u r th e r m o r e , th e I n c r e a s e in th e b i r t h r a to d u r in g th e p a s t d e c a d e may b e e x p e c te d t o slow down tho r a t e o f d e c l i n e o f th e p r o p o r t i o n o f c h i l d r e n .

I n f a c t , e s t im a t e s in d ie s .to

t h a t t h e p r o p o r t i o n o f p o p u la tio n u n d e r 15 w i l l o n ly f a l l fro m 2 5 .4 p e r c e n t to 2 3 .9 p e r c e n t b etw een 1940 a n d I 9 6 0 .21 B u e s e n b e r r y ^ 2 p o i n t s o u t a n o th e r a s p e c t in th e c h a n g in g a g e c o m p o s itio n t h a t may a f f e c t th e co n su m p tio n fu n c tio n .

He m a in ta in s t h a t th e p e rs o n s who a r e in th e age

g ro u p s j u s t b e f o r e r e t i r e m e n t s a v e s u b s t a n t i a l l y m ore th a n th e y o u n g e r u n i t s .

Bo c a u s e a n i n c r e a s i n g p e rc e n ta g e o f th e

p o p u l a t i o n w ould be I n c lu d e d i n t h i s g ro u p , t h e r e w ould be p r e s s u r e e x e r t e d to lo w e r th e c o n su m p tio n f u n c t i o n . I t m u s t be c o n c lu d e d , t h e r e f o r e , t h a t t h e n e t e f ­ f e c t o f th e s e f a c t o r s on th e c o n su m p tio n f u n c t i o n I s I n d e ­ te rm in a te .

R e g a rd le s s o f w h e th e r c h a n g e s in ag e c o m p o s itio n

may i n c r e a s e o r d e c r e a s e th e p r o p e n s i ty t o consum e, I t i s p r o b a b le t h a t , a s y e t , s i n c e th e c h a n g e s have been g r a d u a l , th e I n f l u e n c e e x e r t e d on th e c o n su m p tio n f u n c t i o n by t h i s t r e n d h a s n o t b een g r e a t . P opula t i o n Ifrcnds a n d In v e s tm e n t O p p o r t u n i ti e s A c c o rd in g to th e p ro p o n e n ts o f econom ic m a t u r i t y , a d e c l i n i n g r a t e o f p o p u la t i o n g ro w th may a l s o d e p re s s th e

102 l e v e l o f em ploym ent by r e d u c in g p riv e t© in v e s tm e n t o p p o r­ tu n itie s *

Two e f f e c t s o f a d e c l i n i n g r a to o f p o p u la t i o n

g ro w th on p r i v a t e i n v e s tm e n t w a r r a n t i n v e s t i g a t i o n .

In Hie

f i r s t p l a c e , th e p o p u l a t i o n t r e n d ia?y a l t e r th e c o m p o s itio n o f co nsum er demand to w a rd s p r o d u c ts w hich r e q u i r e l e s s i n v e s tm e n t to p ro d u c e .

S e c o n d ly , th e t r a n s i t i o n from a

r a p i d l y i n c r e a s i n g p o p u la t i o n to a s lo w ly g ro w in g one may i n c r e a s e in v e s tm e n t r i s k s . C hanges i n th e C o m p o sitio n o f C onsum ption E x p e n d !tu p e s P r o f e s s o r H anson*s m ain c o n te n ti o n w ith r o s p e c t t o p o p u l a t i o n i s t h a t a d e c l in e i n tho r a t e o f g ro w th w i l l a l t e r th o c o m p o s itio n o f c o n su m p tio n e x p e n d ! t u r e s .

I t s h o u ld be

n o te d t h a t t h i s a rg u m e n t does n o t assum e t h * t th e i n c r e a s e d p o t e n t i a l demand due to r a p i d l y gro w in g p o p u la tio n i s synonym ous w ith an i n c r e a s e d e f f e c t i v e dem and.

The c o n te n ­

t i o n i s t h a t a s h i f t from a r a p i d l y i n c r e a s i n g p o p u la tio n to a s lo w ly i n c r e a s i n g p o p u la tio n w i l l o n ly s h i f t dem and. The p r e s s u r e o f p o p u la tio n g ro w th te n d s t o s h i f t demand to w a rd h o u s in g and r a i s e s r e n t s . B ut th e demand f o r h o u s in g r e q u i r e s nor© in v e s tm e n t o f c a p i t a l th a n m o st o t h e r k in d s o f consum er dem and. I t I s n o t t r u e , a s some c r i t i c s h a v e i n f e r r e d , t h a t th e p o p u l a t i o n a rg u m en t im p lie s a p r i o r i n ­ c r e a s e In a g g r e g a te dem and, w hich i n c r e a s e i t le a v e s u n e x p la in e d . What th e s e c r i t i c s o v e rlo o k i s th e f a c t t h a t a m ere s h i f t in dem and, th ro u g h th e e n s u in g s t i m u l u s to In v e s tm e n t, may r s i s e g l incom e a n d so th e a g g r e g a te e f f e c t i v e dem and. I n a d d i t i o n to h o u s in g , H ansen b e l i e v e s t h a t a r a p i d l y g ro w in g p o p u l a t i o n w i l l a f f e c t c a p i t a l f o r m a tio n in

103 til© f i e l d o f p u b l i c u t i l i t i e s a n d th e m anufoc t u r e o f ?fe s s e n ­ t i a l c o n s u m e r’s g o o d s .M An e x a m in a tio n o f e a c h o f th o s e f a c to r s i s in o rd e r. S o u s in p ;.

H ansen does n o t s p e c i f y d i r e c t l y

w h e th e r h e b e l i e v e s t h a t th e demand f o r h o u s in g i s a f u n c ­ t i o n o f th e num ber o f p e o p le

or

th e num ber o f

fa m ilie s #

I n h i s c r i t i q u e o f T e rb o rg h ,

he

s u g g e s ts t h a t

i t i s th e

g ro w th o f p o p u l a t i o n , a s s u c h , r a t h e r th e n th e g ro w th in th e num ber o f f a m i l i e s t h a t c r e a t e s th e demand f o r h o u s ­ in g .* '"

H e n ce , a r a p i d l y g ro w in g p o p u l a t i o n w ould demand

more h o u s in g th a n a s lo w ly gro w in g p o p u l a t i o n even i f th e r a t e o f g ro w th o f f a m i l i e s w ere t o re m a in c o n s t a n t o r i n ­ c r e a s e due to e d e c l in e i n th e a v e ra g e s i z e o f th e f a m i l y . T h is p o s i t i o n i s open to q u e s t i o n . A r e c e n t s tu d y 25 by S c h if f i n d i c a t e s tin51 i t i s th e r a te o f g row th o f f a m i l i e s t h a t i s d e c i s i v e w ith r e s p e c t to th e demand f o r h o u s in g .

U t i l i z i n g th e p o p u la tio n an d h o u s in g , f a m i l i e s ,

incom e and r e n t s e c t i o n o f th e 1 6 th C ensus o f th e U n ite d S t a t e s i n 1 9 4 0 , he fo u n d t h a t the: v a lu e o f th e h o u s in g a c ­ com m odations w hich a f a m i l y ,

at

a n y incom e l e v e l , i s a b le

and w i l l i n g to pay f o r i s s m a l l e r , th e l a r g e r th e num ber th e f a m i l y .

in

U i s w ould i n d i c a t e t h a t i f a d e c l i n i n g r a t e

i n g ro w th I n p o p u l a t i o n was t o be a b s o r b e d in s m e ll e r f a m i ­ l i e s , r a t h e r th a n i n a d e c l i n e in th e in c r e e s e o f f a m i l i e s ,

104 th e s a v i n g s - i n v e a tenant p ro b le m would be e a s e d . th e f o l l o w i n g a rg u m e n t a p p e a r v a l i d .

IIor d o e s

"B u t i f i t i s t r u e

t h a t f i v e f a m i l i e s im p ly a g r e a t e r demand f o r h o u s in g th a n two f a m i l i e s , d o e s i t n o t a l s o f o l lo w t h a t a f a m i ly o f f i v e 26 w i l l dem and m ore h o u s in g th a n a f a m i ly o f tw o ?” T h is a r ­ gum ent w o u ld be c o r r e c t o n ly i f i t c o u ld be d e m o n s tra te d t h a t a f a m i l y o f f i v e w ould sp e n d two an d o n e-h a I f tim e s a s much f o r h o u s in g a s a f a m i ly o f tw o.

S c h i f f *s s tu d y i n d i ­

c a te s t h a t t h i s i s n o t c o r r e c t . T h e r e f o r e , i t a p p e a r s th* t th e ra t© o f g ro w th o f f a m i l i e s i s m ore im p o r ta n t i n *&.© demand f o r h o u s in g th a n th e r a t e o f g ro w th o f th e p o p u l a t i o n .

F u r th e m o r e , i t i s

th e a b s o l u t e r a t e o f g ro w th o f f a m i l i e s , r a t h e r th a n th e r e l a t i v e r a t e o f g ro w th , t h a t i s th e im p o r ta n t c o n c e p t. 27 T h is may be d e m o n s tra te d w i t h r e f e r once to th e a c c o lo r s ti o n p rin c ip le .

I f i t i s assum ed t h s t th o c o n s t r u c t i o n i n d u s t r y

I s o p e r a t i n g u n d e r c o n d i t i o n s o f f u l l em ploym ent, an I n c r e a s e i n demand f o r h o u s in g o c c a s io n e d by an i n c r e a s e In th e num ber o f f a m i l i e s w i l l c a u s e th e i n d u s t r y to make new in v e s tm e n t. The am ount o f new in v e s tm e n t n e e d e d w i l l be d e te r m in e d b y th e am ount o f th e i n c r e a s e d demand and th e p r o d u c tio n m ethods o f t h e c o n s t r u e t i on i n d u s t r y .

The am ount o f i n c r e a s e d demand

i s d e te rm in e d b y th e a b s o l u t e i n c r e a s e i n dem and, w h ich d e ­ p en d s l a r g e l y on th e a b s o l u t e in c re m e n t o f g ro w th o f f a m i l i e s .

105 I t i s a l s o a p p a r e n t t h a t i t i s th e a b s o l u t e i n ­ c re m e n t o f g ro w th I n th e p o p u l a t i o n t h a t I s t h e I m p o r ta n t c o n c e p t w i t h r e f e r e n c e to th e e f f e c t o f p o p u l a t i o n g ro w th on th e demand f o r o t h e r goods and s e r v i c e s . T e rb o rg h * s m ain c r i t i c i s m s ta g n a tio n is ts .

T h is d i s p o s e s o f

o f th e p o p u l a t i o n a rg u m e n t o f th e

He s t a t e s , " F o r s e v e n ty y e a r s we e x p e r ie n c e d

a d e c l i n i n g r a t e o f p o p u l a t i o n g ro w th , an d a d im in is h in g p r o p o r t i o n o f I n v e s tm e n t a t t r i b u t a b l e t o t h i s f a c t o r , w ith 28 no i n d i c a t i o n o f d e c l i n i n g econom ic h e a l t h a n d v i g o r * ” The a b s o l u t e g ro w th i n p o p u l a t i o n d id n o t d e c l i n e u n t i l 1 9 2 5 , ev en th o u g h th e p e r c e n ts go ra t© o f g ro w th s t a r t e d t o d e c l in e I n th e m id d le o f th e N in e te e n th C en tu ry * 1h© a b s o l u t e d e c l i n e in p o p u la tio n g ro w th , s t a r t ­ in g i n 1 9 2 5 , was l a r g e l y a b s o rb e d In » r e d u c t i o n in t i e s i s e o f th e f a m i l i e s r a t h o r th a n i n an a b s o l u t e d e c l i n e i n th e r a t e o f g ro w th o f new f a m i l i e s ,

ih e a v e r a g e f a m ily s i s e 29 h a d d e c r e a s e d fro m 4*3 in 1920 to 3*8 in 1940* D u rin g th e ” t h i r t i e s ” th e a b s o l u t e in c re m e n t o f g ro w th o f f a m i l i e s a l s o d e c l i n e d f o r Hie f i r s t tim e i n h i s t o r y .

Hie num ber

o f p r i v a t e f a m i l i e s i n c r e a s e d by 5 ,5 5 3 ,0 0 0 i n th e tw e n tie s 30 an d b y 5 ,0 4 4 ,0 0 0 In th e t h i r t i e s • H e n ce , i t i s p ro b a b le t h a t t h i s e x e r c i s e d some d e p r e s s iv e i n f lu e n c e on th e demand f o r h o u s in g d u r in g th e t h i r t i e s .

106 J u d g in g f r o m th e i n c r e a s e I n th e m a r r ia g e r a t e , t h e in c r e m e n t o f g ro w th I n f a m i l i e s d u r in g th e " f o r t i e s 11 w ill r is e s h a rp ly .

I t c a n be a s s e r t e d , t h e r e f o r e , t h a t th e

t r e n d o f p o p u l a t i o n g ro w th h a s n o t d e p r e s s e d th e demand f o r h o u s in g .

N e v e r t h e l e s s , th e lo n g - r u n p o p u l a t i o n t r e n d

i n d i c a t e s t h a t t h e U n ite d S t a t e s f a c e s a f u t u r e d ro p i n th e a b s o l u t e r a t e o f g ro w th o f f a m i l i e s .

The f a c t t h a t H a n s e n 's

d i a g n o s is may n o t b e a p p l i c a b l e a t th e p r e s e n t d o e s n o t d en y t h a t I t I s v a l i d f o r th e f u t u r e * (2 )

O th e r Consigners 1 G o o d s.

Ih e c o m p o s itio n o f

demand may a l s o a l t e r i n o t h e r a s p e c t s w ith c h a n g e s in th e r a t e o f p o p u l a t i o n g ro w th .

A r a p i d l y g ro w in g p o p u la tio n

m u st e q u ip i t s e l f w ith a d d i t i o n a l f a c i l i t i e s

to p r o v id e

f o o d , c l o t h i n g , e d u c a t i o n , p u b l ic u t i l i t i e s a s w e l l a s h o u s in g .

S in c e H a n s e n 's a rg u m e n t c o n c e rn in g th e d e c l i n i n g

r a t e o f g ro w th o f p o p u l a t i o n a p p l i e s to s h i f t s

in dem ands,

an d n o t to r e d u c t i o n i n p o t e n t i a l demand f o r th e s e t h i n g s , i t m u s t b e d e m o n s tr a te d t h a t t h e r e h a s b een a num ber o f c h an g e s i n th e c o m p o s itio n o f dem and.

H ansen b e l i e v e s t h a t

a s o c i e t y w ith a l a r g e r p r o p o r t io n o f o l d e r p e o p le w i l l d e ­ mand m ore p e r s o n a l s e r v i c e s ; f.nd t i s change i n th e c o m p o si­ t i o n o f demand w i l l r e q u i r e l o s e c a p i t a l th a n f o r th e n e c e s s itie s o f l i f e .

Even I f i t c o u ld b e d e m o n s tra te d t h a t

s e r v i c e s a s a g ro u p r e q u i r e l e s s c a p i t a l th a n o th e r ty p e s

107 o f co n su m ers * g o o d s , t h e r e I s no f a c t u a l b a s i s f o r m a in ­ t a i n i n g t h a t s e r v i c e s h a v e become m ore i m p o r t a n t .

F o r th e

econom y a s a w h o le , J u d g in g fro m K u z n e ts ' d a t a , * ^ t h e r e was n o p e r c e p t i b l e t r e n d i n th e p r o p o r t i o n o f s e r v i c e s i n th e flo w o f g o o d s to co n sig n ers b e tw e e n 1920 a n d 1 9 4 5 .

C o n se ­

q u e n t l y , t h i s a s p e c t o f H a n s e n 's a rg u m o n t i s o f d o u b t f u l v a l i d i t y on th e b a s i s o f c u r r o n t e v id e n c e .

