The study of Mercantilism (an ill-defined concept at best) has usually been a study of Mercantilist pamphlets. Historians have used the pamphlets to piece together a picture of the economic policy of the age; theorists have discussed the doctrines they contain, more or less sympathetically, but usually in the light of classical economic theory and therefore frequently in a faintly patronizing manner. But each age must write its own history and in a neomercantilistic world we cannot be content to view Mercantilism so narrowly. We must, I suggest, stand back from the pamphlets and take a wider view of the matter.

Some five years ago Professor Charles Wilson wrote a paper in which he attempted to do just that. In particular, he sought to identify certain objective economic conditions in the Mercantilist world which would account for Mercantilist trade practices. Behind this approach was the idea that Mercantilism was not merely an economic ideology invented by ex parte pamphleteers, but a rational economic policy reflecting the economic facts of the age. Furthermore, Professor Wilson suggested that the economic facts of the Mercantilist period bore a certain resemblance to the economic facts of the contemporary world. Heresy received its due, for the late Professor Heckscher immediately brought the weight of his authority to bear on Professor Wilson's article and gently but firmly tried to push the whole problem back into the well-worn grooves of traditional Mercantilist scholarship.

During the decade of the twenties, monetary theory and policy became a major focal point in the economic literature of the Western world. Although central-banking machinery had long since been in operation in England, France, and Germany, and the Federal Reserve System had been established in the United States about six months prior to the outbreak of the First World War, it remained for the post-war world to see the emergence of centralized monetary control in a recognized and accepted form.

The experience during the war in the techniques and dangers of large-scale financial operations, together with the unprecedented post-war inflation of currency in Germany, left a vivid impression with economists, bankers, politicians, and business men. As a result, there occurred in the following years a lively discussion both of the workings of monetary and banking systems and of their implications for policy. The discussion soon became a definite controversy in terms of adherence to, and dissent from, the philosophy of “monetary orthodoxy.”

To some extent, it was a continuation of the split which had grown out of the English Bullion Report of 1810 and had centered around the Banking and Currency Schools. There was, indeed, much debate over issues which had previously inspired the able analysis of such pioneers as Thornton, Tooke, and Overton. But there was a great deal more than that. Investigation was directed towards the most challenging problems of monetary theory, and policy recommendations took on a tone of urgency matched only by their infinite variety.

Measures of levels of consumption in various countries are useful not only as means of comparing the utilization of goods and services in the countries concerned but also as partial indicators of the relative levels of welfare and of production in those countries. These indicators are particularly useful in international economic relations for determining contributions to mutual defence, and to the various United Nations organizations. Although the usefulness of these measures is recognized, agreement as to the best method of obtaining these measures has not been reached.

Canada and the United States were chosen for this methodological study of international levels of consumption because of the similarity of modes of living, institutions, economic systems, age and sex distributions of the population, sizes of family, and habits of consumption in the two countries. In addition the author is familiar with both countries and most of the necessary data were available. The study was confined to the period 1947 to 1950 because a series of years is more reliable for purposes of comparison than a single year in this post-war period, and because data for more recent years were not available when the methodology was tested.

A comparison of per capita national and personal incomes in Canada and the United States during the period indicated that Canadian incomes were approximately 66 per cent of American incomes. Average family incomes in the two countries were in about the same relationship; the average Canadian family received $2,233 and the average American family $3,187 in 1948. What, then, was the relative level of consumption in the two countries?

The rating, that is, the taxing, of property in England by local government is based on the Act of 49 Elizabeth. While this statute did not specifically declare Crown property exempt from rating, it did provide that for property to be ratable there must be an occupier and that his occupation must be “beneficial.” By “beneficial occupation” the law means “an occupation from which the occupier derives either a pecuniary profit, or some personal advantage or convenience.” All buildings such as post-offices, customs-houses, barracks, prisons, belonging to the Crown and occupied for public purposes are therefore exempt from rating. Crown property in the possession of an occupier who has a beneficial occupation is ratable, and hence tenants of Crown property are required to pay property taxes. Occupation of property by nationalized industries does not amount to occupation by the Crown and these premises are also ratable. Lands occupied by the royal family are exempt for different reasons arising from the prerogatives of the Sovereign.

In 1874 the Parliament of the United Kingdom approved a system of grants in lieu of property tax which are known as “contributions in lieu of rates.” Under this system the United Kingdom makes ex gratia payments, generally equivalent to full taxes, to all county boroughs, boroughs, urban districts, and rural districts containing Crown property beneficially occupied. Other local government units do not receive these grants since they are not taxing authorities. The United Kingdom was quite certainly the first country in the world to make such payments. It may therefore be of interest to record the events leading up to this historic decision and to trace briefly the growth of these contributions.

