Professional Documents
Culture Documents
[December
1941]
851
and (3) to individual industries, derive from Dr. Kreps's belief in an insufficiency of purchasing power and an inadequacy of employment opportunities.
Tbe two groups of criteria bear little relation to one another and, indeed, at least
(4) and (5) are mutually inconsistent. Criterion (4) implies that an industry
is to be commended if "in increasing production" it tends "to give additional
opportunity for buman beings to get additional wages so tbat tbey may buy and
consume the additional product" (p. 47). Criterion (5) implies "tbat on tbe
whole society tends to be benefited whenever it gets more ana more product for
less and less effort" (p. 4 7 ) ; i.e., an industry's performance is desirable if the
(labor) cost per unit of product has Increased, and also if the (total) cost per
unit of product bas decreased and the decrease has been passed on to consumers
in the form of lower prices. The inconsistency of these criteria is confirmed by
Dr. Kreps's data: the rank difference correlation between tbe rankings of 22
industries by criteria (4) and (5) is .5 and between the rankings of 5 broad
industry groups, .6. The composite ranking of the 22 industries by the "real"
criteria (1) and (5) shows practically no correlation with their composite ranking by the "purchasing power" criteria (5), (6), and (7) (tbe rank difference
correlation is .08 between composite ranks assigned the sum of the ranks by
the individual criteria).
As Dr. Kreps says, ". . . no attempt is made to explain why an industry performed as it did" (p. 7) ; the purpose is rather to weigh that performance in the
scale of social desirability. Whether one accepts the particular scale used in this
book hinges very largely on whether, like Dr. Kreps, one believes in an underconsumption or over-saving theory of cyclical and secular unemployment or, like
the reviewer, believes such a theory, at best, seriously incomplete and, at worst,
completely fallacious. The difference is epitomized by the significance attributed
a decline in labor cost per unit of output: Dr. Kreps thinks such a decline
mischievous because it is likely to reduce "mass purchasing power"; the reviewer
thinks it commendable because it probably reflects increased efficiency and hence
permits a larger real output to be wrung from our meagre and inadequate resources.
MILTON FRIEDMAN
35c.
Monograph no. 18 presents the results of the first comprehensive study of tbe
development and activities of the trade association in the United States since the
N.R.A. The principal source of the data included in the study was the "Trade
Association Survey," a questionnaire sent by the Department of Commerce in
1938 to about 2500 associations of national or regional scope. This is the best
single monograph on the trade association. It should prove of value to the student
of industrial organizations, the trade association executive, and the public administrator alike.
Considerable statistical evidence is presented concerning the prevalence of
trade associations in various industries and concerning their structure and internal
organization. The stimulus given to the formation of associations by the N.R.A.
is traced, and the reasons for the subsequent disbandment of many of these is
analyzed. One interesting development noted is the growth in recent years of