A g a in , t h i s

d o es n o t mean tha t th e f u t u r e w i l l n o t show su c h a t r e n d . B a th e r i t im p lie s t h a t th e a rg u m e n t i s n o t a p p l i c a b l e a t th e p r e s e n t t im e . I n v e s tm e n t R isk s Ih e k e y t o th e e f f e c t o f th e r a t e o f p o p u l a t i o n g ro w th on in v e s tm e n t r i s k s i s p r o v id e d b y P r o f e s s o r H a n se n . One o v e rw h e lm in g ly im p o r t a n t f a c t , h o w e v e r, c h a r ­ a c t e r i z e d th e c e n t u r y w h ic h p re c e d e d th o V»orld War. I t was a u n iq u e e p o c h . I t was a c e n t u r y o f r s p l d e x p a n s io n i n t o new t e r r i t o r y and i t was a c e n t u r y o f p r o d ig io u s g ro w th o f p o p u l a t i o n . P o p u la tio n p o u re d I n t o A m e ric a , i n t o th e g r e a t W est, i n t o B r a z i l , th e A r g e n tin e , C a n ad a , A u s t r a l ! ” and flo w e d b a c k fro m th e a g r i c u l t u r a l co m m u n ities I n t o th e g i a n t u rb a n c e n t e r s w hIch grew a n d f e d on t h i s e x ­ p a n s io n . u h ls one c e n t r a l f a c t o f g ro w th /m d e x p a n ­ s i o n d o m in a te d th e w hole o f econom ic l i f e . It m in im iz e d th e r i s k o f new v e n t u r e s . I f o p tim ism h a d c a r r i e d r a i l r o a d b u i l d i n g to o f a r a t th e moment, i f a c i t y h a d te m p o r a r i l y o v e r b u i l t , -die damage was s h o r t l i v e d . E x p an sio n e n d g ro w th soon made good the e r r o r . B usinessm en c o u ld lo o k f a r i n t o th e f u t u r e w ith g i g a n t i c p l a n t s , w ith a n t i c i p a t o r y c a p i t a l o u t l a y s , in v e s tm e n t p la n s w hich hod no r e ­ l a t i o n to th e p r e s e n t , a n d w hich wore b a s e d upon th e e x p e c t a t i o n o f g ro w th an d e x p a n s i o n .3^

108 One a s p e c t o f a n I n c r e a s e In in v e s tm e n t r i s k i s fu rn is h e d by F e lln e r . . . . . I t i s p o s s i b l e , h o w e v e r, t h a t p o p u la tio n g ro w th h a s a f a v o r a b l e e f f e c t on in v e s tm e n t— b e c a u s e th e c o m p o s itio n o f a d d i t i o n a l consum ing u n i t s , can b e f o r e c a s t m ore e a s i l y ( w ith l e s s u n c e r t a i n t y ) th a n th e c o m p o s itio n o f a d d i t i o n a l c o n su m p tio n o f a g iv e n p o p u l a t i o n * ^ I n a d d i t i o n t o i t s e f f e c t upon th e l e v e l o f em ploy m e n t, in v e s tm e n t a l s o c o n t r i b u t e s to th e p r o d u c tiv e c a p a c i t y o f th e n a t i o n .

I f p o p u la t i 021 g ro w th d o es n o t k e e p p a c e w ith

t h i s I n c r e a s e d p r o d u c t i v i t y , f u l l u t i l i s a t i o n o f th e c a p a ­ c i t y r e s u l t s i n p e r c a p i t a i n c r e a s e s I n Income an d h i g h e r s ta n d a rd s o f l iv i n g .

D u rin g th e n i n e t e e n t h C e n tu ry , th e

i n c r e a s e d c a p a c i t y r e s u l t e d In » p e r c a p i t a i n c r e a s e in c o n s u m p tio n , i t i s t r u e , b u t th e r a p i d p o p u la t i o n g ro w th m e a n t t h a t s l a r g e r f r a c t i o n o f th e Inc r e s so d o u tp u t p r o ­ v id e d a d d i t i o n a l co n su m ers th an w ould be th e c a s e i f th e r a t e o f p o p u l a t i o n g ro w th were d e c l i n i n g . T h e r e f o r e , i n an economy w here th e p o p u l s t io n i s n o t I n c r e a s i n g r a p i d l y , I f tlx© p r o d u c tiv e c a p a c i t y i s

to be

u t i l i z e d f u l l y , h ig h e r s t a n d a r d s o f p e r c a p i t a co n su m p tio n m u st r e s u l t .

S uch h i g h e r s ta n d a r d s in v o lv e an i n c r e a s i n g

demand f o r goods t h a t a r e n o t a b s o l u t e l y e s s e n t i a l f o r th e m a in te n a n c e o f l i f e .

Raddaway s t a t e s : " Dor.-and i s more

f i c k l e a s b e tw e e n one s e m i- lu x u r y and a n o t h e r , an d i f th e r o

100 I s a s lu m p , t h i s ty p o o f i n d u s t r y w i l l s u f f e r th e g r e a t e s t 34 35 f a l l i n de ma nd. Paradi so h a s shown t h a t '’luxury*’ ite m s su c h a s consum er t r a n s p o r t a t i o n , r e c r e a t i o n a l and c e r t a i n ty p o s o f h o u s e h o ld e q u ip m e n t, f l u c t u a t e much more w id e ly w ith c h a n g e s I n incom e th a n do s u c h c o n s u m e rs T goods a s f o o d , c l o t h i n g , and h o u s in g e x p e n d itu r e s ( i n c l u d i n g r e n t and u t i l i t i e s ) #

In a d d itio n

to c h a n g e s i n in co m e, lu x u r y

ty p o goods may a l s o b e s u b j e c t to f l u c t u a t i o n s b e c a u s e o f c h a n g e s i n f a s h i o n , t a s t e s , o r th e in tr o c h ic tlo n o f new n o v e ltie s * P ro d u c ts w ith su ck f l u c t u a t i o n s in demand L p ly g r e a t e r r i s k s in p ro d u c tio n .

I f th e e n tr e p r e n e u r i s f o r c e d

t o b e a r g r e a t e r r i s k s , h i s e v a l u a t i o n o f tho m a r g in a l e f f i ­ c ie n c y o f c a p i t a l w i l l te n d to be r e d u c e d .

C o n s e q u e n tly ,

h e I s l i k e j y to be nioro c a u t io u s In m aking in v e s tm e n t d e c i ­ s io n s .

T Iiis w ould te n d to re d u c e th e am ount of p r i v a t e

in v e s fe.en t . T here I s a se c o n d a s p e c t in th e i n c r e a s e In i n ­ v e s tm e n t r i s k .

As H ansen h a s p o in te d ou.t, i f an e n t r e ­

p r e n e u r made a m is ta k e d u r in g th e N in e te e n th C e n tu ry w hich r e s i l l t e d In th e o v e rp r o d u c tio n o f a com m odity, th e r a p i d g ro w th o f p o p u l a t i o n w ould l i k e l y make good, t h i s e r r o r in th e f u t u r e .

C o n s e q u e n tly , i t i s p ro b a b le t h a t c o n s i d e r a b le

in v e s tr a e n t was u n d e rta k e n in a n t i c i p a t i o n o f a r i s i n g dem and.

110 T h is p r o v id e s a n e x p l a n a t i o n e s to why p o p u l a t i o n grow tdi may n o t o n ly I n c r e * s e p o t e n t i a l dem and, b u t a l s o i n ­ c r e a s e e f f e c t i v e dem and.

w ith th e r a p i d g ro w th i n p o p u l a t i o n ,

e n t r e p r e n e u r s w ere e n c o u ra g e d to f i n a n c e e x p a n s io n w ith, m ore f r e q u e n c y . s o c i e t y v ia

® .f s , i n t u r n , r e l e a s e d Income i n t o th e

th e m u l t i p l i e r and a c c e l e r a t i o n e f f e c t w hich

i n c r e a s e d th e e f f e c t i v e demand an d p r o v id e d h i g h e r l e v e l s o f incom e a n d em ploym ent* I t a p p e a rs u n l i k e l y t h a t e n t r e p r e n e u r o f th e p re s e n t age i s th a t o p t l i s t i c .

I f h e m akes «= m is ta k e in

i n v e s tm e n t , r e s u l t i n g i n o v e r p r o d u c tio n , th e l o s s may n o t be a s e a s i l y r e m e d ie d .

Ih e g ro w th in p o p u l a t i o n m ry n e v e r

u t i l i z e h i s p r e s e n t o v e rc a p a c ity .

A w areness o f t h i s f a c t

I s l i k e l y to c o n v in c e th e e n t r e p r e n e u r the. t he s h o u ld n o t r u s h w h o le h e a r te d ly I n t o s p e c u l a t i v e in v e s tm e n t,

Iv e n

th o u g h e c o n o m is ts may a r g u e c o n v in c in g ly t h a t i f h e an d o t h e r e n t r e p r e n e u r s p r o v id e enough in v e s tm e n t f u l l em ploy­ m en t w i l l r e s u l t , i t i s p r o b a b le t h a t th e e n t r e p r e n e u r w i l l p r e f e r to via i t a n d s e e w h at h a p p e n s .

I f h e i s c o n te m p la tin g

th e e r e c t i o n o f a new i n d u s t r i a l u n i t , one o f th e p rim a ry f a c t o r s i n h i s d e c i s i o n w i l l be w h e th e r o r n o t th e f u l l u se o f th e c e p e c i t y may be c o v e re d In r r e a s o n a b l e tim e b y a g ro w in g dem and. The i n c r e a s i n g r i s k a rg u m en t i s e m in e n tly p e r s u a s ­ iv e .

The a u th o r m u s t a d m it, h o w e v e r, t h a t a v a i l a b l e

I ll

s t s t i s t i e s 1 e v id e n c e c a n n e i t h e r v e r i f y n o r r e f u t e i t . N e v e r t h e l e s s , i t a p p e a r s p l a u s i b l e t h a t th e w hole s t r u c t u r e o f I n v e s tm e n t i s e f f e c t e d l y i n c r e a s e d r i s k s ? cccrapenying a d e c l i n i n g r a t e o f p o p u l a t i o n g ro w th . C o n c lu s io n D e s p ite th e u p s u rg e i n p o p u la tio n grow th d u r in g th e p a s t d e c a d e , th e m o st p l a u s i b l e p r e d i c t i o n i s thp t th e lo n g - te r m r a t e o f g ro w th w i l l c o n tin u e to d e c l i n e .

H ow ever,

th e a rg u m e n t c o n s t r u c t e d b y th e p ro p o n e n ts o f econom ic m a t u r i t y a ro u n d t h i s t r e n d , d o es n o t a p p e a r to be e n t i r e l y v a li d * I n th e f i r s t p l a c e , t h e r e seem s to be l i t t l e

ju s ­

t i f i c a t i o n f o r th e c la im t h a t th e d e c l i n i n g r a t e o f p o p u la ­ t i o n grow til r e d u c e s th e co n su m p tio n f u n c t i o n .

As p o in te d

o u t in C h a p te r IV , t h e r e a r e many f a c t o r s t h a t in f lu e n c e th e p r o p e n s i t y to consum e. til© f a c t o r s ,

A c o n s i d e r a t i o n o f o n ly one o f

th e n , c an le a d to no d e f i n i t i v e c o n c lu s io n

a s to th e t r e n d o f th e c o n su m p tio n f u n c t i o n .

F u rth e rm o re ,

i t I s d e b a t a b l e a s t o v/he t h e r a d e c l i n i n g r r te o f p o p u la tio n g ro w th te n d s to I n c r e a s e o r d e c r e a s e th e c o n su m p tio n f u n c t i o n . S e c o n d ly , th e a rg u m e n t t h a t '■ d e c l i n i n g r a t e o f p o p u la tio n g ro w th a l t e r s

th e c o m p o s itio n o f demand to w a rd s

p r o d u c ts t h a t r e q u i r e l e s s . c a p i t a l f a c i l i t i e s

is of d o u b tfu l

112 v a lid ity *

Hie demand f o r h o u s in g i s a p p a r e n t l y a f u n c t i o n

o f th e num ber o f f a m i l i e s , a n d a t th e p r e s e n t , th e d e c l i n i n g r a t e o f g ro w th o f p o p u l a t i o n h a s r e s u l t e d p r i m a r i l y i n sma 1 l e r - s i z e d f a m i l i e s r a t h e r th a n in a d e c l in e in th e a b s o ­ l u t e r a t e o f g ro w th o f f a m i l i e s .

F u r th e r m o r e , t h e r e i s

no e m p i r i c a l e v id e n c e t h a t consum er demand h ag s h i f t e d to p e r s o n a l s e r v i c e s , w hich s u p p o s e d ly r e q u i r e l e s s c a p i t a l fa c ilitie s . The one f a c e t o f th e a rg u m e n t t h a t a p p e a rs p l a u s ­ i b l e c o n c e rn s in v e s tm e n t r i s k s .

I t i s l i k e l y th e .t a d e ­

c l i n e In th e r a t e o f p o p u l a t i o n g ro w th w i l l h ^ v e a n u n f a v o r ­ a b le e f f e c t on e n t r e p r e n e u r i a l a n t i c i p a t i o n s *

T h is would

te n d t c d e p r e s s th e l e v e l o f p r i v a t e in v e s tm e n t*

I t may

be c o n c lu d e d t h a t t h i s i s th e m o st v a l i d r e a s o n g iv e n b y t h e p r o p o n e n ts o f econom ic m a t u r i t y to s u p p o r t th e b e l i e f t h a t a d e c l i n i n g r a t e o f p o p u la tio n g ro w th m ry r e s u l t in some d w in d lin g o f p r i v a t e In v e s tm e n t o p p o r t u n it y .

113 F o o tn o te s 1.

H a n se n , A lv in H ., F i s c a l P o l i c v and B u s in e s s C v c l e s , -------- 1---------------------------**----- -~ p. 359.

2*

S M * # PP- 5 5 0 -3 5 1 .

3.

B u re au o f th e C e n su s, F o r e c a s t s o f th e P o p u la tio n o f th e U n ite d S t a t e s , 194^X 375" ^H © T|lon}'; 15*47, p. 3 9 I

4.

S t a t i s t i c a l A b s t r a c t o f th e U n ite d S t a t e s , 1949 e d i~ t i o n , p . &3•

5.

D e w h u rst, F r e d e r i c J . a n d A s s o c i a t e s , A m e ric a ’s Needs a n d H e so u rc e 3 , p . 35*

6*

B u reau o f th e C e n su s, " F e r t i l i t y : A p r i l , 1 9 4 7 ," C u r r e n t P o n u la t:l on R epor t s - P o p u l a t i o n Cha m c t e r i s t i c s , S e r i e s *------------------------------------------

7.

S t a t i s t i c a l A b s t r a c t o f th e U n ite d S t a t e s , o p . c i t . , p . "SB.

8.

B ureau o f th e C e n s u s , o p . c i t . , p . 5#

9*

'sT helpton, P. K ., o p . c i t . , p . 2 7 .

10.

S t a t i s t i c a l A b s t r a c t o f th e U n ite d S t a t e s ,

prr:-----------------------------------

o p .c i t . , —

11.

B ureau o f th e C e n su s, o p . c i t . , p . 5.

12.

B u reau o f th e C e n su s, ’’H a r i t a l F e r t i l i t y : A p r i l , 1 9 4 9 ,” C u r r e n t P e c u la tio n Be p o r ts -P opula. t i o n Che r a c t o r i s t i c s , S e r i e s p .' SO, L!o . 2 7 , p . 1*

13.

I b id . , p. 39.

14.

I b i d . , p . 39 *

15.

H a n se n , A lv in H ., "Some N otes on T e rb o rg h ’s ’The Bogey o f Econom ic i*s t u r l t y , ,,f Review o f Economic S t a t i s t i c a , 2 8 :1 6 , F e b r u a r y , 1 9 4 6 .

16.

T e rb o rg h , G e o rg e , ih e bogey o f F co n o u lc • • r t i< r lt y , p . 60.

114 •

I f o ld . , p . 6 5 .

IS .

!,A n a t i o n a l S u rv e y o f L iq u id £ s s e t s - D l s t r i b u t i o n Ac­ c o r d i n g t o I n c o m e /1 F e d e r a l R e se rv e B u l l e t i n 5 2 :7 2 0 , J u l y , 1946* r .1T..r., -,T- r »-»■■■

19.

J o n e s , M a r t in , S e c u la r T rends an d I d l e R e s o u r c e s , p . 1 6 .

20.

S ts t i s t i e s 1 A b s t r a c t o f th e Un i t e d St*? t e a , o p . c i t . ,

21.

Ib id . , p. 7.

22.

D u o s e n b e rry , Jam es S . , Incom e S a v in g e n d Consumer B e h a v io r . p . 63#

23.

H a n se n , A lv in H», F i s c a l P o lic y an d B u sin e s s C y c le s , p p . 3 5 7 -8 .

24.

