Harry G. Johnson

Optimum Tariffs and Retaliation

During recent years the proposition first advanced by Bickerdike, that a country can improve its welfare as compared with the free trade position by imposing a tariff on imports, has achieved general recognition in the literature of international trade theory. There is still, however, some confusion over what happens if other countries retaliate by imposing tariffs in their turn. Although Kaldor1 in his classic revival of the Bickerdike proposition, referred explicitly to the possibility that a country might gain by imposing a tariff even if other countries retaliated—a possibility which is also indicated by considerations of general monopoly theory—the possibility is often overlooked: it being assumed, and argued against the “optimum tariff” theorem, that once retaliation occurs all parties are bound to lose as compared with the free trade position. The locus classicus of this error (and some others) is probably Professor Scitovszky’s analysis of retaliation in his “Reconsideration of the Theory of Tariffs.”2

Monetary Theory and Policy

In order to isolate a field of study clearly enough demarcated to be usefully surveyed, it is necessary to define monetary theory as comprising theories concerning the influence of the quantity of money in the economic system, and monetary policy as policy employing the central bank’s control of the supply of money as an instrument for achieving the objectives of general economic policy. In surveying the field thus narrowly defined fourteen years ago, Henry Villard [123] began by remarking on the relative decline in the significance attached to it as compared with the offshoot fields of business cycle and fiscal (income and employment) theory, a decline related to the experience of the 1930’s, the intellectual impact of Keynes’s General Theory [66], and the inhibiting effects of the wartime expansion of public debt on monetary policy. While this division of labor has continued, and has indeed been accentuated by the emergence of the cross-cutting field of economic growth and development as an area of specialization, the field of money has been increasingly active and has received increasing attention in the past fourteen years.

The monetary approach to the balance of payments: A nontechnical guide

Abstract The monetary approach uses monetary rather than multiplier and market stability tools. It differs from the `elasticities, `Keynesian multiplier, `absorption, and `economic policy approaches in introducing stocks as well as current expenditure flows into the adjustment process so that payments disequilibria are transitory and conditional on domestic monetary policy. The development of the approach is sketched, and some policy implications briefly discussed.

The Costs of Protection and Self-Sufficiency

I. Introduction, 356. — II. Conception of the problem, 356. — III. The consumption cost of protection, 358. — IV. The production cost of protection, 362. — V. The total cost of protection, 366. — VI. Conclusion, 371.

The Social Sciences in the Age of Opulence

The tradition of presidential addresses before this Association is a varied and extremely democratic one, offering no set pattern for the guidance of a pxresident-elect. My immediate predecessor in the presidency, wvho ha,s honoured me by agreeing to take the chair tonight, last year offered us his reflections on one of the fundamental concepts in his field of sociology, the myth. His predecessor applied the tools of his trade as a political theorist to a dissection of the political assumptions of contemporary economics-not entirely, it must be confessed, to the comfort and satisfaction of the economists present in the audience. Previous presidents have frequently employed the occasion to collect in one intellectual basket the fruits of a lifetime of serious scholarship in their own particular vineyard. For my own address tonight, I have chosen to speak on the contemporary position, prospects, and problems of the social sciences. This choice reflects in part a feeling that an address on the kind of professional subject to which I have been devoting my attention in recent years-a topic in the pure theory of international trade-would be of such limited general interest as to strain even the tolerance of this audience. My main reason, however, for choosing to talk about our profession, rather than to exemplify its work in one specific area of economics, is that I think that I can contribute most usefully to fulfilling the purposes of this Association by attempting to place the manifold problems with which its members are currently confronted in a broader historical perspective. I should begin by defining my terms. By the age of opulence I mean simply to refer to our contemporary economy and society, a society characterized by the steady raising of the general standard of living through the accumulation of capital in both human and material forms and the conscious application of science to the improvement of technology and management. The notion has received sufficient popular attention as a result of the work of J. K. Galbraith to require little furtlher elaboration; in any case, I have explored its implications for the formulation of economic theory in a paper presented to this association six years ago. The term social sciences, however, requires considerable qualification. I chose it to indicate the four sciences of economics,

