American Economic Association

Revue d'Economie Politique, Volume 74, Number 2, 1964Source: Journal of Economic Abstracts, Vol. 3, No. 2 (Apr., 1965), pp. 235-238Published by: American Economic AssociationStable URL: http://www.jstor.org/stable/2719833 .

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REVUE D'ECONOMIE POLITIQUE

VOLUME 74 1964 NUMBER 2

NOTES ON PRODUCTION MODELS

(Quelques Reflexions sur les Modeles de Production)

GEORGES BERNARD

While having written his paper in 1962, the author has added a reference to the survey article by Prof. A. A. Walters (Econometrica, January, 1963) on production and cost functions. The condition of equivalence between production and cost functions is stated and the latter considered. (This condition consists in the exogeneous character of the factor costs vector)

A new shape of cost functions is proposed, in which the main emphasis is on the definition of capacity and on the degree of use of capacity. The capacity is defined not as usual by the minimum average unit cost, but by the output at which total cost is infinite. The load factor, defining the degree of use of this capacity is in consequence always a fractional number, contrary to what happens in other formulations.

Elasticities of the production with respect to mean unit and total costs are explicit and discussed. It is formally proven that the short term, i.e., constant capacity marginal cost is a monotonously increasing function. The shape of total and mean cost functions is derived from this statement.

Long term, i.e. variable capacity cost functions are described heuristically and shown on figures. The case of increasing returns to scale, when the theories of general equilibrium and social ef- ficiency are invalid, is briefly discussed. [French, pp. 439-461]

235

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236 Journal of Economic Abstracts

LIQUIDITY, THE RATE OF INTEREST, AND THE SAVING- INVESTMENT-LIQUIDITY-DECISIONS

(Le r6le de la liquidit6 dans les d6cisions microe'conomiques et la polyvalence du taux de I 'intc6r9t)

EMIL M. CLAASSEN

The author shows that the liquidity calcul in connection with the rate of interest operates on the margin as well of the household's liquidity and saving decisions as of the firm's liquidity and invest- ment decisions.

The proper (Keynesian) liquidity decision of the household is not concerned with absolute liquidity but with relative liquidity. It is based on a comparison between the absolute liquidity of money and the relative liquidity of interest-bearing assets. On the other hand, the saving decision is connected with a liquidity calcul. Thus, the rate of return (rate of interest plus the rate of capital gain or loss) of interest-bearing assets in which savings can be invested must not completely compensate the time preference because of the liquidity advantage of interest-bearing asset holding. Both the proper liquidity decision and the saving decision are interrelated in so far as the marginal rate of liquidity-differential preference must be equal to the marginal rate of time preference minus the liquidity advantage of interest-bearing assets and this again equal to the rate of return.

In a similar way the firm's proper liquidity and investment deci- sions take place on a two-fold margin. Cash holding must be con- sidered not only (as in the household) as a liquidity differential preference in respect to the interest-bearing asset holding, but also as a liquidity preference by taking into account the marginal effi- ciency of physical asset holding due to an investment in capital goods. The optimum condition of the firm's balance sheet requires that the marginal rate of liquidity-differential preference in respect to interest bearing asset holdings (which must correspond to their rate of return) must be equal to the marginal rate of liquidity, preference in respect to real asset holdings and this again equal to the marginal rate of efficiency of (real) investment, the latter being again equal to the rate of cost ("pure" interest rate plus credit administration charges).

By combining the different decision margins on which the liquid-

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Revue D'Economie Politique 237

ity calcul in connection with the rate of interest operates, the author reformulates D.H. Robertson's threefold margin of the rate of inter- est by emphasising the r6le of liquidity being relevant for each decision. [French, pp. 462-96]

TECHNICAL PROGRESS AND DECENTRALIZATION

(Progres Techenique et Decentralisation)

Louis REBouD

The author first defines technological progress as being indicative of the progress of productivity, and shows that decentralization comprises the decentralization of economic activity (delocalization) and also the power of decision-making.

Four aspects of the problem are then discussed. First, it is shown that technical progress today, makes possible, even desirable, a delocalization of economic activities in many sectors of industry. This is mainly because of improvements in transport and production methods.

Having established that delocalization is taking effect very slowly, despite the efforts of government authorities, the author examines the obstacles to this delocalization: economic processes and environ- mental structures.

It should be noted, however, that policies for decentralization are not always inoperative. The example of Grenoble is used to estab- lish the reasons why certain growth centres attract industries in search of a new location. The influence of pace-making industries is shown to be important, particularly when these develop in a favourable environment, and when they coincide with the decen- tralization of the power of decision-making.

Finally, the consequences of successful decentralization on techni- cal progress are examined. It is established that, at the level of a given firm, as well as at regional and national levels, decentraliza- tion, can, in many ways, favour technical progress, for example, in the innovation and distribution of new techniques.

In conclusion, it is seen that there is no determinism closely linking technical progress and centralization. Decentralization is both possible and desirable. However market mechanisms alone would appear to be insufficient to achieve a harmonious national distribution of industry. [French, pp. 497-525; 730-754]

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238 Journal of Economic Abstracts

POPULATION, HUMAN CAPITAL AND INTERNATIONAL MIGRATIONS

GILBERT ABRAHAM-FROIS

For the last few years, international migrations towards Europe have been presenting characteristic features of their own and raising new problems.

This is an emigration with an economic motivation, going from underdeveloped countries towards economically mature countries, and especially towards Europe; for industrial Europe is wanting in man-power. The decrease of labour supply from Italy makes it now necessary to call upon other countries: European ones (Spain, Portugal, Greece), mediterranean ones (Turkey, North Africa and more particularly Algeria), or even remoter ones (Black Africa, Jamaica and even India and Pakistan) It seems this migration will not stop unexpectedly.

This fact leads us to consider a few sides of the problem of the cooperation between developed and less-developed countries. We must ask ourselves what benefits are drawn from this movement of labour by the country of emigration and the country of immigra- tion. Starting from the notion of human capital, one is led to under- line that the country of immigration holds way upon, and may even be said to take unfair advantage of the country of emigration. For the developed country receives much more than the less-developed one. Indeed, it receives free of charge a factor of production. It is only in the further use of this factor that a kind of equality-or a reduced inequality-appears.

One answer to this problem may be offered. A professional qualification should be made available to a certain percentage of immigration workers, with regard to the needs of the country of emigration and the prospects of the country of immigration. After some time, those workers would be called back by their own coun- tries where they would be offered a job in keeping with their new qualification. [French, pp. 526-559]

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