Volume 52, Number 3, juillet–septembre 1976

EN:

This paper is a summary of the Legal Factum submitted by the Canadian Labor Congress to the Supreme Court of Canada. It intends to demonstrate the irrelevance of the Anti-Inflationnary Act of October 1975. Three main questions are dealt with.

First, was there an economic crisis in October 1975? Analysing various sets of data, the paper concludes that, by no stretch of imagination, could October 1975 be called an economic crisis. Second, was there a policy crisis in the sense that traditional methods had been tried and failed? It establishes here that no serious attempt had been made to contain inflation by traditional fiscal and monetary tools by October 1975. Third, what results can be expected from income policies? This part gives a summary of the voluminous evidence for the U.K. and the U.S., and concludes that the evidence of other incomes policies is that their effects on slowing the rate of inflation are small and often transitory.

EN:

The stability of OPEC may be defined as the upholding of a high level of cohesion between the members of this organisation, in order to secure for the whole a certain level of bargaining power that everyone would think to be acceptable at a given time and in a given context. This level of cohesion is mainly estimated by the common will of members to apply rigorously a common strategy regarding the price-quantity of crude petroleum. In the long run, such a strategy would call for a common production plan in order to determine not only the total level of annual production, but also the quotas of each country, the price level and the rate of development of the capacity of production.

The aim of this paper is to contribute to the bringing out of a problematic regarding such a production plan as a whole. The main topics are: (1) the necessity of OPEC, (2) the price determination of petroleum, (3) the question of the instability of a coalition. The analysis accounts for the fact that the petroleum sector produces a non-renewable resource, on the one hand, and for the environment and international constraints that the member countries of OPEC have to face in their development process, on the other hand.

EN:

There is considerable merit in thinking of the modern multidivisional corporation as an economy within itself. There is an important similarity between the interaction of divisions within a corporation and the perfectly competitive economic model formulated by Leon Walras¹. When we look at modern corporations from this viewpoint we discover that much of what we know in general equilibrium economics may have considerable application inside modern corporations. Some of our existing theorems help clarify distinctions between decentralization and central control in corporate management in the same way that they clarify the distinctions between the market economies and those that run by central decree. They help distinguish which divisions must be centrally managed and those which can be left to look after themselves. This viewpoint offers new insights too—that, for instance, the products transferred between divisions may quite logically have two transfer prices instead of one. This viewpoint also permits an easy synthesis of the existing literature on transfer pricing. While the transfer pricing issue is especially important for multinational and international corporations which transfer goods and services between divisions located in different countries, the principles generally apply to any multidivisional corporation. The purposes of this paper are to present a simple, but general analytic model of the multidivisional corporation, to use it to make a synthesis of the existing literature on transfer pricing, and to make some important new discoveries.

¹ Léon Walras, Elements of Pure Economics, édité et traduit par W. Jaffe (London : George Allen and Unwin, 1954). Kenneth Arrow fait mention de cette similitude dans son article : « Optimization, Decentralization and Internal Pricing in Business Firms », Contributions to Scientific Research in Management, 9-18, Western Data Processing Centre, Los Angeles, University of California Press, 1961.

EN:

This paper is a critique of the neoclassical theory of investment behavior advanced by Jorgenson and others. The main conclusions are as following:

1. Jorgenson's specification of the objective function implies that prices are constant.

2. The rejection of this hypothesis and the assumption of a competitive equilibrium imply that prices must be treated as exogeneous variables and that there is no excess capacity of production.

3. Jorgenson's specification of an "ad hoc" adjustment between actual and desired demand for capital is not acceptable with respect to his equilibrium conditions.

4. Since the capital stock is by definition a weighted sum of past investment, it would be more convenient to assume a hyperbolic function about replacement instead of a geometric function.

5. The rejection of the competitive equilibrium assumption in favor of a non competitive equilibrium approach implies that prices must be considered as endogeneous variables and that an excess capacity of production is always possible. This last consideration is crucial when interpreting the empirical results obtained by estimating the parameters of a "reduced form" demand function for capital.

EN:

Since there is a relatively large number of publications on the Hungarian economic reform—generally known as the New Economic Mechanism—the purpose of this paper is not so much to present the different aspects of the system as to show both the problems and results which one can identify seven years after its adoption. At the end of 1973, the State increased its control of the economy. We try to demonstrate that in so doing the national authorities did not mean to reopen the question of the "liberalization" of the economy, but above all wanted to make some reajustments in the economic policy in view of the effects of the world crisis on prices and wage policy. The difficulties Hungary has recently known have been attributed to market-socialism by orthodox socialists who are opposed to this policy. On the other hand some of the architects of the N.E.M. maintain that the present model does not fully correspond to market socialism. One must admit that indeed many elements of the economic problems (inflation, income inequalities, development of monopolistic power) that can be identified in Hungary are linked with the disadvantages of a decentralized socialist model. However, in spite of these problems the achievements of the Hungarian economy are worthy of mention. The economic authorities do not conceal their price at having exceeded the forecasts of the 1971-1976 five year Plan. Even if, as several writers maintain, the introduction of the market is not a panacea for all the flaws of socialism in general, Hungary through its past experience and present endeavours provides valuable information to all those interested in studying a synthesis of planning and the market.