H a n se n , A lv in H ., "Some N o tes on T erborghD s r ±he Bo~ey o f Econom ic M a t u r i t y , ’ 11 o p . c i t . , p . 1 4 .

25.

S c h i f f , E r i e , ’'F a m ily S iz e an d l i e s i d e n t i a l C o n s t r u c t i o n , ” A m erican Economic R eview , 3 6 :9 7 -1 1 2 , In arch , 1946.

2€.

A d l e r , Hans A ., " A b s o lu te o r R e l a t i v e lie to o f Dec l i n o In P o p u la tio n G ro w th ,” Q u a r te r l y J o u rn s 1 o f Econom ics . 5 9 :6 3 3 , A u g u s t, 1 9 4 5 .

27.

I b i d . , p . 626.

28.

T e rb o rg h , G e o rg e , o p . o l t « , p . 5 0 .

29.

D e w h u rst, F r e d e r i c J . end. A s s o c i a t e s , o p . c i t . , p . 3 8 .

30.

I b id . , p . 38.

31.

K u z n e ts , Sim on, N a t io n a l P ro d u c t S in c e 1 8 6 9 , p . 3 5 .

32.

H a n se ’ :, A lv in H . , in Itemoo r a r y Da t i o n r l Economic C om m ittee H e a r i n g s » P a r t § , pT 3'5"04.

53.

F e l l n e r , Wr-. J . , D o n e tf r y P o l i c i e s a n d F u l l I& nplcyraent, p. 70.

34.

Reddav/ay, W. B#, The Econom ics o f a D e c lin in g P o p u la ­ t i o n , p . 107. S ee P a r a d i s o , L o u is J . , i n D ep t, o f Commerce, " C l a s s i ­ f i c a t i o n o f Consum er E x p e n d itu re s by I n c o m e - B l ^ o t i c i t y ,” S u rv ey o f C u r r e n t B u s in e s s , J a n u a r y , 1 9 4 5 , p p . 7 - 1 0 .

35.

115

C h a p t e r VI TERMTO MAX EXPANSION AND SECULAR STAGNATION

The se c o n d vobJ o r e le m e n t i n P r o f e s s o r H a n se n ’s a n © ly s is o f th e f a c t o r s r e s p o n s i b l e f o r econom ic p r o g r e s s i s th e p r e s e n c e o f u n d e v e lo p e d la n d a n d o t h e r n a t u r a l r e ­ so u rc es*

W ith r e f e r e n c e to t i l l s f a c t o r he s t a t e s :

I t i s n o t p o s s i b l e , I t h i n k , to make ev en a n a p p ro x im a te e s t i m a t e o f th e new c a p i t a l c r e a t e d i n th e n i n e t e e n t h c e n t u r y w hich was a d i r e c t c o n s e q u e n c e o f th e opening; up o f new t e r r i t o r y — b u t i t m u st h a v e b e en v e r y c o n s i d e r a b l e — th e o p e n in g o f new t e r r i t o r y a n d th e grow Hi o f popu­ l a t i o n v;ero t o g e t h e r r e s p o n s i b l e f o r a v e r y l a r g e f r a c t i o n —p o s s i b l y som ewhere n e a r o n e -h a I f o f th e t o t e 1 volum e o f new c a p i t a l f o r m a tio n I n th e n in e te e n th c e n tu ry . Those o u t l e t s a r e r a p i d l y b e in g c l o s e d . Ihe r e p o r t on L im its o f Land S e t t l e m e n t by I s a i a h Bowman a n d o t h e r s may b e r e g a rd e c f a s c o n c lu s iv e i n I t s f i n d i n g s t h r t t h e r e a r e n o i m p o r ta n t a r e a s l e f t f o r e x p l o i t a t i o n a n d s e t t l e m e n t —n o one i s l i k e l y to c h a lle n g e th e s t a te m e n t t h a t f o r e i g n In v e s tm e n t w i l l , i n th e n e x t f i f t y y e a r s , p la y an i n c a a p a r a b lv s m a l l e r ^ r o l e th a n was th e c a s e i n th e n i n e t e e n t h c e n t u r y . The p u rp o se o f H ilo c h a p t e r i s to a n a ly z e th e t e r r i t o r i a l e x p a n s io n o r f r o n t i e r a rg u m e n t, p ro b le m s w i l l be c o n s i d e r e d :

'ih re o m a jo r

f i r s t , h a s th e f r o n t i e r p a s s e d ;

s e c o n d ly , th e e f f e c t o f a p a s s in g o f th e f r o n t i e r on I n v e s t ­ m en t o p p o r t u n i t y ; f i n a l l y , th e p o s s i b i l i t y o f o f f s e t t i n g s u c h a n e f f e c t th ro u g h f o r e i g n in v e s tm e n t.

116

D e fin itio n T here i s c o n s i d e r a b le c o n f u s io n a s to th e p r e c i s e m e a n in g o f th e term m e n t.

' f r o n t i e r ” In I ^ o f o s s o r H a n se n ’s a r g u ­

T e rb o rg h c o n c lu d e s th a t th e c o n c e p tio n o f th o f r o n t ­

i e r h e l d b y th e p r o t a g o n i s t s o f ecan em ic m a t u r i t y d e n o te s " th o g e o g r a p h ic zone u n d e rg o in g o c c u p a tio n by th e f i r s t g wave o f s e t t l e m e n t . ” Tims c o n s t r u o d , th e e n d in g o f th e f r o n t i e r I n th e U n ite d S t a t e s o c c u r r e d a ro u n d 1 8 9 0 .

H is ­

t o r i a n s c u s t c n a r i l y r e f e r to 1890 a s th e d a te f o r th o c l o s i n g b f th o f r o n t i e r s i n c e , a f t e r t h a t y e ? r , f r e e home­ s t e a d s w ore no lo n g e r a v a i l a b l e . I t i s a p p a r e n t t h a t P r o f e s s o r Hanson h a s a d i f ­ f e r e n t c o n c e p tio n o f th e term " f r o n t i e r . ” th e le s s

He s t a t e s , " n e v e r­

w i t h r e s p e c t to th e f r o n t i e r , tlie econom ic d e v e lo p ­

m en t o f th e l a s t f r o n t i e r s t a t e s had s c a r c e l y s t a r t e d by 1 890— tlie f r o n t i e r i n term s o f f r o n t i e r d ev elo p m en t l a s t e d on u n t i l World, v.or I .

I t i s w h o lly in c o r n e t to s a y the t

th e econom ic f r o n t i e r e n d ed i n 1 0 9 0 .” T h is s t a te m e n t s u g g e s ts thr. t H ansen b o l le v e s t h a t th e f r o n t i e r c a s t s an " a f t e r g l o w . ”

gven th o u g h th o p io n e e r s

h a d , b y 1 8 9 0 , p e n e tr ? to c i i n t o p r a c t i c a l l y a l l u n d e v e lo p e d a r e a s I n th e U n ite d S t a t e s , c o n d it i o n s in th e s e ^ r e « s w ere c o n d u c iv e t o in v e s tm e n t f o r an a d d i t i o n a l p e r io d o f tim e .

117 As tin © p ea so d fro m th e da to o f th o i n i t i a l s e t t l e m e n t , In v e stm e n t- o p p o r t u n i t y c r e a t e d by t i l l s s o u rc e te n d e d to d im in is h . To th e a u t h o r , t h i s c o n c e p tio n o f th e f r o n t i e r la c k s p r e c is io n .

I f i t i s e \ e r p o s s i b l e to e m p ir ic © lly

c h e c k t h i s e le m e n t i n P r o f e s s o r H a n se n ’s t h e s i s , s more o b j e c t i v e d e f i n i t i o n f o r tho f r o n t i e r th a n th e o p e n in g up o f now t e r r i t o r y w i l l h a v e to be f o r m u la te d . H ig g in s

4

P ro fe sso r

h r s a tte m p te d to f u r n i s h t h i s d e f i n i t i o n .

In d i s ­

c u s s i n g th e t e r r i t o r i a l a rg u m e n t, he d e s c r i b e s two ty p e s o f f r o n t ! o r — g e o g ra p h ic and. e co n o m ic.

A g e o g ra p h ic f r o n t i e r

w ould be s a i d t o e x i s t i f , a ssu m in g t e c h n i c a l k n o w le d g e , p o p u l a t i o n a n d t a s t e s a s c o n s t a n t , th e r e i s an ore© w i t h in w h ich l a b o r an d c a p i t a l a r e s u b j e c t to i n c r e a s i n g r e t u r n s . G iven t h e s e c o n d i t i o n s , th e f r o n t i e r would p a s s when l a b o r a n d / o r c a p i t a l become s u b j e c t to d im in is h in g r e t u r n s . I t i s n e c e s s a r y , h o w e v e r, to ta k e a c c o u n t o f d y ­ n am ic c h an g e s*

K o n d r a ti e f f ^ h a s p o in te d o u t t h a t c e r t a i n

a r e a s s u c h a s tlie U n ite d S t a t e s , A u s t r a l i a , Cane d a , a n d A rg e n tin a wore known lo n g b e f o r e th e y w ore c o m m e rc ia lly e x p lo ite d . I t i s p e r f e c t l y c l e a r h i s t o r i c a l l y t h a t , i n th e c a p i t a l i s t i c © ccnanic s y s te m , new r e g io n s a r e o p e n ed f o r commerce d u r in g th o se p e r io d s i n w h ic h th e d e s i r e o f o ld c o u n t r i e s f o r new m a rk e ts rnd new s o u rc e s o f raw m a t e r i a l s b e ­ com es more u r g e n t th a n t h e r e t o f o r e *0

118 S i m i l a r l y , a n I n n o v a t i o n , su c h a s a to m ic e n e r g y , may make p r e v i o u s l y known b u t u n u s e d r e s o u r c e s ( f o r e x a m p le , u ran iu m d e p o s i t s ) h i g h l y u s e f u l a n d co n s o q u e n tly w o r h y o f d e v e lo p ­ m e n t.

C h e e p e r pow er may © Iso r e s u l t In th e e x p l o i t s .t i o n o f

an a r e a f o r m e r l y l o f t i d l e . To i n c l u d e th e s e p o s s i b i l i t i e s , H ig g in s d e f i n e s a s e c o n d ty p e o f f r o n t i e r - an econom ic f r o n t i e r .

T h is i s

an a r e a w here i n c r e a s i n g r e t u r n s t o l a b o r a n d c a p i t a l w ould a p p e a r o n ly i f

t h e r e h a v e b een c h a n g e s in t e c h n iq u e s , popu­

la tio n , or te s te s . econom ic

As a r e s u l t o f th e s e dynam ic c h a n g e s ,

f r o n t i e r s mry become g e o g ra p h ic f r o n t i e r s . T h ere i s

one d i f f i c u l t y i n th e

n i t i o n s . I t I s a lm o s t

u sg

o f th e s e d e f i ­

im p o s s ib le to d i s t i n g u i s h th e e f f e c t s

o f th e d e v e lo p m e n t o f nov; l a n d s end r e s o u r c e s on in v e s tm e n t o p p o r t u n i t i e s from th e g ro w th o f p o p u la tio n and t e c h n o l o g i c a l in n o v a tio n s .

F o r e x a m p le , a c c o r d in g to th e s e d e f i n i t i o n s ,

a n y a r e a , r e g a r d l e s s o f how w e ll s e t t l e d or d e v e lo p e d , c o u ld b e c l a s s i f i e d a s a g e o g ra p h ic f r o n t i e r i f a t e c h n o l o g i c a l in n o v a t i o n r e s u l t e d i n I n c r e a s i n g r e t u r n s to l a b o r a n d c a p i t a l . A c c o rd in g to H ig g in s , t h e n , b e s i d e s i n c r e a s i n g r e ­ t u r n s to l a b o r a n d c a p i t a l , one o f th r e o a d d i t i o n a l c o n d i­ t i o n s m u st be p r e s e n t , i f sn a re a i s to c o n s t i t u t e a g e o ­ g ra p h ic f r o n t i e r . little

F i r s t , i t may b e an ere© w here t h e r e i s

i f a n y u t i l i z a t i o n o f th e m o st a d v a n c e d known te c h n iq u e s .

119 S e c o n d , i t m y be an a r e a w here tho r a t i o o f l a b o r a n d /o r c a p i t a l to n a t u r a l r e s o u r c e s i s lo w e r th a n i n o t h e r c o u n ­ trie s .

H en ce, th e m a r g in a l p r o d u c t i v i t y o r th e l a b o r a n d /

o r c a p i t a l w ould bo h i g h e r .

F i n a l l y , i f m ig r a ti o n o f

c a p i t a l and l a b o r i n t o a new a r e a r a i s e s

th e m a r g in a l p r o ­

d u c t i v i t y o f th o s e f a c t o r s in th e o l d e r ax*eas, b u t n o t above th e l e v e l i n th e new t e r r i t o r y , i t may b e s a i d to b e a g e o ­ g ra p h ic f r o n t i e r . S t- t e d i n t h i s fo rm , th e f r o n t i e r a re a a p p e a rs to be

p.

more p r e c i s e c o n c e p t tlimn t h a t f o r m u la te d b y H a n sen .

P e rh a p s i t s g r e a t e s t a t t r i b u t e i s t h a t i t e l i m i n a t e s th e c ritic is m

th* t H ansen ig n o re s u n e x p lo i t e d r e s o u r c e s an d u n -

d e v e lo p e d r e g i o n s i n th e U n ite d S t a t e s a t th e p r e s exit tim e .

7

C hanges i n t e c h n i q u e s , p o p u l a t i o n , and t a s t e s may w a r r a n t th e e x p l o i t a t i o n o f r e g i o n s now r e l a t i v e l y u n d e v e lo p e d . Has th e h r o n t i e r m assed? I t i s now p o s s i b l e to a s s e s s P r o f e s s o r H a n se n ’s d e c l a r a t i o n th r t th e f r o n t i e r hr d d is a p p e a r e d by ’. .'orId Y

new c o m m u n itie s , p u b lic u t i l i t i e s , end so f o r t h .

I t is

r e a d i l y a p p a r e n t t h a t th o s e ty p e s o f in v e s tm e n t w ere n e c e s ­ s i t a t e d i n th e d e v e lo p m e n t o f th e f r o n t i e r r e g i o n s i n th e N in e te e n Hi C e n tu r y .

I t I s a l s o o b v io u s t h a t th e p r o v i s i o n

o f th e s e c a p i t a l goods n o t o n ly i n c r e a s e d in v e s tm e n t in th e

124 f r o n t i e r r e g i o n , b u t a l s o s t i m u l a t e d in v e s tm e n t i n th e s e ttle d a re a .

As P r o f e s s o r H anson s t a t e s s t!Gue may c i t e

th e g i a n t o f f i c e b u i l d i n g s o f o u r g r e a t n a t i o n a l c o m p a n ie s, d o in g a n a tio n w id e b u s i n e s s b u t l o c a t e d in Hew Y ork C i t y . The in v e s tm e n t i n t h e o l d e r s e t t l e d c e n t e r s was i n v e ry l a r g e m e a su re th e r e s u l t o f th e d e v e lo p m e n t o f th e e n t i r e eco n o m y ."

16

But i t i s n o t a s o b v io u s t h r t th e p r e s e n c e o f f r o n t i e r a r e a s d u r in g t h a t l a t t e r h a l f o f th e N in e te e n th C e n tu ry c r e a t e d m ore in v e s tm e n t th a n i f th e u n d e v e lo p e d r e ­ g io n s h a d n o t b e e n p r e s e n t .

I t i s c o n c e iv a b le t h a t th e

m i g r a n t , h a d h e s t a y e d i n th e s e t t l e d a r e a s , w ould h av e g iv e n r i s e

to a s much c a p i t a l f o m a t i o n a s he d i d on th e

fro n tie r a re a .

I t w ould h av e b een j u s t a s n e c e s s a r y to

p r o v id e h e m e s, p u b lic u t i l i t i e s a n d c a p i t a l e q u ip m en t f o r t h i s w o rk er* I n f a c t , T e rb o rg h

16

c o n c lu d e s t h a t th e f r o n t i e r

p r o p e r w ould g e n e r a t e l e s s c a p i t a l f o r m a tio n th a n an e q u a l g ro w th o f p o p u l a t i o n in th e o l d e r r e g i o n s .