According to the principle of acceleration, net induced investment is proportional to the rate of increase in national product. The principle is usually qualified by a statement to the effect that if the economy's production is at a rate lower than some previous peak, the proportionality may not hold. Once, however, capacity is reached, increases in the rate of production will induce investment.

This paper derives its relevance from the current attempts to construct a set of dynamic input-output equations which will generate demand for additional stocks of capital facilities on the basis of a set of capital coefficients and measures of capacity for the “industries” of the system. The basic arguments set forth are applicable also to tests for the feasibility of solutions of static input-output systems with respect to existing stocks of capital, but most attention will be directed to the dynamic formulation.

Professor Leontief's dynamic input-output equations are of the form:

Xi represents the rate of output of the ith industry, Yi is the amount of this output taken by the autonomous final demand sector and aik is the now familiar coefficient of production, the amount of the ith industry's product which the kth industry purchases per unit of output of the kth industry. This much of the equation set is identical to the static input-output system. The dynamic addition is in the bik capital coefficients, which measure the amount of stock of the ith industry's product held by the kth industry per unit of annual output, and in the values, which are the first derivatives of the annual rates of output of the various industries with respect to time. The capital coefficients are accelerator values for each industry with respect to all other industries. The summated value,

is the instantaneous annual rate of induced investment for the economy at any given moment of time.

When the Labour party came to power in Britain in 1945 and again when it was returned to office in 1950, it was committed to a programme that rejected “the claims of the few to live on the labour of the many,” and demanded that “fair shares should be the national rule.” As was noted in Labour and the New Social Order, “The first principle of the Labour Party—in significant contrast with those of the Capitalist System, whether expressed by the Liberal or by the Conservative Party—is the securing to every member of the community, in good times and bad alike (and not only to the strong and able, the well-born or the fortunate), of all the requisites of healthy life and worthy citizenship.” In 1945 “fair shares” was interpreted to mean, among other things, nationalization of certain basic industries, provision of welfare services, and taxation designed to redistribute income. It was assumed that egalitarian measures would not be difficult to apply, notwithstanding the fact that the bulk of the economy would continue to be privately owned and operated. Labour leaders and voters confidently looked forward to what one Labour M.P. called “a general levelling, upward, outward, and downward.”

Economists have long been aware of the interdependence of the consumption and the consumption plans of individuals. For the most part they have been interested in the implications of this interdependence for the theory of market behaviour rather than in its implications for welfare. The purpose of this article is to give a detailed diagrammatic treatment of the welfare implications of external economies and diseconomies of consumption. In particular, we shall discuss the fiscal measures which, in a competitive economy, would provide the incentives necessary to the attainment of an optimal allocation of resources.

We shall distinguish from each other, and consider separately, three types of interdependence of consumption and consumption plans.

(i) The consumption of a particular commodity X by a particular individual A may increase (decrease) the satisfactions of other individuals, that is, generate external economies (diseconomies).

(ii) The consumption of a particular commodity X may change the satisfactions of other individuals independently of the identity of the consumer.

(iii) The receipt of money income by a particular individual A may, independently of his manner of disposal of the income, change the satisfactions of other individuals.

No doubt this classification is not exhaustive. Thus no place is found for various external repercussions of consumption which might be discussed in a dynamic model, that is, in a model permitting instability of preference maps. Even in static models a place could be found for types of interdependence not discussed here. Many of these excluded types, however, can be described as combinations of those already enumerated (for example, a particular act of consumption may lower the satisfaction of some, raise that of other individuals) and can be treated by the techniques to be developed for their analysis.

This paper is concerned with measuring and comparing the value of the productivity of a similar unit of labour in the agricultural and the non-agricultural sectors of the economy. In such a study the term “productivity of labour” may have several meanings. It may mean the gross value of the product of a given combination of labour with other factors of production, divided by the number of units of labour employed. Or, secondly, it may refer to the inherent ability or the willingness on the part of a person to contribute his efforts. Thirdly, the term may refer to the value of the incremental product resulting from the addition of one unit of labour to a fixed quantity of other factors, given the demand for the product, the inherent ability of the worker, and the nature of the production function. Economic theory has identified this third concept as the marginal product of labour; it is the increment to the value of the total product contributed by an additional unit of labour in the particular circumstances in which it is being used. It is this concept which has meaning in the solution of the problem of the best allocation of factors within an industry or among industries. Notwithstanding the crudeness of the method which I have been forced to use to measure productivity of labour it is this third concept which I have in mind for this study.