concentration to competitive success resulting from innovation, scale economies or some other non- transferable quality.

The reader, however, will search the index in vain for Brozen’s name. Demsetz is more fortunate and e m s a footnote on page 272. Thus the book, which begins with a tantalizingly merent approach, is, in fact, a conventional industrial organization text leaning heavily on the traditional S:C:P paradigm.

Judged in this context it is an extremely com- prehensive, well written and attractive work. It is aimed for the student market at an academic level below that of Scherer’s classic text. Business mana- gers will probably find it more accessible than Scherer, especially when combined with the au- thor’s earlier two books.

The first four chapters deal with the standard concepts of market structure, profitability and economic performance. To this are added useful sections on market and product life cycles, and a brilliant diagrammatic encapsulation on one page (p. 51) of the equilibrium conditions of Pareto efficiency. Ten diagrams from the work-leisure trade-off via the production function, the perfect competitor’s equilibrium and consumer surplus in the output market form an invaluable aide-memoire for student and teacher alike.

Chapter 5 deals with the nature of the firm and briefly and well covers the subject from Coase to Williamson’s ‘U’ and ‘M form organizations. Suc- cess criteria from straight forward DCF results to the more recent growth theories are examined. The following chapter surveys the empirical evidence available on the divorce of ownership from control and shows how this has been used to buttress or detract from the theories of Chapter 5. Chapters 7 and 8 provide theoretical and empirical arguments as to why competition in the capital market may or may not be a satisfactory proxy for competition in the market for goods. In the Review Questions the problem ‘takeovers can cause increased efficiency even in firms that are not taken over’ is posed. This is apposite yet Henry Manne’s seminal work on the market in corporate control is not mentioned either in the text or index.

Chapters 9 and 10 discuss market structure, its measurement problems, the US situation, and theories deriving from it (viz. the S : C : P paradigm). Chapters 11 and 12 examine determinants of struc- ture (scale economies, entry barriers, multi-plant economies etc.) and how empirical estimates of cost conditions are made. Chapter 13 is, in a way, the book’s core, examining structure and profitability, with the empirical literature survey stopping explic- ity and significantly in 1972 (pre-Brozen and De- msetz).

Profits, of course, are partly dependent on prices and Chapters 14-18 give a comprehensive and standard review of price behaviour in theory and practice. Profitability’s relationship with advertising

is briefly covered in Chapter 19, and with efficiency and technological change in Chapters 20 and 21 respectively. The book concludes in a well rounded fashion with chapters on anti-trust policies and reg- ulation.

In short this is a first class traditional approach to industrial organization. One wonders, however, if businessmen will recognize themselves. Entrep- reneurs take decisions today in anticipation of to- morrow’s cost and demand curves. As a consequ- ence if they guess right they make profits, if wrong losses. The traditional industrial organization economist, however, examines the outcome, com- pares it with the concurrent activities and attempts to draw conclusions or build theories. The concur- rent activities, however, are again directed at to- morrow’s markets not today’s. Until entrepreneur- ship is brought back to centre stage as a topic of study one wonders if industrial economists, even those as highly competent as Professor Shepherd, can make industrial organization as fruitful and meaningful for policy makers as it should be. If we do not, our advice may not only be wrong but dangerously so.

W. DIUKYM Rwkk-University of Edinburgh, UK

STEPHEN HILL Reviews

Business Economics for Engineers

R. J. Betts, Bn~iness Eumodca for Jhgbmem, McGraw-H11, M.kknhea4 VK, 1980. pp. 246. E5.95.

Business Economics for Engineers is a useful addi- tion to the growing number of books concerned with giving students of other professions an under- standing of the commercial context within which their profession operates. Despite the title the book could be equally useful to other peripheral (to economics!) professions such as accountancy and law.

The problem as always with this type of book is treading a careful path between becoming entang- led in the details of the firm’s decision process, more properly the realm of managerial economics, or treating the firm’s activities at a superficial level. The author has a good literary style, and manages to inject some interest into descriptive areas that can easily become tedious and repetitive. The major weakness of this book is a product of its purpose; by failing to delineate an analytical deci- sion framework the author must necessarily treat major decision areas such as pricing and investment appraisal at a descriptive level, which rather re- stricts the professional engineer from becoming ac- tively involved in the decision process. The de- velopment of the analysis of business decision

54 MANAGERIAL AND DECISION ECONOMICS, VOL 3, NO. 1, 1982 @ Heyden & Son Ltd, 1982

seems ripe for a synthesis that will enable the various involved professionals to better understand each others skills and provide an appropriate envi- ronment for synergy.