He p o i n t s to

th e f a c t t h a t w h ile th e f r o n t i e r d e v e lo p e d " p r o p o r t i o n a t e l y m ore a c t i v i t y In th e c r e a t i o n o f t r a n s p o r t a t i o n f a c i l i t i e s , su c h a s r o a d s a n d r a i l w a y s , i t i n v e s te d l e s s i n o t h e r p r o ­ d u c ti v e f a c i l i t i e s , i n h o u s in g , e n d i n consum er *s c a p i t a l

125 e q u ip m e n t, th e n was I n v e s t e d i n e q u ip p in g a l i k e of

p opulation In the e a s t . ”

in c re a s e

V7

T h is a rg u m e n t may be r e f u t e d , h o w e v e r, b y exam­ i n i n g th e i n t e r r e l a t i o n s h i p betw een f r o n t i e r developm entt i n th e N i n e te e n th C e n tu ry and p o p u la tio n grow H i.

I f th e re

h a d b e e n few f r o n t i e r a r e a s , i n t e n s i v e e x p l o i t a t i o n o f th e e x i s t i n g le n d a n d r e s o u r c e s w ould hav e l e d to th e p o i n t o f d im in is h in g r e t u r n s much e a r l i e r .

TUIa would have m ea n t

more l i m i t e d o p p o r t u n i t y f o r im m ig ra n ts .

Hie m a g n itu d e o f

m i g r a t i o n to Hie U n ite d S t a t e s w ould h a r d l y have been a s g re a t.

Hie nim iber o f in m ig r a n ts i n th e d e cad e o f Hie

”e i g h t i e s ” was o v e r f i v e m i l l i o n , an d b etw een 1901-1910 18 i t was n e a r l y n in e m i l l i o n . As t h i s was r e s p e c t i v e l y 4 0*6 p e r c e n t a n d 55 p e r c e n t o f th e p o p u la tio n I n c r e a s e d u r i n g th e s e d e c a d e s , i t c an b e s e e n t h a t Im m ig ra tio n was r e s p o n s i b l e f o r a good s h a r e o f p o p u la tio n grow Hi d u r in g t h is p e rio d . I t I s p r o b a b le t h a t , i f th e w e s te rn t e r r i t o r i e s h a d n o t b e e n a v a i l a b l e , Im m ig ra tio n would n o t h a v e b e en as g re a t.

The o p o o r t u n i t i e s f o r t h e Im m ig ran t to e a r n a

l i v e l i h o o d , to a c q u i r e l a n d , o r to work n a t u r a l r e s o u r c e s w ould n o t h a v e b e e n a m p le . b een a s a t t r a c t i v e c o u n trie s .

H e n ce , A m erican would n o t have

to th e s u r p l u s p o p u la tio n o f E uropean

F u rth e r m o r e , i t i s l i k e l y thw t th e g a te s to

126 I m m ig r a tio n w ould hav e b e e n c lo s e d much e a r l i e r had t h e r e b e e n no f r o n t i e r a r e a s * I t seem s p l a u s i b l e to c o n c lu d e t h a t th e p re s e n c e o f f r o n t i e r a r e a s d e f i n i t e l y c o n t r i b u t e d to th e r a p i d I n ­ c r e a s e I n p o p u l a t i o n d u r in g t h i s p e rio d *

T h e re fo r© , T e r -

b o r g h 1s a rg u m e n t t h a t a t l e a s t th e same am ount o f c a p i t a l f o r m a tio n w ould hr*ve b een o c c a s io n e d h ad t h e r e been n o f r o n t i e r a p p e a r s I n v a lid * Hi© p r e c e d in g p a ra g ra p h s i l l u s t r a t e

th e d i f f i c u l t y

i n s e p a r a t i n g th e e f f e c t s o f the f r o n t i e r on in v e s tm e n t op­ p o r t u n i t y In th e N in e te e n th C e n tu ry , from th e e f f e c t s o f p o p u l a t i o n g ro w th .

W ith r e s p e c t to h o u s in g a n d p u b lic u t i l i ­

t i e s t h e r e i s th e e v id e n t d a n g e r o f d o u b le - c o u n tin g .

I t Is

p r o b a b l e , h o w e v e r, t h a t th e in v e s tm e n t in r a ilw a y s was l a r g e l y i n s t i g a t e d by th e p re s e n c e o f f r o n t ! - r a r e a s .

Many

o f th e r a i l w a y s w ere s u b s i d i z e d i n t h e i r in a u g u r a ti o n b y s u b s ta n t ia l g ra n ts o f la n d .

Between 1850 an d 1800, a p p ro x ­

i m a t e l y ISO m i l l i o n a c r e s o f 2.and w ere g r o u te d to r a i l ­ w a y s . 19

I n a d d i t i o n , th e U n ite d S t a t e s gov ern m en t g r a n te d

e x t e n s i v e lo a n s t o r a i l r o a d s .

Over 102 m i l l i o n d o l l a r s was 20 owed by th o r a i l r o a d s to trie gov ern m en t In 1 8 8 5 . I n p r> rt,

t h e n , th e p re s e n c e o f f r o n t i e r a r e a s s t i m u l a t e d in v e s tm e n t in r a ilr o a d s .

In t u r n , th e c o n s t r u c t i o n o f c o n t i n e n t a l

r a i l w a y s f a c i l i t a t e d th e d ev elo p m e n t o f f r o n t i e r a r e a s .

A

127 l a c k o f t r a n s p o r t a t i o n f a c i l i t i e s w ould h a v e m ea n t f e a t th e r e s o u r c e s o f th e w e s te r n a r e a s w ould h av e l a i n d o rm a n t f o r many a d d i t i o n a l y e a r s . 3he in v e s tm e n t i n r a i l r o a d s was a l a r g e p e r c e n ta g e o f a l l c a p i t a l f o r m a tio n d u r in g fe e l a t t e r h a l f o f th e X^ine te e n tli C e n tu r y .

I n fe e d e c a d e o f th e ” se v e n t i e s ” i t

a c c o u n te d f o r a b o u t 13 p e r c e n t o f a l l c a p i t a l f o r m a t io n ; in th e " e i g h t i e s ’* fee p e r c e n ta g e h a d r i s e n to 15*

21

S in c e

f e a t t im e , th e p e r c e n ta g e h a s g r a d u a l l y d e c l i n e d . I t may be c o n c lu d e d t h a t fe e d e v elo p m e n t o f f r o n t ­ i e r a r e a s d u r in g th e N in e te e n f e C e n tu ry s t i m u l a t e d i n v e s t ­ m e n t.

C a p i t a l f o llo w e d fe e p io n e e r a s h e p r o g r e s s e d w e s t­

w a rd .

New c o m m u n ities w ere b u i l t ,

tr a n s p o r ta tio n lin k s

w ith f e e s e t t l e d a r e a s w ere f o r g e d , new i n d u s t r i e s a r o s e to e x p l o i t th e r e s o u r c e s .

A s s o c ia te d w if e r a p i d p o p u l a t i o n

g r o w th , fe e d e v e lo p m e n t o f f r o n t ! - r a r e a s n e c e s s i t a t e d mr- j o r c a p i t a l r e q u ir e m e n ts . I t h a s n o t b een d e m o n s tra te d , h o w e v er, t h a t a r e l a ­ tiv e d e c lin e In f r o n t i e r a re a s w i l l d e p re ss p r iv a te i n v e s t ­ m ent o p p o r t u n i t i e s ,

'die a rg u m e n t i s a d v a n c e d t h a t th e r e

w ould be s t i l l a l i m i t l e s s f r o n t i e r o f u n s a t i s f i e d human w a n ts .

E x p l o i t a t i o n o f fees© w a n ts , i t I s s a i d , would mean

a p r a c t i c a l l y u n l i m i t e d s o u rc e o f in v e s tm e n t o p p o r t u n it y . E x i s t i n g l a n d and n a t u r a l r e s o u r c e s would b e d e v e lo p e d more

128 in te n s iv e ly *

T h is c la im c a n o n ly be a s s e s s e d a d e q u a te ly

w i t h r e f e r e n c e to a th ir d , m ethod in w h ich new t e r r i t o r i e s a n d new r e s o u r c e s i n f l u e n c e d in v e s tm e n t o p p o r t u n i t y : by a f f e c t i n g e n tr e p r e n e u r ia l e x p e c ta tio n s . E n tro p re n e u rla l A n tic ip a tio n s I n C h a p te r V, I t was p o in te d o u t t h a t a r a p i d l y g ro w in g p o p u l a t i o n m^y m in im is e th e r i s k s o f p r i v a t e bus!** n ess e n tre p re n e u rs .

R apid p e n e t r a t i o n i n t o n e w t e r r i t o r i e s

a n d d e v e lo p m e n t o f new r e s o u r c e s may a l s o hav e th e seme e f ­ fe c t.

The N in e te e n th C e n tu ry b u s in o s s m s n , v ie w in g th e

r a p i d e x p a n s io n w e stw a rd , c r u l d w ith more c e r t a i n t y expand h i s o p e r a tio n s * As lo n g a s s u p p l i e s o f l a n d , l e b o r and n a t u r a l r e s o u r c e s becom ing a v a i l a b l e f o r e x p l o i t a t i o n w ere r a p i d l y i n c r e a s i n g , th e r e was a c o n s t a n t s h o r t a g e o f c a p i t a l , m a c h in e ry , h o u s in g , t r a n s ­ p o r t a t i o n f a c i l i t i e s and moans o f s u b s i s t e n c e f o r th e w o r k e rs . T h is e v e r-g r o w in g n e e d f o r n e c e s s i t i e s o r s t a n d a r d - t y p e g o o d s s t i m u l a t e d th e e n tr e p r e n e u r s to expand t h e i r p l a n t s i n a d v a n c e o f th e i n c r e a s i n g dem and.

Doner c i t e s th e r a i l ­

r o a d s a s a n i n d u s t r y b u i l t w e ll a h e a d o f th e demand f o r p ?•.

tra ffic . The i n c r e a s e In th e a n t i c i p a t e d m a r g in a l e f f i c i e n c y o f c a p i t a l i n t u r n te n d e d to p ro v id e th e e f f e c t i v e demand n e c e s s a r y to f u l f i l l th e s e e x p e c t a t i o n s .

Xt v?as a l s o

129 r e l a t i v e l y e a s y to f o r e c a s t th e d i s p o s i t i o n o f t h i s o f f o e t i v e dem and.

Hie f r o n t i e r c o m m u n itie s and th e r a p i d l y grow ­

in g p o p u l a t i o n e x p an d e d th e m a r k e ts , p r i n c i p a l l y f o r n o n lu x u r y ty p e s o f g o o d s .

They f a c i l i t a t e d

m ass p r o d u c t i o n t e c h n i q u e s . in g I n d u s t r i a l l y #

th e d e v e lo p m e n t o f

The econom y was r a p i d l y e x p a n d ­

The r a p i d l y g ro w in g p o n u l a t i o n and th e

d e v e lo p m e n t o f new t e r r i t o r i e s w ere p r o v id in g th e m a rk e ts f o r t h i s e x p a n s io n #

I n v iew o f s u c h a f a v o r a b l e c lim r t e ,

i t seem s p l a u s i b l e to c o n c lu d o th r t th e p s y c h o lo g y o f the e n t r e p r e n e u r w ould l o a d him to f a v o r a b l e lo n g - te r m a n t i c i p a ­ t i o n s , a n d h e n c e , to be w i l l i n g to expand h i s in v e s tm e n t. As v/as i n d i c a t e d i n C h a p te r V, t h e r e i s r e a s o n to b e l i e v e t h a t th e e n t r e p r e n e u r h a s l e s s o p t i m i s t i c a n t i c i p a ­ t i o n s a t th e p r e s e n t tim e .

A d e c l i n e in f r o n t i e r a r e a s , a s

w e l l a s a d e c r e a s i n g r a t e o f p o p u l a t i o n g ro w th , may c o n t r i ­ b u te t o th e s e l e s s f a v o r a b l e e x p o r t a t i o n s ,

bven th o u g h

t h e r e m??y be a l i m i t l e s s f r o n t i e r o f w a n ts , i t d o e s n o t seem t h a t t h i s w i l l in d u c e in v e s tm e n t by p r i v a t e e n tr e p r e n e u r s a s s vie c e s s f u l l y a s an e v o r -g ro w in g n e e d f o r n e c e s s i t y - t y p e g o o d s I n new c o m m u n ities I n f r o n t i e r a re a s * A to m ls tic C o m p e titio n The p r e s e n c e o f th e N in e te e n th C e n tu ry f r o n t i e r a p p e a r s to have o f f e r e d an e n v iro n m e n t c o n d u c iv e to th e o p e r ­ a t i o n o f a l a i s s e z - f a i r e c o m p e titiv e s o c i e t y .

F ra n k lln ig h t

130 h a s e x p l a i n e d th e d r i f t away fro m I n d i v id u a li s m in te rm s o f th e pa a s i i i s o f the f r o n t i e r ( t h e e n d o f f r e e homes t o a d s ) . From tile v a n ta g e p o i n t o f th e p r e s e n t , we c a n s e e t h r t o n ly a re m a rk a b le a c c i d e n t a l and i n h e r e n t l y te m p o ra ry s o t o f c o n d i t i o n s unde i t p o s s i b l e , f o r a tim e , f o r s u c h a ’f r e e * s o c i a l s y s te m —p r i v a t e i n i t i a t i v e in econom ic l i f e a n d g o v e rn m e n t, th ro iig h r e p r e s e n t a t i v e i n s t i t u t i o n s - - to seem to w ork, o r seem t o h av e th e c a p a c i t y o f s o l v i n g th e pro b lem o f c o m b in in g l i b e r t y w ith o r d e r . D em ocracy, su c h a s i t w a s, w>s p o s s i b l e o n ly i n so f a r a s t h e r e w ere no v i t a l p o l i t i c a l iiro b le m s , no s e r i o u s d i f ­ f e r e n c e s o f o p in io n o r c o n f l i c t s o f i n t e r e s t . . . * Hie c o n d i t i o n s u n d e r w h ic h f r e e g o v ern m en t was p o s s i b l e , m oaning u n d e r w hich t h e r e w ere no s e r ­ io u s p o l i t i c a l i s s u e s , w ere an i n c i d e n t o f th e 1f r o n t i e r .* Hie g e o g r a p h ic a l d i s c o v e r i e s and t e c h n i c a l i n v e n t i o n s o f Hie s e v e n te e n th an d e i g h t ­ e e n th c e n t u r i e s r e l i e v e d s o c i a l a n d econom ic p r e s s u r e s i n th e c o u n t r i e s o f Wes team E urope* W ith a n e s s e n t i a l l y u n l i m i t e d dom ain a w a itin g econom ic c o n q u e s t , l i f e c e s s e d to be s e r i o u s l y c o m p e titiv e f o r in d iv id u a ls * b p r a c t i c a l l y unbounded s p h e re o f a c t i o n a n d s e lf - a g g r a n d iz e m e n t v/as open f o r a n y a n d a l l w ith s u f f i c i e n t e n e rg y und a m b itio n to c o u n t s e r i o u s l y Sn s o c i a l o r p o l i t i c a l a f f a i r s * S uch a w o rld c o u ld be i n d i v i d u a l i s t i c end would n a t u r a l l y te n d to w a rd i n d i v i d u a l i s m —w hich th e s i t u a t i o n c o n ti n u e d . I t d id s o , sn d e x p e r ie n c e d a b r i e f p e r i o d o f r fre e d o m , * a l i t e r a l W it h e r i n g away o f Hie 3 t a t e * f B u t, w ith th e f i l l i n g up o f t h e w o rld a n d th e p a s s in g o f f r o n t i e r c o n d i t i o n s , r e q u ir e m e n ts w ould r e v e r t tc o l d e r nomas o f s t a b i l i t y th ro u g h d i s c i p l i n e * 2 T h is view i l l u s t r a t e s one f a c e t o f s h i g h l y com­ p le x i n t e r r e l a t i o n s h i p b e tw ee n t h e e x p l o i t a t i o n o f new t e r r i t o r y d u r in g th e N in e te e n th C e n tu ry and th e r i s e o f c o n c e n tra tio n .

V diile u n d e v e lo p e d la n d s e x i s t e d , th e y e n ­

c o u ra g e d an a t o m i s t i c s o c i e t y .

T his i s p a r t i c u l a r l y e v id e n t

131 I n th e o a s 0 of* l a b o r .

How l a n d s p r o v id e d s n oscep© v a lv e

f o r th e l a b o r e r t h a t was n o t s a t i s f i e d w ith h i s w o rk in g c o n d itio n s .

