A Note on Soviet Profit Maximization

Abstract

correlation analysis between consumption, various definitions of autonomous expenditures, and money supply in nominal terms for the period 1927-65. The levels of the variables and their first differences are examined in order to minimize the influence of trends. Three sub-periods are analysed. One period includes the war years; another period excludes the war years 1939-45; the third period excludes the war years 1942-45 when the country undertook what appears to be a maximum effort. This period coincides with US entry into the war and active co-operation in the war effort on the part of the two countries. In addition to FM's and AM's definition of autonomous expenditures DePrano-Mayer's (DM's) definitions of autonomous expenditures are also examined.3 DM's gross concept considers autonomous expenditures as investment in producer's durable equipment, non-residential construction, residential construction, federal govemment expenditures on income and produet account, and exports. Their net concept subtracts capital-consumption. In effect, the evidence presented in Table II leads to the conclusion that for the whole period, including and excluding war years, autonomous expenditures as defined by AM and DM give better fits than the FM definition. However, the perfornance of money (which includes notice on time deposits held by the public in chartered banks) is somewhat better. Canadian experience is also consistent with observations made by DM for the United States that in all periods gross fixed private domestic investment and gross fixed private domestic investment plus exports perform very favourably. For first differences, AM and DM perform sometimes better and sometimes worse than money. In all cases, however, AM's definition of autonomous expenditures performs better than DMs and FM's definition. Indeed, when the war years 1939-45 are excluded, AM's definition of autonomous expenditures outpaces money.