Federal support of basic research: Some economic issues

SummaryThere is no necessary connection between leadership in basic science and leadership in the applications of science, because scientific progress is a cooperative endeavour and not a competitive game; indeed, there may be a conflict between basic research and applied science. The notion of “a position of leadership”; in science raises questions of what leadership consists in and what its value is to the nation. The two main arguments for government support of science are cultural-social, and economic. The cultural-social argument stresses scientific activity as a form of social consumption of wealth and raises the question of whether other uses of the resources employed would contribute more to the greatness of the society. The economic argument stresses basic scientific research as a form of investment for the future, and raises the questions of what the rate of return on such investment is and whether and to what extent government support is called for. Relevant economic research results bearing on this problem are scarce. Economic theory suggests that competition in the market will supply less than the optimal amount of basic research; but our society substantially supplements the market through private contributions to and government support of science, and the question is whether this supplementation is deficient or excessive. Here difficult problems arise, on which more economic research is needed; one of these concerns the relative merits of government and private support of science. The rule-of-thumb procedures generally recommended for determining the volume and allocation of government support to basic scientific research generally ignore these problems, and amount to endorsing the present level of government support or recommending that it be increased. Allocation of federal support of science should take account of the possibility of stimulating the economic development of poor regions of the country by locating scientific research facilities in them.

Labour Mobility and the Brain Drain

The movement of labour, and especially of educated labour, from poorer to richer countries has excited considerable public concern in many countries during the past decade, under the popular description of ‘brain drain’. Two types of such concern may be noted: concern in lower-income advanced countries such as Canada and the United Kingdom about the flow of native talent to the United States, and concern in various developing countries and in the United States about the flow of educated talent from the former to the latter, conceived in the United States as the problem of student non-return. The latter concern is the one relevant to this Conference, though it may be worth noting that the flows that occasioned the former concern appear to have been, at least in magnitude, a temporary phenomenon associated with university expansion, a build-up of scientific research endeavour and an expansion of demand for medical services in the United States, funds for the first two of which at least have been recently sharply cut back. Indeed some sections of public opinion in Canada are now concerned about the reverse ‘problem’ of an inflow of foreign (and especially American) academics attracted by the recent rapid expansion of the Canadian University system, while Britain has been besieged by inquiries for suitable employment from British scientists and engineers who have lost their jobs in the United States. This reversal should serve as a reminder both that flows of labour migration are a response to market forces, and that demand-supply situations can change fairly rapidly, and should not be incautiously identified as permanent structural economic features.

Methodologies of Economics

The central question is whether there will be a reaction from the dominance of mathematics and econometrics. Affluence has meant problems of space and cost for libraries, while demands for more amenities, permissiveness about theft and vandalism, as well as graduate work and empirical research impose new demands. Reaction towards conventional library scholarship may follow from ‘radicalism’ diminishing returns from mathematical and quantitative techniques, declining enrolments and junior staff ratios, and the need for new ideas. One likely line is ethics and welfare economics. Rising publishing costs may reduce library storage problems.

Prospects for partnership : industrialization and trade policies in the 1970s

In October 1972 the World Bank invited a group of international economists to examine various aspects of the partnership between developing and developed countries. Based on that seminar, this collection of writings analyzes the types of trade policies that are necessary to ensure the optimum industrialization of less developed countries. Since supply issues have received a great deal of attention in recent years, the focus of this volume is the demand aspects of the adjustment problems inherent in the increasing volume of manufactured product exports from developing countries. The collection covers such key issues as protection versus free trade, the infant industry argument, the problem of appropriate technologies, and the future relationship between developing countries and the industrialized world. Would the benefits of industrialization in the former exceed the costs in the latter? Over what period of time? The discussions, which threaded together the various themes from trade adjustment to changing international idustrial patterns, are drawn together in the last paper to indicate directions which analysis, and then policies, might take.

Money, Information and Uncertainty.

Significantly rewritten and updated, this well known textbook covers the whole of monetary economics, from the role of money to international monetary relationships. It is unique in linking theoretical findings to policy issues and events, and extends conventional analyses of financial intermediation and monetary theory.Money, Information, and Uncertainty bridges the gap between introductory textbooks and the latest journal articles, clarifying the macroeconomic significance of a series of innovative developments in the economics of information and the analysis of financial markets and institutions. Goodhart brings out the key implications of ideas such as information asymmetries and market-completion services for problems relating to money and banking, making it easier for banking specialists who dont follow the financial literature to understand where their field is moving.The books 18 chapters are organized around the theme that monetary phenomena can be properly understood only against a background of uncertainty and information costs, and around the premise that portfolio theory is the most appropriate analytical tool.The first 9 chapters focus on microeconomic issues, such as the role of and the demand for money and the role and functions of banks and of the Central Bank. The final 9 chapters take up macroeconomic issues, such as the transmission mechanisms of monetary policy and international monetary problems. Chapters new to this edition cover the nature of markets, credit rationing, the functions of central banks, financial regulation the determination of interest rates, and floating exchange rates.Charles Goodhart is Norman Sosnow Professor of Banking and Finance at the London School of Economics. He has served as a monetary economist and as Chief Adviser at the Bank of England. He is the author of The Evolution of Central Banks.