As lo n g a s l a b o r e r s c o u ld h o m e ste a d in th e

w e s t, e m p lo y e r-e m p lo y e e r e l a t i o n s h i p s w ere l e s s l i k e l y t o become c r i t i c a l .

I n l i k e m an n er th e o r g a n i z e t i o n o f p r i ­

v a t e e n t e r p r i s e was a l s o s t i m u l a t e d .

F e lln e r 2 ^ p o in ts o u t

t h a t t h e a d d i t i o n s to t h e econom ic a r e a s w ere u s u a l l y c h a r ­ a c t e r i z e d b y a t o m i s t i c c o n d i t i o n s an d w ere r e l a t i v e l y f r e e from i n s t i t u t i o n a l r i g i d i t i e s . I t I s a l s o r e a s o n a b l e to b e l i e v e , h o w e v er, t h a t th e d e v e lo p m e n t o f t h e s e f r o n t i e r a r e a s in th e n i n e t e e n t h C e n tu r y , w h ile f e a t u r e d b y in d iv i d u a li s m on th e f r o n t i e r , s t i m u l a t e d t h e u s e o f te c h n iq u e s t h a t prom oted c o n c e n tr a ­ t i o n i n the- I n d u s t r i a l se g m en t o f th e econom y.

Edw ards

h a s i n d i c a t e d t h a t th e c o r p o r a t e fo rm o f b u s in e s s o r g a n ! 26 z s t i o n d e v e lo p e d m o st r a p i d l y a f t e r th e p a n ic o f 1373. I t w ould a p p e a r t h a t , i n c t l o a s t two a r e a s , th e e x p l o i t a ­ t i o n o f th e f r o n t i e r s t i m u l a t e d t i l l s t r e n d to w ard s c o n c e n ­ tra tio n * F i r s t , l a r g e am ounts o f fu n d s w ere n e e d e d to b u i l d a n d o p e r a te r a i l r o a d s .

*’o r e x a m p le , th e fu n d e d d e b t o f

r a i l r o a d s was a p p r o x im a te ly f o u r a n d a h a l f b i l l i o n d o l l a r s i n 1 8 9 0 .27

T h is made i t p r a c t i c a l l y im p e r a tiv e t h a t th e

c o r p o r a t e form o f b u s i n e s s o r g a n i z e t i o n bo u s e d .

“I n th e

132 b e g in n in g th e r o a d s f e l l I n t o th e h an d s o f s p e c u l a t i v e c a p i t a l i s t s who w ere c o n c e rn e d o n ly in th e a t t a i n m e n t o f q u ic k p r o f i t s fro m th e m a rk e t m a n ip u la tio n o f th e B e c u r ipo t i e s o f th o s e e n t e r p r i s e s A s a r e s u l t o f t h i s s i t u a t i o n , 39 p e r c e n t o f a l l r a i l r o a d bonds w ere in d e f a u l t i n 1876*

€>Q

Edw ards p o i n t o u t t h a t th e house o f Morgan e f f e c t e d a f i n a n ­ c i a l r e o r g a n i z a t i o n o f th e r a i l r o a d s d u r in g th e ^ e i g h t i e s 1* «A a n d * ¥ e p la c e d c o m p e titio n w ith m o n o p o ly .ff S e c o n d , m a n u f a c tu r in g i n d u s t r i e s e x h i b i t e d th e sam e t r e n d to w a rd s c o n c e n t r a t i o n .

B eard p o i n t s o u t t h a t

th e r a p i d e x p a n s io n o f m a rk e ts o c c a s io n e d by t e r r i t o r i a l d e v e lo p m e n t f a c i l i t a t e d m ass p r o d u c tio n t e c h n iq u e s , w hich 31 r e q u i r e d l a r g e am ounts o f f u n d s . He s t a t e s : •Hie am ount o f money n e e d e d f o r th e b u i l d i n g o f g r e e t p l a n t s r a n a g a i n s t th e d i s p e r s i o n o f i n d i v i d u a l o w n e rsh ip c h a r a c t e r i s t i c o f h a n d i­ c r a f t d a y s . I n th e te n d e n c y to o v e r b u i l d , com­ p e t i t i o n among m a n u f a c tu r e r s becam e k e e n , som e­ tim e s s a n g u in a r y ; an d o f t e n i n s h e e r s e l f p r o t e c t i o n th e y s o u g h t e s c a p e from low r e t u r n s o r ev en b a n k ru p tc y b;y fo rm in g c o m b in a tio n s o r agroem en t s .3 2 F u r th e r m o r e , c o n c e n t r a t i o n was sp e e d e d by th e I s r g e p r o f i t s made i n i n d u s t r i e s c o n n e c te d w ith c o n t i n e n t a l e x p a n sio n * F o r e x a m p le , Andrew C a rn e g ie e x te n d e d h i s a r e a o f c o n t r o l b y I n v e s t i n g th e p r o f i t s fro m h i s s t e e l m a n u f a c tu r in g i n ­ d u s t r y i n r a i l w a y s , m in in g , a n d G r e a t l a k e s s h ip p in g # I t w ould a p p e a r t h a t th e tr e n d to w ard s

133 c o n c e n t r e t l o n t h a t d e v e lo p e d i n th e l a t t e r p a r t o f th e N in e te e n th . C e n tu r y

m s

s t i m u l a t e d by t h e e x p l o i t a t i o n o f

f r o n t i e r a r e a s d u r i n g t h i s p e rio d #

C o n s e q u e n tly , th e U n ite d

S t a t e s em erg ed fro m t h e N in e te e n th C e n tu ry w ith e much m ore l i m i t e d dom ain a v a i l a b l e to th e i n d i v i d u a l i s t , and an i n ­ c r e a s i n g l y c o n c e n t r a t e d i n d u s t r i a l seg m en t o f th e economy# Hie e f f e c t o f c o n c e n t r a t i o n on In v e s tm e n t o p p o r t u n it y w i l l b e f u r t h e r e x p lo r e d I n C h a p te r V I I .

I t may be n o te d , how­

e v e r , t h a t m o n o p o li s t i c c o n t r o l may h a v e some e f f e c t on th e f u t u r e d e v e lo p m e n t o f new r e s o u r c e s .

Domar®^ h a s p o in te d

o u t t h a t th e a b i l i t y o f m o n o p o lie s to p r o t e c t th e s e l v e s from c s p i t r l l o s s e s m akes them l e s s i n t e r e s t e d in im m e d ia te ly u t i l i z i n g new r e s o u r c e s .

"The new r e s o u r c e s , w h e th e r new

fa rm l a n d , o r a new d e p o s i t o f c o p p e r , o r a new s t a n d o f t im b e r , c a n n o t h e l p b u t com pete w ith th e p r o d u c ts o f e x i s t ­ i n g r e s o u r c e s ." ® ^

I f th e i n d u s t r y i s m o n o p o li s t i c , i t i s

l i k e l y t o d e v e lo p th e s e r e s o u r c e s l e s s r a p i d l y in o r d e r t o p r o t e c t e x i s t i n g in v e s tm e n t.

Darner s t a t e s s

I t was v e r y f o r t u n a t e f o r t h i s c o u n tr y t h a t , th r o u g h o u t th e N in e te e n th C e n tu r y , a fa rm e r w a n tin g to ta k e up l a n d , s a y In Io w a , d i d n o t h av e t o o b t a i n p e rm is s io n frc-m a New E n g la n d l e g i s l a t u r e , who w ould h a v e u n d o u b te d ly r e ­ f u s e d to g r a n t s u c h a p e rm is s io n w henever i n i t s o p i n io n , th e d e v e lo p m e n t o f Iowa fa rm s d e p r e c i a t e d fa rm la n d v a lu e s in New E n g la n d , a s i n f a c t i t d i d .5 6 T h u s, th e e x p l o i t a t i o n o f th e f r o n t i e r d u r in g th e N in e te e n th . C e n tu ry a p p e a re d to b o th s t i m u l a t e and d e p r e s s

134 c o m p e titio n .

I n th© f r o n t i e r a r e a , a n e n v iro n m e n t c o n d u —

e l v e t o a t o m i s t i c c o m p e titio n was p r e s e n t .

Th© r a p i d e x ­

p l o i t a t i o n o f t h e s e a r e a s , h o w e v e r, f a c i l i t a t e d th e t r e n d to w a rd s c o n c e n t r a t i o n In th© economy a s a w h o le .

The n e t

e f f e c t o f t h e s e two I n f l u e n c e s on in v e s tm e n t o p p o r t u n i t y la a p p a re n tly in d e te rm in a te . Forei,< 5n In vme"''!'—* s tm ■e— n. c i t . , p# 101.

35.

Domar, oj). c i t . , p . 3 6 .

36.

H a n so n , A l v i n , o p . c i t . , p p . 5 6 3 -3 6 4 .

181

37.

S chum p© tor, J o s e p h A ., C a p i t a l i s m . S o c ia lis m a n d D em ocracy, C h a p te r 8 .

38.

I b i d ., p. 97.

39.

B a in , Jo e S . , uP r ic e end P ro d u c tio n Pol.' c i e o , r; i n E l l i s , Hbvjard S . , E d*, A S u rv ey o f C o n tem p o rary S co n o r,tica, p . 136.

40.

See C h a p te r I I I *

41.

Hocien, P a u l T . end F r i t z H a c h lu p , F ir.one jn g A m erican

42.

I b i d . , p p . 4 2 :- 4 2 3 .

43.

B u t t e r s , J . K e ith and. Jo h n L in t r ie r , E f f e c t o f F e d e r a l Taxes on G-rowing: E n t e r p r i s e .

44.

IJ^i,!,*

45.

S e e , f o r e x a m p le , J o n e s , I s r t i n V ., o| 5. c i t . , y . 7 1 .

46.

W illia m s o n , S . T . , and H e r b e r t H a r r i s , T rends in C o l l e c t i v e B a rg s i n l n g , C h a p te r 9 .

47.

I b i d * , p p . 1 0 8 -1 0 9 .

48.

H a n se n , A lv in I I . , F i s c a l P o lic y and B u sin e ss l y c l e s , -o. 3G4*.

9

P• 23.

182

C h a p te r V I I I COKCLTJSI OKS The p ro p o n e n ts o f econom ic m a t u r i t y a rg u e t h a t th e f u t u r e p r o s p e c t s f o r s u f f i c i e n t p r i v a t e in v e s tm e n t o u t l e t s to o f f s e t th e am ount o f s a v in g s fo rth c o m in g a t l e v e l s o f f u l l em ploym ent a r e n o t b r i g h t ,

ih e i s s u e s o f

t h i s t h e o r y oon be r e s o l v e d in tw o; th e a d e q u a c y o f th e p r o p e n s i t y to consum e, a n d th e a d e q u a c y o f in d u c e m e n ts t o In v e s t.

T h is c h a p t e r w i l l (1 ) sum m arize th e f i n d i n g s o f

th e p r e c e d in g c h a p t e r s , (2 ) d i s c u s s i n t e r r e l a t i o n s h i p s among th e c o n s t i t u e n t e le m e n ts o f th e th e o r y o f econom ic m a t u r i t y , a n d (3 ) a p p r a i s e t h i s th e o r y on th e b a s i s o f a v a i l a b l e e v id e n c e . The C onsum ption F u n c tio n V iith r e s p e c t to th e c o n su m p tio n f u n c t i o n , i - u s n e ts 1 d a t a o f t e n - y e a r a v e r a g e s , w ith e f i v e - y e a r o v e rla p to r e ­ d u ce th e e f f e c t s o f c y c l e s , i n d i c a t e s t h a t h i s t o r i c a l c o n ­ su m p tio n h a s m a in ta in e d a s t a b l e r e l a t i o n s h i p to incom e. I f t h i s r e l a t i o n s h i p i s m a in ta in e d in th e f u t u r e , a lth o u g h an I n c r e a s i n g p e rc e n ta g e o f in v e s tm e n t o u t l e t s w i l l n o t b e n e ed e d to f u r n i s h o f f s e t s f o r s a v i n g s , th e a b s o l u t e am ount o f I n v e s tm e n t n e c e s s i t a t e d w i l l bo g r e a t e r .

103

Hie p ro p o n e n ts o f econom ic m a t u r i t y h av e c la im e d t h a t t h e r e i s a c u r r e n t te n d e n c y f o r th e p r o p e n s i t y to s a v e to ris e *

P r o f e s s o r H ansen s t r e s s e s th e g ro w th o f i n s t i t u ­

t i o n a l i z e d p e r s o n a l s a v in g s and o f c o r p o r a t e s e l f - f i n a n c i n g a s f a c to r s in th is

tre n d *

A lth o u g h i t c a n n o t be demon­

s t r a t e d c o n c l u s i v e l y , i t i s p r o b a b le t h a t th e s e d e v e lo p ­ m en ts may e x e r c i s e some p r e s s u r e to w a rd s an i n c r e a s e in t h e r e l a t i v e am o u n t o f s a v in g s * T hese a r e , h o w e v e r, n o t th e o n ly f a c t o r s t h a t a f f e c t th e s a v in g s - c o n s u m p tio n r a t i o .

P o p u la tio n tr e n d s

h a v e a p p a r e n t l y e x e r c i s e d some I n f lu e n c e on th e p r o p e n s i t y to consum e*

The t r e n d to w a rd s u r b a n i z a t i o n w ould seem t o

h a v e te n d e d to r a i s e th e c o n su m p tio n f u n c t i o n , a s th e a v e r a g e en d th e m a r g in a l p r o p e n s i t y t o sa v e f o r th e fa rm p o p u l a t i o n a p p e a rs t o be h i g h e r th a n i s u rb a n d w e l l e r .

th e c a s e f o r th e

The c h a n g in g age c o m p o s itio n a l s o p r o b a b ly

e x e r c i s e s some i n f l u e n c e on th e c o n su m p tio n f u n c t i o n , a l ­ th o u g h i t i s a lm o s t im p o s s ib le to m easu re th e d i r e c io n o r th e m a g n itu d e o f t h i s i n f l u e n c e .

Hie i n c r e a s i n g p r o p o r t io n

o f th e p o p u l a t i o n re ^ c lrJ n g r e t i r e m e n t age would ten d t o i n ­ c r e a s e th e c o n su m p tio n f u n c tio n * A t th e same tim e , a d e c l i n i n g r a t e o f g ro v jth in p o p u l a t i o n w ould a l s o r e s u l t i n y oung c h i l d r e n c o m p ris in g a s m a l l e r p r o p o r t io n o f t h a t p o p u l a t i o n .

T h is f a c t o r w ould

make g r e a t e r s a v in g s on th e p a r t o f f a m i l i e s a p o s s i b i l i t y .

184

I t c a n n o t be d e m o n s tr a te d , h o w e v e r, the t th e p o s s i b i l i t y w i l l becom e a n a c t u a l i t y , b e c a u se f a m i l i e s w ith l e s s e r num bers o f c h i l d r e n may us© t h e i r i n c r e a s e d a b i l i t y sa v e to p ro m o te c o n su m p tio n s ta n d a r d s *

to

/-..nother p o p u la tio n

t r e n d t h a t w ould te n d to in f lu e n c e th e c o n su m p tio n f u n c t i o n i s th e i n c r e a s e i n th e p r o p o r t io n o f th e p o p u la tio n w hich i s i n th e a g e g ro u p s j u s t b e f o r e r e t i r e m e n t a g e .

I t is

p r o b a b le t h a t th e s e g ro u p s w i l l sa v e a l a r g e r p r o p o r t io n o f t h e i r Income th a n th e y o u n g e r g ro u p s . I t i s im p o s s i b l e , h o w e v er, to ta k e th e s e s e p a r a t e i n f l u e n c e s and r e n d e r ju d g m e n t a s t o t h e i r com bined e f f e c t on th e c o n su m p tio n f u n c t i o n a t th e p r e s e n t tim e .

Of s i g n i ­

f i c a n c e , h o w e v e r, i s th e f a c t t h a t th e age c o m p o s itio n o f th e p o p u l a t i o n , a lth o u g h c h a n g in g , h a s n o t r e s u l t e d , a s y © t, In a m arked i n c r e a s e i n th e p o p u la tio n beyond r e t i r e m e n t age.

F u r th e r m o r e , th e Inc r e e s c i n th e b i r t h r a t e d u r in g

th e " f o r t i e s ” w ould m i t i g a t e th e p o s s i b l e d e p r e s s iv e e f f e c t s on th e c o n su m p tio n f u n c t i o n o f a s m a ll e r p r o p o r t io n o f young .c h ild re n .

