Fritz Machlup

Publishing Scholarly Books and Journals: Is It Economically Viable?

In a wide sense of the phrase, any activity is economically viable if its product is promoted to the ranks of public goods and its cost is borne largely out of public funds, such as actual or potential tax revenues. In a narrower sense, however, an activity is regarded as economically viable only if its product is bought in the market with funds out of private pockets at prices that cover its cost. Thus, when we ask whether railroad transportation, universal higher education, public museums, or classical opera are economically viable undertakings, the meaning evidently is whether they must rely on support largely from public funds or are sold in the market to private buyers, possibly aided by private contributions not exempt from taxation. This need not be the only meaning of the phrase. Doubts regarding the economic viability of an industry may suggest that the industry, after a period of expansion, finds it impossible to stay at the level of activity attained. Its sales opportunities at cost-covering prices prove inadequate. If that industry, because of a profit squeeze or downright losses, is compelled to retrench to put up with reduced sales volumes and be forced to cut down its current expenditures and capital outlays-it will be called a declining industry: at the level of activities attained, the industry is not economically viable. The retrenchment, of course, need not involve all members of the industry, but if a significant percentage of the firms have to trim or go out of business, the judgment that the industry is not economically viable at the size that it has attained has a sufficiently clear meaning. A judgment that questions or denies an industrys economic viability can be meaningful in a third sense: its technology may be about to be replaced by a superior one, and establishments operating with the obsolescent techniques may find it difficult or impossible to survive. From a secular point of view the verdict of not viable is perhaps too harsh. When the railroads forced the stagecoach out of business, the transportation industry began its greatest development, though the stagecoach

Professor Knight and the "Period of Production"

I Frank H. Knight, Capitalistic Production, Time, and the Rate of Return, Economic Essays in Honour of Gustav Cassel (London, I933); Capital, Time, and the Interest Rate, Economica, August, 1934; Professor Hayek and the Theory of Investment, Economic Journal, March, 1935; F. A. von Hayek, Capital and Industrial Fluctuations, Econometrica, April, I934; On the Relationship between Investment and Output, Economic Journal, June, I934; Martin Hill, The Period of Production and Industrial Fluctuations, ibid., December, 1933; C. H. P. Gifford, The Concept of the Length of the Period of Production, ibid.; The Period of Production under Continuous Input and Point Output in an Unprogressive Community, Econometrica, April, 1935; J. Marschak, A Note on the Period of Production, Economic Journal, March, I934; K. E. Boulding, The Application of the Pure Theory of Population Change to the Theory of Capital, Quarterly Journal of Economics, August, I934; Wassily Leontief, Interest on Capital and Distribution: A Problem in the Theory of Marginal Productivity, Quarterly Journal of Economics, November, I934; R. F. Fowler, The Depreciation of Capital, Analytically Considered (London, I934); Erich Schiff, Kapitalbildung und Kapitalaufzehrung im Konjutnkturverlauf (Vienna, 1933); Richard von Strigl, Lohnfonds und Geldkapital, Zeitschriftffir Nationalbkonomie, January, 1934; Kapital und Produktion (Vienna, I934);

What the World Thought of Jacob Viner

When Jacob Viner died on September 12, 1970, the profession lost one of its most admired elder statesmen. There is little point in comparing the fame that different scholars have achieved or the ranking they have been accorded in professional judgment. There will surely be differences of opinion about awarding rank 1, 2, or 3, but there is little doubt that Jacob Viner was one of the most honored scholars in economics and cognate fields. The economic profession and the academy bestowed countless honors on Viner. The American Economic Association elected him president (for the year 1939) and awarded him the Francis A. Walker Medal (in 1962). He was a fellow of the American Academy of Arts and Sciences, the American Philosophical Society, the British Academy, the Manchester Statistical Society, the London School of Economics and Political Science, the Royal Academy of Sweden, the Accademia Nazionale dei Lincei in Rome; he received a special award from the American Council of Learned Societies and was an honorary member of the Institute for Advanced Study at Princeton. No less than thirteen institutions of higher learning conferred honorary doctors degrees on Viner. Going through the citations that were read on the occasions of these awards, one is impressed by the consensus which his academic colleagues had reached concerning Viners contributions to scholarship, to the learning and the research of his students, and to a more rational formation of public policy. I have excerpted brief passages or phrases from these citations for quotation in this memoir.

What Was Left on Viner's Desk

Over 2 ,000 pages of unpublished manuscript and notes were left on Viners desk, in its drawers, and on the shelves of his study when he died on September 12, 1970. At least one-half of the manuscripts had been written with a view to eventual publication after some revision, polishing, and completion of the documentation. The rest consists of lectures, occasional papers, reports, memoranda, and notes on a variety of subjects. In addition, there is Viners bibliographical catalog, consisting of over 20,000 cards and slips, most of them with entries in Viners hand. Finally, there are the files containing his correspondence with other scholars. This report on my preliminary search of the Viner Papers will be organized under the following headings:

Corporate Management, National Interest, and Behavioral Theory

THERE was a time when most business managers owned the businesses they managed. Hence, there was no conflict between the managers interests and those of the owners. At the same time, the best economists proclaimed that the interests of society would be served best if businessmen competed with one another, each trying to maximize his own profit. Thus, no conflict was seen to exist between the managers interests and those of society. This is different from what we hear today. Managers are told, and tell one another and everybody who is willing to listen, that their social responsibilities override most of their other objectives. The story is one of divided loyalty and split personality. In order to be able to look the facts straight in the eye, I have prepared the minutes of a management meeting of the famous XYZ Corporation. I submit that the minutes will speak for themselves.

The "Period of Production": A Further Word

PROFESSOR KNIGHT agrees with me that it is a truism to say that capital maintains itself until it is liquidated (or lost). But I am not able to agree with Professor Knight when he seems to infer from this truism that capital is never disinvested or that it must be considered as conceptually perpetual. According to Professor Knight, disinvestment is not in question unless society is decadent. (If Professor Knight gave a definition of a decadent society it would probably contain disinvestment of capital as criterion!) That Professor Knight prefers to pass over the case of such a society unfortunately does not get rid of the existence of disinvestment. These few remarks may illustrate how difficult discussion becomes if phenomena are considered as nonexistent just because they do not fit into the conceptual scheme preferred by one party. I admitted that the fiction of synchronized production-where production periods are zero by definition-may be helpful for certain purposes. But I fail to understand why all problems should be ruled out when they do not fit into the synchronization scheme. I endeavored to show in my article that the time interval between input and output must not be passed over if changes of production are to be studied. How usefully the capital-time concept can be employed also for studies of the stationary state has recently been shown by Professor Pigous The Economics of Stationary States. Professor Knight is one of the rare outstanding economists who are so open-minded as to listen to and consider the arguments of others. He showed this when he conceded Mr. Bouldings ideas on the capitaltime relation. The distance of this from the position which I expounded in my article is much less than Professor Knight seems to think. A FINAL WORD