The treatment of complex decisions leaves con- siderable room for misunderstanding. For example the analysis of advertising gives the impression that total revenue is unaffected by advertising, while the analysis of investment appraisal fails to point out the relationship between the discount rate and op- portunity cost. The temptation to fall back on state- ments such as ‘for a variety of reasons’ and ‘it can be shown that’ is best avoided.

As a guide to commercial understanding in a brief and easily assimilated form this book can be firmly recommended. To the student who wishes to become actively involved in the decision making process and requires more than a passing know- ledge, there are other more substantial texts availa- ble in a similar price range.

Stephen Hill - UWIST, UK

K. I. S A M S Reviews

Incomes Policies, Mation and Relative Pay

J. L Fallick and R. F. Elliott (Edftors), Inwmes PoUdes, Inflation a d Redative Pay, AUen and Unwin, London, 1981. pp. 284. Hardbad €14.00, Paperback €5.95.

A number of distinguished scholars have produced this interesting and timely book. It consists chiefly of nine chapters, each relating to a separate aspect of incomes policy, and a valuable historical Appen- dix setting forth the c o m e of UK incomes policies in the post-War period. The volume has both theoretical and empirical content; UK and foreign experiences of incomes policies are discussed.

The first chapter contains a theoretical discussion by Professor M. J. Artis. It is designed to examine the rationales for incomes policy that are suggested by economic analysis. The survey begins with the ‘wage theorem’ view suggested by Keynesian theory, proceeds to a discussion of the Phillips curve in its ordinary and augmented forms, and then outlines and appraises the real wage hypothesis. The question of incomes policy and distribution is then examined; certain side-effects of incomes policy (on productivity and efficiency) re- ceive a short mention.

Dr S. G. B. Henry has contributed Chapter 2. His objective is to study incomes policy and aggre- gate pay, using econometric models of wages and earnings. His paper contains a description of cur- rent models of inflation which are then estimated Won using, so far as is possible, a common data

base. The empirical work is confined to UK experi- ence. Policy conclusions are then noted. The writer seeks to demonstrate that certain of the more im- portant research undertaken in this field is in some respects inadequate: in particular, there are criti- cisms of aspects of the work of Parker, Sumner and Ward. The author considers that the evidence indi- cates that incomes policies have their planned effects, but only whilst they are in operation: they tend to be followed by a period in which losses of real wages are restored.

Chapter 3 is concerned with the effects of incomes policy on the relations between the public and private sectors of the British economy. It is written by Mr A. Dean. The author examines public and private sector pay with emphasis on .the experience of the 1970s. Incomes policies in the public sector are then surveyed; matters such as the alleged discrimination practised against that sector in periods of incomes policy are discussed. The writer then considers the relationship between public sec- tor pay and the control of public expenditure, argu- ing that the problem of public expenditure control has been worsened by large and erratic movements in public sector pay: such pay is ‘right at the heart of both incomes policy and public expenditure con- trol’ (p.70).

In Chapter 4 Dr K. Mayhew examines the prob- lem of UK incomes policy and the private sector. The author assesses the extent to which incomes policies distort differentials within plants or firms and relativities between plants and occupations; the allocative importance of relative pay is examined; and other ways in which the disruption of pay relationships might affect the private sector are considered. Dr Mayhew argues that there is little evidence to suggest that incomes policies have dis- turbed differentials or relativities for anything other than the short run. The author notes that concern about comparability is strong, especially at local level, and it is possible that because of such feelings incomes policy may have a deleterious effect on the conduct of collective bargaining: yet, the author argues, it is difficult to find consistent long-lasting effects. There seem to have been no profound in- fluences on the structure of trade unions or on the distribution of power within them.

Chapter 5 consists of a paper by the Editors. The subject is UK incomes policy and the public sector: the authors provide an examination of the be- haviour of the public sector in periods of incomes policy by concentrating on the methods of pay determination in that sector. They stress the com- plexity of public sector pay determination and argue that the imposition of incomes policies has generated short-term and long-term anomalies leading to problems in pay settlements and indus- trial relations.

Chapter 6, by R. Steele, is on incomes policy and low pay in the UK. The author notes that every formal incomes policy since 1965 has acknowledged

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