On b a la n c e , i t w ould appeal* th e n t h a t t h e c h a n g ­

in g ag© c o m p o s itio n o f th e p o p u la tio n h a s n o t a s y e t e x e r ­ c i s e d a m ark ed i n f l u e n c e on th e p r o p e n s i ty to consum e. She i n t r o d u c t i o n o f new p r o d u c ts may a l s o i n c r e a s e th e p r o p e n s i t y to consum e.

T h is w ould a p p o a r to be th e

c a s e f o r su c h d u r a b le co m m o d ities a s th e a u to m o b ile , w hich a p p a r e n t l y e x e r c i s e some i n f lu e n c e to w ard s i n c r e a s i n g th e

185

p r o p e n s i t y t o consum e, p a r t i o u l a r l y In th e d e c a d e s o f th e " tw e n tie s ."

I t i s , o f c o u r s e , c o n c e iv a b le t h a t s i m i l a r new

p r o d u c t s , s u c h a s t e l e v i s i o n s e t s , may o p e ra bo in a s i m i ­ l a r f a s h i o n a t th e pro son t tim e . S u ch r e a s o n i n g w ould i n d i c a t e th /-1 I t i s q u e s t i o n ­ a b l e to p o i n t t o one o f th e s e s e v e r a l f a c t o r s a s P r o f e s s o r H ansen h a s d o n e , a n d c o n c lu d e t h a t th e p r o p e n s i t y to c o n ­ sume I s d e c l in i n g *

U n le ss i t c a n bo c o n c l u s i v e l y demon­

s t r a t e d , w h ic h I s n o t th e c a s e , t h a t t h e r e i s a d e c l i n e i n th e h i s t o r i c a l c o n su m p tio n f u n c t i o n , t h e r e i s no r e a s o n to a l t e r th e c o n c lu s io n th« t o v e r a p e r i o d o f tim e , t h e r e I s a s t a b l e r e l a t i o n s h i p betw een c o n su m p tio n an d incom e* f t i i s d o e s n o t n e c e s s a r i l y d is p r o v e th e th e o r y o f econom ic m a t u r i t y , h o w e v e r, f o r w ith i n c r e a s e s In Income acco m p an ied b y ev en e s t a b l e c o n su m p tio n f u n c t i o n , th e a b s o l u t e m ag n i­ tu d e o f s a v in g s boccanes g r e a t e r , a n d , h o n c e , in v e s tm e n t o f f s e t s i n g r e a t e r am ounts w i l l a l s o be n e c e s s a r y * In ch aco acn ts to I n v e s t P o p u la tio n Qfrends A lth o u g h th e t r e n d in th e d e c l i n i n g r a t e o f popu­ l a t i o n g ro w th was r e v e r s e d d u r in g th e " f o r t i e s , ” m o st popu­ l a t i o n e x p e r t s b e l i e v e t h a t t h i s i s o n ly te m p o ra ry an d t h a t th e r a t e o f g ro w th w i l l a g a in d e c l in e in th e n e x t few

186 do c a d e s «

P r o f e s s o r H ansen h a s c la im e d t h ^ t t h i s w i l l d e ­

p r e s s p r i v a t e I n v e s tm e n t o p p o r t u n i t i e s by a l t e r i n g th e c o n s u m e r 1s demand to w a rd s l e s s " c a p i t a l - u s i n g " p ro d u c ts * S p e c i f i c a l l y , he c la im s t h a t a r a p i d l y g ro w in g p o p u la tio n w i l l demand more h o u s in g th a n a s lo w ly grow ing one* a s s e rtio n is

ih is

o f q u e s t i o n a b l e v a l i d i t y , a s th e demand f o r

h o u s in g i s a p p a r e n t l y r f u n c t i o n o f th e r » t e o f g ro w th o f f a m i l i e s r a t h e r th a n o f th e r a t e o f g row th o f p o p u la tio n a s such*

S3 n e e a l a r g e p a r t o f th e r e d u c t i o n :in th e g ro w th o f

p o p u l a t i o n d u r in g th e " t h i r t i e s ”

wps

o f f s e t by a d e c l in e

I n th e o v e ra g e f a m i ly s i z e , and s i n c e th e num ber o f f a m i l i e s h a s g r e a t l y i n c r e a s e d i n th e 11f o r t i e s , "

t h i s w ould w a r r a n t

th o c o n c l u s i o n th e t th e U n ite d S t a t e s i s n o t a t p r e s e n t " m a tu re ” w ith r e s p e c t to h o u sin g * N e v e r t h e l e s s , i t i s p ro b a b le th s t a d e c l i n i n g r a t e o f p e c u l a t i o n g ro w th w i l l e x e r c i s e some d e p re ss iv © i n f l u e n c e on p r i v a t e in v e s tm e n t o p p o r t u n it i e s *

E n tre p re ­

n e u r i a l a n t i c i p a t i o n s s h o u ld be more f a v o r a b l e w ith a r a p i d l y g ro w in g p o p u l a t i o n th a n w ith r s lo w ly g row ing o n e , f o r two rea so n s*

I n th e f i r s t p l a c e ,

r

l a r g e r f r a c t i o n o f th e o u t ­

p u t i s r e q u i r e d to f u r n i s h th e a d d i t i o n a l consum ers w ith n e c e s s i t y goods i n an economy w ith a r a p i d l y g ro w in g po ti­ l e t i o n , w h ile i n an economy whoso num bers *?re i n c r e a s i n g s lo w ly m ore r e l i a n c e m u st be p la c e d on h i g h e r s ta n d a r d s o f p e r c a p i t a c o n su m p tio n I f tlic r:

is

to an i n c r e a s e d o u t p u t .

187

B e ca u se th e demand f o r n e c e s s i t y ty p e goods i s l e s s e l a s t i c th a n tii© demand f o r s e m i- lu x u r y o r lu x u r y ty p e g o o d s , th e e n t r e p r e n e u r c a n f o r e c a s t w ith n o r e e a s o the demand f o r h i s p ro d u c ts .

I f th e a n t i c i p a t e d demand f o r n e c e s s i t y goods I s

s u b j e c t to l e s s e r r o r . I t i s l e s s l i k e l y t h a t th e e n t r e ­ p r e n e u r w i l l be l e d t o c u r t a i l p r o d u c tio n ?n d d e p r e s s em p lo y m en t• S e c o n d ly , i n a n econom y w ith a r a p i d l y g ro w in g p o p u l a t i o n , e n t r e p r e n e u r i a l m is ta k e s w hich r e s u l t in o v e r ­ p r o d u c tio n o f a com m odity w i l l bo re m e d ie d by an e x p an d e d m a r k e t i n a s h o r t e r p e r i o d o f tim e .

H en ce, c o n s i d e r a b le

I n v e s tm e n t c o u ld be u n d e rta k e n in a n t i c i p a t i o n o f a r i s i n g demand#

I n a n economy w ith a s lo w ly g ro w in g p o p u l a t i o n ,

in v e s tm e n t in a n t i c i p a t i o n o f demand i s l i k e l y to be tem ­ p e r e d b y th e f a c t t h a t th e i n c r e a s e d c a p a c i t y may n o t be u t i l i z e d f o r some p e r i o d o f t im e . T e r r i t o r i a l E x p a n sio n The p ro p o n e n ts o f econom ic m a t u r i t y view th e " p a s s i n g o f th e f r o n t i e r ” a s a n o th e r e le m e n t w ith a d v e r s e e f f e c t s on p r i v a t e in v e s tm e n t o p p o r t u n it y .

I f th e f r o n t i e r

I s d e f in e d a s r n a r e a w here l a b o r and c a p i t a l a r e s u b j e c t to I n c r e a s i n g r e t u r n s , c h a n g in g p o p u l a t i o n , t a s t e s , a n d te c h n iq u e s in^y w a r r a n t th e e x p l o i t a t i o n o f r e s o u r c e s t h a t a r e now u n d e v e lo p e d .

Y e t, i n c o m p a riso n w ith th e c o n d it i o n s

133

d u r i n g th© l a t t e r h a l f o f th e N in e te e n th C e n tu ry , th e s e o p p o r t u n i t i e s may be much m ore l i m i t e d ,

A b s o lu to p r o o f ,

h o w e v e r, th e t th e f r o n t i e r h a s p a s s e d o r i s p a s s in g i s a p p a r e n tly u n a v a lia b le I f t h e r e i s a l o s s r a p i d d e v e lo p m e n t o f new t e r ­ r i t o r i e s an d r e s o u r c o s , i t w ould a p p e a r to de p ro a a p r i va t e in v e s tm e n t o p p o r t u n i t i o s c h i e f l y th ro u g h i t s e f f e c t on e n tre p re n e u ria l a n tic ip a tio n s ,

l u r i n g an e r a when t h e r e

I s r a p i d p e n e t r a t i o n i n t o new t e r r i t o r i e s , th e a n t i c i p a t e d m a r g in a l e f f i c i e n c y o f c a p i t a l i s h i g h e r .

The e v e r -g r o w in g

n e e d f o r n e c e s s i t i e s o r s t a n d a r d - t y p e goods s t i m u l a t e d th e e n tr e p r e n e u r s t o exp an d t h e i r p l a n t s in a n t i c i p a t i o n o f th e i n c r e a s i n g demand*

Such a f a v o r a b l e c lim e to to expanded

o p e r a t i o n s i s n o t p r e s e n t when t e r r i t o r i a l and r e s o u r c e d e v e lo p m e n t i s l e s s r a p id * W ith r e s p e c t to f o r e i g n in v e s tm e n t, i t a p p e a r s im p ro b a b le t h a t t h i s con p ro v id e a n a d e q u a te p r i v a t e i n v e s t ­ m en t o u t l e t f o r

o re th a n a te m p o ra ry p e r i o d .

I n th e f i r s t

p l a c e , a h i g h e r am ount o f f o r e i g n in v e s tm e n t th a n d o m e s tic in v e s tm e n t i s r e q u i r e d t o a c h ie v e th e same r e s u l t s .

T his

i s p r i m a r i l y b e c a u se o f th e f a c t t h a t f o r e i g n In v e s tm e n t c a n o n ly s t i m u l a t e th e n o n -m o v ab le c a p i t a l goods i n d u s t r i e s (p r im a r ily c o n s tru c tio n ) i n d ir e c t ly .

S e c o n d ly , i f p r i v a t e

i n v e s t o r s a r e to r e c e i v e i n t e r e s t m l p r i n c i p a l re p a y m e n t on f o r e i g n in v e s tm e n t i n A m erican d o l l a r s , e i t h e r a s t e a d y

189

p r o g r e s s i o n o f f o r e i g n in v e s tm e n t i s n e c e s s a r y o r an i n ­ c r e a s i n g r^ t i o o f im p o r ts to e x p o r t s m ust be a c c e p t e d . The l a t t e r , a ssu m in g t h e c o n s ta n c y o f th e c o n su m p tio n f u n c t l o n , w ould a g g ra vs t e s a v in g s - i n ve a fcnen t ma la d j us tn e n t s . T e c h n o lo g ! c a 1 I n n o v a tio n s B ecause th e e le m e n ts o f e x te n s i v e e x p a n s io n , p o p u l a t i o n g ro w th , and t e r r i t o r i a l e x p a n sio n e x h i b i t some te n d e n c y to d e p r e s s p r i v a t e in v e s t: ©nt o u t l e t s , a d d i t i o n a l r e l i a n c e r u s t be p la c e d on t e c h n o l o g i c a l d e v e lo p m e n ts i f o f f s o t s to s a v in g s a r e t o be fo rth c o m in g from, p r i v a t e so u rc e s.

New i n d u s t r i a l d e v e lo p m e n ts , su ch a s th e r a i l r o a d

a n d a u to m o tiv e i n d u s t r i e s , h a v e p ro v id e d s i g n i f i c a n t am ounts o f in v e s tm e n t in th e p a s t .

As f a r a s p o t e n t i a l i t i e s r r© c o n ­

c e r n e d , t? e r e I s no r e a s o n t o b e l i e v e t h a t th e U n ite d S t a t e s i s f a c e d w ith a d e a r t h o f such .I n d u s t r i a l d e v e lo p m e n ts i n th e f u t u r e .

A tom ic e n e r g y , p l a s t i c s , s y n t h e t i c r u b b e r and

s y n th e tic f ib r e s

y b e c i t e d a s exam ples o f p o t e n t i a l

i n d u s t r i a l d e v e lo p m e n ts w hich c o u ld p r o v id e l a r g e am ounts o f p riv * t e inv© s tmen t . Ilor i s th e p r e d i c t i o n

t h e r e a p p a r e n t l y much e v id e n c e to w a r r a n t

t h a t t h e r e i s © tr e n d to w ard s " c e p i t a 1 - s a v i n .s ”

I n n o v a tio n o r t h r;t s u c h a tr e n d w ould h- vo u n f a v o r a b le e f ­ f e c t s on p r i v a t e in v e s tm e n t o p p o rtu n e t y .

The e m p i r i c a l e v i ­

d en ce a v a l l a b i o , a 1 th o u g h i n d i c a t i n g n d e c l i n e i n th e am ount o f I n v e s te .e n t p e r u n i t o f o u tp u t d u r in g th e " tw e n tie s * and " th ir tie s ,"

d o e s n o t e s t a b l i s h thsn

th e phenomenon made I t s

190 a p p e a ra n c e d u r i n g th o s e d e c a d e s .

F u r th e rm o r e , I t i s n o t

o b v io u s t h a t e t r e n d to w a rd s c a p i t a 1 - s a v in g in n o v a tio n v o u ld d e p r e s s p r i v a t e In v e s tm e n t o p p o r t u n i t i e s .

I n f a c t , such, a

t r e n d w ould seem , in a n d o f I t s e l f , t o r a i s e

th e m a r g in a l

e f f i c i e n c y o f c a p i t a l an d h e n c e s t i m u l a t e in v e s tm e n t. H ow ever, th e d o u b t f u l v a l i d i t y o f th e s e a rg u m e n ts a d v a n c e d by th e p ro p o n e n ts o f econom ic m a t u r i t y doo 3 n o t mean t h a t t h e r e i s no b a s i s f o r a ssu m in g th r t t e c h n o lo g i c a l in n o v a t i o n s may f u r n i s h In a d e q u a te p r i v a t e in v e s tm e n t o u t l e t s i n th e f u t u r e .

C u r r e n t i n s t i t u t i o n a l d e v e lo p m e n t, p a r t i ­

c u l a r l y monop - i y , may w e ll impede f u t u r e t e c h n o l o g i c a l i n n o ­ v a tio n s ,

T I s d o e s n o t o v e rlo o k th e f a c t t h a t l a r g e - s c a l e

e n t e r p r i s e s may f i n a n c e e x te n s i v e r e s e a r c new I n v e s tm e n t p o s s i b i l i t i e s .

p r o j e c t s to f i n d

N e v e rth e le s s , th e ir a b i l i t y

t o p r o t e c t th e m s e lv e s from l o s s e s th ro u g h th e o b s o le s c e n c e o f e x i s t i n g p l a n t and f a c i l i t i e s b e c a u se o f new t e c h n o lo g i c a l d e v e lo p m e n ts may r e s t r i c t p r i v a t e in v e s tm e n t o u t l e t s . L ab o r u n io n s a l s o e x h i b i t some I n f lu e n c e on th e e x p lo ita tio n o f te c h n o lo g ic a l d e v e lo m o n ts . co n stru c tio n ,

I n a r e a s su c h a s

vjlioro th e t r a d e u n io n d ev elo p m e n t has. r e s u l t e d

I n a s i g n i f i c a n t d e g re e o f m onopoly pow er, t h e i r p a s t b e h a ­ v i o r h p s r e v e a l e d a r e l u c t a n c e to a c c e p t t e c h n o lo g i c a l In n o ­ v a ti o n s in th e i n d u s t r y .

T his w ould h a v e an u n f a v o r a b le e f ­

f e c t on p r i v a t e in v e s tm e n t o p p o r t u n it y . I t

I s a l s o p r o b a b le

tir

t c u rre n t p o l it i c a l fa c to rs

may im p in g e upon p r i v a t e in v e s tm e n t.

d i i s seem s to be

191

p a r t i c u l a r l y t r u e w ith r e a p o e t to th e e f f e c t o f th e c o r ­ p o r a t i o n i-.come t a x on new an d s m a ll b u s in e s s e n t e r p r i s e s , h o t o n ly d o e s I t r e s t r i c t th e d e v e lo p m e n t o f th e s e now i n d u s t r i e s and h e n c e p r o v id e s l e s s in v e s tm e n t o u t l e t s , h u t i t a l s o e n c o u ra g e s c o n c e n t r a t i o n , w h ich lies an u n f a v o r a b le e f f e c t on p r i v a t e in v e s tm e n t o p p o r t u n i t i e s . I n t e r r e l a t l o n s h l p s Apong th e C o n s t i t u e n t E le m e n ts C a r e f u l c o n s i d e r a t i o n o f th e s e c o n s t i t u e n t p a r t s w o u ld I n d i e s c-e t h r .t t h e r e i s an e le m e n t o f m u tu a l i n t e r ­ d ep en d e n ce among them .

H ence, i t i s d i f f i c u l t to « d e q ir t e l y

t e s t th e th e o r y o f econom ic m a t u r i t y by m e re ly i s o l a t i n g th e s e p a r a t e e f f e c t s on in v e s tm e n t o p p o r t u n i t i e s o f p o p u la ­ t i o n t r e n d s , t e r r i t o r i a l e x p a n sio n and t e c h n o l o g i c a l d e v e l opmcn t s . E x te n s iv e an d I n te n s iv e E x p an sio n Of p a r t i c u l a r n o te i s th e e f f e c t o f a d e c l i n e in th e r a t e o f e x te n s i v e e x p a n s io n ( p o p u ln tio n gro w th « n l t e r ­ r i t o r i a l e x p lo its tic n )

on t e c h n o l o g i c a l d e v e lo p m e n ts .

If

5 1 I s th e e s s e , a s t h i s s tu d y c o n te n d s , th s t o d e c l in e i n e x te n s i v e e x p a n s io n h a s u n f a v o r a b le e f f e c t s on e n t r e p r e n e u r ­ i a l a n t i c i p a t i o n s , th e i n c e n ti v e to e x p l o i t t e c h n o lo g i c a l d e v e lo p m e n ts c r y w e ll bo re d u c e d .

I t h a s been d e m o n s tra te d

t h a t p o p u l a t i o n g ro w th a n d t e r r i t o r i a l e x p a n s io n enhanced

19& e x p a n s io n a r y e f f e c t s o f th e r a i l r o a d i n d u s tr y *

T here i s

r e a s o n to b e l i e v e t h a t c u r r e n t l y l e s s In v e s tm e n t i s u n d e r ­ ta k e n i n a n t i c i p a t i o n o f demand.

H ence, te c h n o lg o ic a 1

d e v e lo p m e n ts may n o t be e x p l o i t e d w ith Hie r a p i d i t y t h a t th e y w ere i n th e p a s t*

^Viis w ould ham per th e a b i l i t y o f t e c h ­

n o l o g i c a l in n o v a tio n s t o p r o v id e in v e s tm e n t o p p o r t u n i t i e s o r to i n c r e a s e th e p r o p e n s i t y tc consume th ro u g h Hie d e ­ v e lo p m e n t o f now p ro d u c ts * I n t u r n , p a s t t e c h n o l o g i c a l d e v e lo p m e n ts h a v e e n ­ c o u ra g e d e x t e n s i v e e x p a n s io n , p a r t i c u l a r l y t e r r i t o r i a l and r e s o u r c e d e v e lo p m e n t.

T h is may b e s t be i l l u s t r a t e d w ith

r e f e r e n c e to th e r a i l r o a d i n d u s t r y .

The ex p an s i o n

i n d u s t r y , i n a n t i c i p a t i o n o f demand and w e ll a h e a d t r a f f i c n eed s, f a c ilita te d

o f th is o f

th e d e v e lo p m e n t o f w e s te rn t e r r i ­

to rie s . P o p u la tio n Grow Hi an d T er r 1 t o r la 1 Kxps n s i on T here i s a p p a r e n t l y a m u tu a l in te r d e p e n d e n c e b e ­ tw een th e r a t e o f p o p u l a t i o n g ro w th a n d t e r r i t o r i a l d e v e lo p ­ m e n t.

^ n i s may be s e e n , in th e c a s e o f th e U n ite d S t a t e s ,

b y r e f e r e n c e to im m ig r a tio n .

A t th e tim e t h a t th e economy

was r a p i d l y e x p a n d ln g w e stw a rd , th e o p p o r t u n i t i e s from sue! e x p a n s io n a t t r a c t e d l a r ;e num bers o f Im m ig ra n ts , p a r t i c u l a r l y frc m th e Surope& n c o u n t r i e s .

T h is augm ented th e r r te o f

p o p u la tio n g ro w th in th e U n ite d S t a t e s ,

193 She ra t© o f p o p u l a t l n g ro w th In th e w ore d e v e l ­ oped a r e a s a l s o f a c i l i t a t e d

t e r r i t o r i a l e x p a n s io n .

T h is may

b e s e e n by r e f e r e n c e t o th e c o n c e p t o f d im in is h in g r e t u r n s # Ur> to some p o i n t , an i n c r e a s i n g p o p u la tio n in © c e r t a i n a re * w ould be ficcom pan*ed b y a r i s e i n t o t a l an d p e r c a p i t a i n ­ com e, b u t in tim e th e i n c r e a s e in num ber ( i f c o n fin e d to one a r e a ) w ould g iv e r i s e

to a d e c l in e i n per* c a p i t a incom e.

H e n c e , th e i n c e n t i v e to m ig r a te to new a r e a s woul'; be e s t a b ­ lis h e d .

I n t u r n , th e m ig r a tio n o f p o p u la tio n w ould n o t o n ly

p r o v id e in v e s tm e n t in new a r e a s b u t a l s o f u r n i s h a d d i t i o n a l o p p o r t u n i t i e s f o r in v e s tm e n t I n th e more s e t t l e d a r e a s . T o r r i t o r l a 1 E x p lo ita tio n end I n s tltu tlo n a 1 R ig id itie s T here i s a l s o some in te r d e p e n d e n c e b etw een th e r a t o o f d e v e lo p m e n t o f f r o n t i e r a r e a s a n d i n s t i t u t i o n a l r i g i d i t i e s . T h a t t e r r i t o r i a l e x p a n s io n h a d some e f f e c t on th e p r e v e n tio n o f some mon ope I s t i c e le m e n ts i s d e f i n i t e l y i n d i c a t e d w ith r e f e r e n c e to th e la b o r m ovem ent.

As lo n g a s new la n d s were

a v a i l a b l e , th e d i s c on te n te d l a b o r e r s c o u ld e s c a p e th e u n ­ d e s i r a b l e c o n d it i o n s by h o m e s te a d in g in th e w e s t.

W ith th e

e s c a p e v a lv e c l o s e d , th e movement to w ard s l a b o r c o n c e n ta x a tio n was s t i m u l i t e d . The r a p i d e x p a n s io n w e stw a rd , h o w e v er, a p p a r e n t l y fa c ilita te d

th e d e v e lo p m e n t o f i^ c h n lq u e s t h a t a n te n e e d i n d u s ­

t r i a l c o n c e n tr e t i o n .

^he h e a v y demands o f c a p i t a l o f th e

r a i l r o a d s a n d m a s s - p r o d u c tio n i n d u s t r i e s prom oted th e

194

c o r p o r a to d e v e lo p m e n t.

T h i$ , i n t u r n , made p o s s i b l e f u r ­

t h e r c o n c e n t r a t i o n s o f econom ic pow er. The p r e s e n c e o f m o n o p o lis tic e le m e n ts in t u r n , im p ed es th e im m ed iate u t i l i z a t i o n o f nev; r e s o u r c e s .

B ecause

new r e s o u r c e s com pete w ith th e p r o d u c ts o f e x i s t i n g r e s o u r c e s , th e a b i l i t y In c o n c e n t r a t e d I n d u s t r i e s to p r o t e c t I n v e s t e d c a p i t a l fro m l o s s e s w ould impede th e r a p i d e x p l o i t a t i o n o f th e neYj r e s o u r c e s a n d l e s s e n t h e i r f a v o r a b l e e f f e c t s on in v e s tm e n t o p p o r t u n i t y . An A p p r a is a l T h ese i n t e r r e l a t i o n s h i p s i n d i c a t e th e h i g h l y com­ p l e x n a t u r e o f th e c o n s t i t u e n t e le m e n ts o f th e th e o r y o f eco n o m ic m a t u r i t y .

I n th e f i n a l a n a l y s i s , e x i s t i n g e v id e n c e

a p p e a r s in c a p a b l e o f p ro v in g o r d i s p r o v i n g t h i s th e o r y a s a w h o le .

H ow ever, i t i s p o s s i b l e t o p a s s Judgm ent on s e v e r a l

se g m e n ts o f th e a n a l y s i s * A v a i la b le e v id e n c e d o es n o t J u s t i f y th e a rg u m e n t o f th e t h e o r y o f e c o m m ic m a t u r i t y c o n c e rn in g a d e c l i n i n g h i s t o r i c a l co n su m p tio n f u n c t i o n .

T h is d o es n o t , h o w e v e r,

rem ove th e p ro b lem o f s a v i n g s - i n v e s tm e n t m a la d ju s tm e n ts , ®s i t i s p r o 1a b l e t h a t th e a b s o l u t e am ount o f s a v in g s w i l l i n ­ c r e a s e w ith an i n c r e a s i n g t r e n d i n n a t i o n a l o u t p u t .

Hor

d o e s t h e r e a p p e a r to b e a v a l i d b a s i s f o r th e a rg u m e n t th* t

195

c u r r e n t p o p u l a t i o n t r e n d s e x e r c i s e a d e p r e s s iv e e f f e c t on th e demand f o r h o u sin g *

U n t i l t h e r e i s a t r e n d to w a rd

a d e c l i n e i n th e a b s o l u t e r a t e o f grow th o f f a m i l i e s , t h i s a rg u m e n t a p p a r e n t l y d o e s n o t a p p ly to th e A m erican econom y. A p o r t i o n o f th e technologic** 1 a rg u m e n t o f th e p ro p o n e n ts o f econom ic m a t u r i t y i s a l s o o f d o u b t f u l v a l i d i t y . a p p e a r s to be l i t t l e

T h e re

J u s t i f i c a t i o n f o r p r e d i c t i n g t h a t th e

U n ite d S t a t e s i s f a c e d w ith a " d e a r t h o f g r o a t new in d u s ­ tr ie s ."

I n a d d i t i o n , e m p i r i c a l s t u d i e s do n o t s u b s t a n t i a t e

th e c la im t h a t t h e r e i s a t r e n d to w ard s c a p i t a l - s a v i n g s in n ova t i o n s • The v a l i d i t y o f th e " p a s s in g o f th e f r o n t i e r " a rg u m e n t o f th e th e o r y o f econom ic m a t u r i t y I s a p p a r e n t l y in d e te rm in a te .

E x p l o i t a t i o n o f new r e s o u r c e s and t e r r i t o r y

n o t o n ly d e p e n d on d i s c o v e r y b u t a l s o on t e c h n o lo g i c a l i n ­ n o v a tio n #

One c a n n o t p r e d i c t w h at a d v a n c e s w i l l be made

t h a t may s t i m u l a t e e x p l o i t a t i o n o f e x i s t i n g b u t u n u sed re so u rc e s. Two a s p e c t s o f th e th e o r y do a p p e a r to p o s s e s s v a lid ity .

F i r s t , i t I s p ro b a b le t h a t th e d e c l i n e In e x te n ­

s i v e e x p a n s io n ( d e c l i n e in th

r a t e o f p o p u la tio n g ro w th

a n d a p o s s i b l e p a s s i n g o f th e f r o n t i e r ) w i l l e x o r c i s e an u n f a v o r a b le i n f lu e n c e on e n t r e p r e n e u r i a l a n t i c i p a t i o n s , w h ic h te n d s to re d u c e p r i v a t e in v e s tm e n t.

S e c o n d ly , th e

p r e s e n c e o f m o n o p o lis tic e le m e n ts in o u r economy seem s to e x e r c i s e some d e p r e s s iv e e f f e c t on p r i v a t e I n v e s tm e n t.

196

I t I s a p p a r e n t t h a t th e re m o v a l o f th e i n v a l i d e le m e n ts w eakens th e arg u m e n t o f th e th e o r y o f econom ic m a tu rity .

The b a s i s f o r P r o f e s s o r H a n s e n 's c o n c lu s io n t h a t

th e econom y w i l l e x p e r ie n c e d e p r e s s io n s w ith g ro w in g f r e ­ q u e n cy a n d i n t e n s i t y , u n l e s s c o m p e n sa to ry a c t i o n I s ta k e n , i s th e b e l i e f t h a t a l l o f th e s e f a c t o r s hav e c o in c id e d h i s ­ to ric a lly .

i h e i r a d d i t i v e e f f e c t s a r e a l l e g e d to h * v e c r e a t e d

s o r I one as v ln g s -ln v o s trnen t m a la d j u s tmcn t s . B ut th e i n v a l i d i t y o f s e v e r a l e le m e n ts d o e s n o t n e c e s s a r i l y d e s t r o y th e th e o r y o f econom ic m a t u r i t y .

In

f a c t , i t i s p o s s i b l e H is t th e e f f e c t s o f th e r e m a in in g e le m e n ts may be o f s u c h c o n se q u e n c e t h a t th e p r e d i c t i o n s made b y P r o f e s s o r H ansen w i l l b e s u b s t a n t i a t e d . a te ly ,

T Tnfortun-

t h e r e seem s t o be no way t o m ea su re th e m a g n itu d e o f

th e e f f e c t s o f m o n o p o lis tic e le m e n ts and l e s s f a v o r a b le e n t r e p r e n e u r i a l a n t i c i p a t i o n s on p r i v a t e in v e s tm e n t o p p o r­ tu n itie s * H e n ce , th e " tr u th * ' a p p e a rs to l i e betw een th e e x tre m e p o s i t i o n assum ed by th e d o c t r i n a i r e p ro p o n e n ts o f econom ic m a t u r i t y a n d b y th o s e who i n s i s t th e r e i s no s a v in p s - i n v e s trae n t p ro b lem •

1 9 0 -A

Hie re m a in in g e le m e n ts o f th e t h e o r y o f econom ic m a t u r i t y p lu s th e e f f e c t s o f t a c t i o n

p o l i c i e s a n d l a b o r u n io n

a c t i v i t i e s on th e in d u c e m e n t to I n v e s t w ould I n d i c a t e t h a t p r i v a t e I n v e s tm e n t o u t l e t s w i l l n o t be s u f f i c i e n t to a b s o r b s a v i n g s a t a l l tim e s .

W hether th e s e c o n d it i o n s w i l l be

te m p o ra ry o r c h r o n ic I s a n Ind© torm inat@ q u e s t i o n .

Assum­

in g t h e e x i s t i n g I n s t i t u t i o n a l s t r u c t u r e , a f u r t h e r doc l i n o i n t h e r a t e o f e x to n s Iv e e x p a n s io n a p p a r e n t l y w o u ld i n t e n s i f y th e p ro b le m . B ut i t m u st b© rem em bered t h a t t h e th e o r y o f eco n om ic m a t u r i t y r e f e r s t o th e a b i l i t y o f p r i v a t e i n v e s t ­ m en t o u t l e t s t o a b s o rb s a v i n g s .

A ssum ing a “l a i s s e a - f a I r e "

g o v e rn m e n ta l p o l i c y , th e a u th o r b e l i e v e s t h a t f u l l em ploy­ m en t w ould bo i n c r e a s i n g l y d i f f i c u l t t o a c h i e v e .

The e v e n ts

o f th e p r e s e n t t h a e , h o w e v er, do n o t i n d i c a t e t h a t s u c h a g o v e rn m e n ta l p o l i c y w i l l a p p e a r i n th e n e a r f u t u r e .

I t is

p o s s i b l e t h a t th e e f f e c t o f g o v e rn m e n ta l a c t i o n w i l l e n ­ t i r e l y e l i m i n a t e th e p roblem o f s u f f i c i e n t in v e s tm e n t o u t l e t s to a b s o r b s a v i n g s .

The e x p e r ie n c e o f c o n tin u e d

f u l l em ploym ent b y su ch m ea n s, h o w e v e r, w ould n o t n e g a te th e t h e o r y o f econom ic m a t u r i t y .

I t w ould o n ly I n d i c a t e

t h a t a p p r o p r i a t e a c t i o n h a s b een ta k e n to a l l e v i a t e th e p o s s i b l e r e s u l t s o f s u c h a c o n d itio n *

197

8EBLX0GMFHY Books rnw^ i m+mm-

*1

A c h in s t© In , A s h e r , I n t r o d u c t i o n to B u s in e s s C y c le s , Hew Y o rk Thomas Y . C ro w e ll C ‘T$$0‘* 1 tn:'' ri-irr" B e e rd , C h a r le s A# and M ary R. B e a rd , A B a s ic H i s t o r y o f th e U n ite d S t a t e s , P h i l a d e l p h i a , The B la k ls to n Company, 19 4 4 . B r a t t , E lm er C l a r k . B u s in e s s C y c le s an d F o r e c a s t i n g , 3 rd e d i t i o n , C h ic a g o , R ioB S'rT T jr I S & ; K . T m ----B u ch anan, Norman S . , I n t e r n a t l o n a 1 In v e s tm e n t a n d D om estic W e lf a r e . New Y o rk , H enry T I o l t "iihdTtJorap©ny, I942T**™ B u t t e r s , J* K e i th and Jo h n L l n t n e r , E f f e c t o f F e d e r a l T axes on Gr owing E n t e r p r i s e s . Bos t o n . D i v i s i on ’o f ^ e s e a r c K , fe’riaduk t e S c h o o l o f m s i n e s s A d m i n i s t r a t i o n , H a rv a rd U n i v e r s i t y , 1945* D e n n is , L aw re n ce , The Dynamics o f Viter and P .ev o liitic-n , 2nd e d i t i o n , The W eekly 1f o r e i g n L e t ^ e r i D e u s e n b e rry , Jam es S . . Incom e .S a y in g and th© T h eo ry o f Consum er B e h a v io r, C am b rid g e , ^ a s s S r v a F d U n lv ersT Iiy A rea's, I94'9r* D sw h u rst, J . F r e d e r i c a n d A s s o c i a t e s , A m e ric a *s H eeds a n d R e s o u r c e s , New Y o rk , Th© T w e n tie th C e n tu ry FunS., 1945 . ' Dobb. M a u ric e , S t u d i e s I n th e D e v e lo m e n t c f C a p it a l i s m , Hew Y o rk , I n t e r n s fcTona l*TfobYf s h e r s , 19T 47. D o u g la s , P a u l H*, The Th eory o f W ages, New Y o r k , The Mac­ m i l l a n C o ., 1934* r,rr" Economic Pie p o r t s o f th e P r e s i d e n t , T h e, 1949 Y o rk , lla W b u r C S p ace a n d ^ om 'pany1D 4"9.

t i o n , Hew

E d w ard s, G eorge W ., The E v o lu tio n o f f i n a n c e C a p i t a l i s m . Hew Y o rk , Longman* Green" ancTCompany / “I h 's S ." ” E l l i s . Howard S . , D d i t o r , A S u rv ey o f C on tem p o rary Econom ic T h o u g h t, P h i l a d e l p h i a , The'“Sl& Iciaton Company", 1§4SV

198 Fa b r l e a n t , Solom on, C a p ita l Consumption and. A diustenent, Haw Y ork, N a t io n a l B u r e a ^ o T ITooHomrc"l^ r a ar c !C 1W 8 :--------P e l l n e r , W illiam J . , M onetary P o l i c i e s and F u l l Employment, B e s fc s ls y , U n iv e r s it y ------------------------------------F in e , Sherwood K«, P u b lic Spending and. Postwar isoopcmle, P o l i c y , Hew Y ork, C'ol^Vfa"rt e l v e r s i l y ^ r e s &,' 1944". G len d ay, Hoy, The F u tu re o f Economic S o c i e t y . London, M acm illan and $ o T ,T M 4'* H a b e r le r , G o t t f r ie d , P r o s p e r ity and D e p r e ssio n , 3rd e d i t i o n , Lake S u c c e s s , Hew York,” Tftii te a H at!oris, jL$4$... H anson, A lv in H*. Economic P o lic y and F u l l Employment, Hew Y ork, KcGraw H i l l T C oS ^ T H a p a n y 7 i9 lT r------------ “— *------H ansen, A lv in H ., F i s c a l P o lic y and B u sin e ss C y c le s , Hew Y ork, W. W* Hor ton and 'Company, l'§ 4 l. H ansen, A lv in H#, F u l l R ecovery or S t a g n a tio n , Hevi; Y ork, VI. Vi. Horten and C om ^ ny^ 'T ^ 'S. H a r r is , Seymour, E d it o r , Post-W ar Economic P roblem s, Hew Y ork, HcGraw H i l l Book C oT T T B lS T -----------------------------H ic k s . J* B . , V alue and C a p it a l, 2d E d it io n . O xford. Ihe C larendon P r l s s T m S : ------- K------Homan, Paul T. nd F r i t z M achlup, E d it o r s , F in a n cin g American P r o s p e r it y . Hew Y ork, The Tvventleth* C entury Fund, T o w :— J o n e s , M artin V ., S e c u la r Trends and I d le R e so u rc es, C hi­ c a g o , U n iv e r s it y o f C E icago T resQ , 1944V "r "r ......' K ey n es, Jo h n Maynard, rXhe G eneral Theory o f JSnployment I n t e r e s t and Money, Hew 'York, Harcour fc B r a c e ^ c b V ,” 1 § 3 6 . K u zn et3, Sim on, n a t io n a l .Product S in co 1 8 6 9 , Hew York, H a tio n r l Bureau oY^'Eccncki.c' u o s e a r c li/ L even, M au rice, H arold G. M oulton, and C lark Warburton, America* a C a p a city to Consume, W ashington, B . C. , 1 9 3 4 . M e t z le r , L loyd A. e t a l . , Incom e, Employment, and P u b lic P o l i c y , Hew Y ork, W. W. Ho r ton a hdTUcmpeny, 1948. M ou lton , H arold G ., C o n t r o llin g F a c to r s In Economic p e v e lo m e n t , W ashington, D• C . , The"SrockYHg I n s t i t u t i o n , 1 0 4 9 7 .....

199 M y rd a l, G u n n a r, Pop u l a t i o n . C a m b rid g e, M esa#, H a rv a rd U n i v e r s i t y P r e s s , i9 4 0 # 1 ' H o u rs e , Edwin G# a n d A s s o c i a t e s , A m e ric a fs C a p a c ity to P r o d u c e . W ashing b n , D .C ., The Br ooM S gs ’in s t l t u t i on*7*^9 5 4 . Ee&daway, W illia m B ., The -oonomics o f & D e c lin in g P o p u l a t i o n , L ondon, G eorg © A lle n a n d ^ h w in i" 19S9H. R o b b in s, Roy U • , Our la n d e d H e r ita g e * P r i n c e t o n , P r in c e to n U n i v e r s i t y P r e s s , ' ^ -------------------- -S c h u m p e te r, J o s e p h A ., Bus In© a a C y c le s , V o l. XX, Hew Y o rk , -5cGrew H i l l Book Comp&ny, 1939 * S o h m p e t e r , J o s e p h A ,, C a p i t a l i s m . S o c ia lis m a n d B em ooracy, find e d i t i o n , Hew Y o rk , H ferp © r "and B r o t h e r s , 11W 4ff* Sw anson, S n s t W. and % ierso n P. S c h m id t, Sconcm lo S ta g n a tio n o r P r o g r e s s » Hew Y o rk , MeGrew H i l l Book Gompany T e rb o rg h , G e o rg e , The Bogey o f Economi c M a t u r i t y , C hicag o M achine a n d A l l i e d 7'T r b c f u e l I n s t l l m b o , l 9 f4lK. ’ W illia m s o n , S . T. and H e r b e r t H a r r i s , T rends in C o l l e c t i v e B a r g a i n ln g . Hew Y o rk , The T w e n tie th C e h tu i^ ^ u n d ,1 9 4 5 . W rig h t, D avid M cCord, The C re a t i o n o f Pur c h a s i n g Power . Cambriclg©, M a s s ., HervarcT W iv b r s lty " * P r e s s , ~T 9 4 2 • P e r i o d ic a l s

tmmmmesmssesm

A d l e r , Hans A ., A b s o lu te o r R e la tiv e 3b t a o f D e c lin e in P o p u l© tlo n G row tft, ” Q u a r te r l y J o u r n a l o f E co n o m ics. 5 9 s 6 2 6 -6 5 4 , A u g u s t, 1 9 4 5 . " " A ndrew s, P . W. S . , ”A F u r t h e r I n q u i r y i n t o t h e E f f e c t s o f R a te s o f I n t e r e s t , ” O xford Economic P a p e r s , 3 s 3 2 -7 3 , F e b r u a r y , 1940. Chamber l a i n , H e l l W ., ” P r o f e s s ox* h s n s e n ’s F i s c a l P o lic y end th e D e b t,” A m erican Econom ic R eview , 3 5 : 4 0 0 -4 0 7 , J u n e , 1945* C o ir:, G e ra ld , ‘’Comments on W. I . K ings ’Are Wo S u f f e r in g From Econom ic M a t u r i t y ? ’ ” J o u r n a l o f P o l i t i c a l Economy, 4 7 : 1 1 4 -1 1 8 , F e b r u a r y , 194TT Domer, E v se y I>., nB x p a n sio n and E m ploym ent,” Economic R eview , 3 7 : 3 4 -5 5 , M arch, 1947.

A m erican

200 B i l l s , Howard S . , "M o n etary P o l i c y a n d I n v e s t m e n t ,” Amer­ i c a n co n cm ic Be v ie w . 30* 2 7 - 5 8 , M a rch , 1940, F e l i n e r s W illia m J * , "The T e c h n o lo g ic a l A rgum ent o f th e S t a g n a t i o n T h e s i s , " Q u a r te r l y J o u r n a l o f E co n o m ics, 5 5 1 6 3 8 -6 5 1 , A u g u s t, 19& T : ----------------------------------G e re n , P s u l , "The C o n t r ib u t i o n o f L i f e I n s u r a n c e to th e S a v in g s S tr e a m ," J o u r n a l o f P o l i t i c a l Economy, 5 1 i 3 3 -5 2 , F e b r u a r y , 1043* H a n se n , A lv in H ., "Bconcm ic P r o g r e s s a n d D e c lin in g P o p u la ­ t i o n G ro w th ,” A m erican Econom ic Heview 2 9 ; 1 - 1 5 , r'*»reh, 1939* H a n se n , A lv in I I ., "Some K o to s on T e r b o r g h ’s *The Bogey o f Econom ic M a t u r i t y , ’ " Review o f Econom ic S t a t l s t i c s , 28s 1 3 -1 7 , F e b r u a r y , 1946* .11 g i n s , B enjam in H ., "The D o c trin e o f Econom ic M a t u r i t y , ” A m erican Econom ic R eview , 3 6 1 1 3 3 -1 4 1 , !I* rc h , 1 9 4 6 . Hinsh&w, R a n d a ll, " F o re ig n I n v e s tm e n t a n d A m erican Em ploy­ m e n t," A m erican -Conomlc R eview , 3 6 : 6 6 1 -6 7 1 , May, 1946* J o h n a o n , K o r r i s 0 . , "The P a r e t o Law ," Review o f Econom ic S t a t i s t i c s , 1 9 : 1 9 -2 6 , F e b r u a r y , 1937* K s ld o r , N i c h o la s , "R eview o f ’F i s c a l P o lic y and B u s in e s s C y c le s ’ - A lv*n H a n se n ," Econom ic J o u r n a l * 5 3 : 1 0 7 -1 1 1 , A p ril, 1943. K in g , ft i l l f o r d I . , "A re We S u f f e r i n g fro m Econom ic F.a t u r i t y ? " , J o u r n a l o f P o l i t i c a l Economy, 4 7 : 6 0 9 -6 2 2 , O c to b e r, 1 9 3 9 . K n ig h t, F ra n k H ., " S o c i a l S cien ce and th e P o l i t i c a l T re n d ," Uni v e r s I t y o f T o ro n to Q u a r t e r l y , 3 : 4 0 7 -4 2 7 , J u l y , 1 9 3 4 . K o n d r a t l o f f , IT ilio lo i D ., "The Long ftpyes In Economic L i f e , " Review o f Econom ic S t a t i s t i c s . 1 7 s 1 0 5 -1 1 6 , Hovem ber, 1 9 3 5 . L u b e l l , H a r o ld , " B f f o o ts o f R e d i s t r i b u t i o n o f Incom e on C o n su m e rs’ E x p e n d i tu r e s ," American Economic R eview , 3 8 : 1 5 7 -1 7 0 , M arch , 1947. Re©d, H. L . , "Sconom ls t s on In d u s t r i e 1 S ta g n a t i o n , " J o u r m 1 c f P o l i t i c ? ! Be on a n y , 4 8 1 2 4 4 -2 5 .', A p r i l , 1940. S c h i f f , E r i c , " F a m ily Sis© a n d R e s i d e n t i a l C o n s t r u c t i o n ," A m erican Econom ic R eview , 3 6 : 9 7 -1 1 2 , M arch , 1 9 4 8 .

201 S h a c k le * 0* I*. 3* , " I n t e r e s t Ha te e an d th e P ace o f I n v e s t ­ m e n t ,” Econom ic J o u r n a l , 56s 1 - 1 7 , M arch , 1 9 4 6 . S im o n a, H en ry C . , "H ansen on F i s c a l P o l i c y , ” Q u a r te r l y J o u r n a l o f E c o n o m ic s, 5 0 : 1 6 1 -1 9 4 , A p r i l , 19427” S l i c h t e r , Suranor H ., "How B ig i n 1980” , A t l a n t i c , 184s 3 9 - 4 3 , Kovembor , 1949 • S n y d e r, C a r l , " C a p i t a l S u p p ly and n a t i o n a l Vie11 - B e in g ,” A m erican Econom ic R eview , 2 6 : 2 0 0 -2 0 9 , J u n e , 1 9 3 6 . S ta u & In g o r, H ., ”S ta t l o n e r y P opula t i o n - S t e g n a n t S conaay ?* , S o c i a l I ; e s e a r c h , 6 : 1 4 1 -1 5 3 , May, 1939. S w eezy, A la n , ” P opula t i o n Grow th a n d In v e s tm e n t O p p o r t u n i ty ,” Q u a r t e r l y J o u r n a l o f E co n o m ics. 55s 6 4 -7 9 , N ovem ber, 1 9 4 0 . b e i n t r a u b , D a v id , " E f f e c t s o f C u r r e n t and P r o s p e c tiv e T ech­ n o l o g i c a l D evelopm ents Upon C a o i t a l F o r m a tio n ,” A m erican Econom ic He v i e v., 2 9 : 5 - 3 2 , U a ro h , 1939. b i l s o n , T . , "R eview o f ’Bogey o f Econom ic M a t u r i t y ’ by T e rb o rg h an d 1Econom ic S t a g n a tio n a n d P ro g re s s * by Sv;anaon a n d S c h m id t," Sooncm lc J o u r n a l , 5 7 : 3 5 .- 3 5 9 , S e p t . , 1947. b r i g h t , D avid M cCord, ” ’ Hie C ro a t G u e ssin g Gamer : Iterb o rg h v s . H a n s e n ,” Review o f Economic S t a t i s t i c s , 2 8 : 1 8 -2 2 , 7e b ru c r y , 194^_r" " r'” ' G overnm ent Doouaients "A l l a t i o n e l S u rv e y o f L iq u id A s s e ts - D ie t r i b u t i o n A cco rd in g t o In co n © , ” F e d e r a l R eserv e B u l l e t i n , 3 2 : 7 1 6 -7 2 2 , J u l y , 1946. ~ B ureau o f th e C e n su s, " F e r t i l i t y : A p r i l , 1 9 4 7 ," C y r e n t P o p u la tio n R e p o rts - P o p u la tio n C h a r e c to r is 1 1 c s / oerTosT P. 2G>fiT, Sb“.“ l 8',‘ '7 ash in g ‘t b n , D.G. P r o c e s s e ’d^ Juiie 3 0 , 1948. B ureau o f th e C e n s u s , F o r e c a s t s o f th e Popula t i r n o f th e U n ite d S ts t o s , 1945-1975 1(by "P7 KT W i o l p b o n ) , Wa.s h ln g td n , D.CT."7^’^ 3 /E o 3 n 5 ta to G o v e r n m e n t P r i n t i n g O f f i c e , 1942. b u re a u o f th e C e n su s, "Manure c t u r e s 1939” , S i x t e e n t h C ensus

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