Economic development and deliberate policy to accelerate its pace are relatively recent concepts, but the facts of development and economic policies to bring it about are, of course, ancient. Mercantilist, Colbertian, cameralism Smithian policies, all had in mind what now is called development; and much of the discussion of the stages of growth with which German economists during the nineteenth century were so preoccupied is obviously a preoccupation with growth at a time at which pure theory concentrated on the allocation of resources and on slowly developing an intellectual apparatus of which one could cease to be ashamed.

Contemporary reaction to the Homestead Act was complex in the United States, and the judgment of posterity has included much negative criticism. Whatever the real merits and defects of the Act, its impact on public opinion in Europe was not necessarily in keeping with the facts as they unfolded in America. European reactions to the famous Act are much less known than is the case with American public and expert opinion on the same subject. Standard literature on emigration and on the American image in Europe invariably stresses political freedom and economic opportunity as main motives for emigration. The Homestead Act is in most cases mentioned only in passing, as one among several factors in the motivation of prospective emigrants. In some cases it is claimed to have been a major motive but without evidence to bear out how important it was.

Anyone interested in the historical anlysis of the emergence of a wage labor force in the early stages of industrialization will find much of interest in Rashin's study of the Russian case. The value of this study, an expansion and elaboration of a work published in 1940, lies in both over-all and sector estimates of the growth and composition of the work force, and in detailed data on specific aspects of the movement from the land to the factory.

The pamphlet literature and the public documents of our early national period show that in spite of repeated instances of governmental interference in economic life, a great deal of thinking was being done along laissez-faire lines. This thought was unsystematic. It was pragmatic rather than philosophical, never doctrinaire, concerned primarily with defending and attacking specific measures of public policy. Nevertheless, it was serious thought, and in many instances had an important influence on legislative action. It was not restricted to any political group, but pervaded to a greater or less degree the thinking of all leaders of the community. Owing little to the teachings of contemporary European economists, American libertarianism deserves analysis as an indigenous body of theory, growing out of, and adjusted to American conditions.

In their comment Curran and Johnston raise two general points. They suggest (1) that my main conclusions are not substantiated by statistical tests of stability, and (2) that the specifications used in my analysis are inappropriate.

Let me summarize my reply. With regard to Curran and Johnston's statistical tests for the structural stability of my money model, there are three major points. First, in using the Chow test for structural stability the authors do not use the relevant statistical information to carry out the test, so the results they derive are not the appropriate test of the economic hypotheses. I on the other hand report and interpret the results of the relevant Chow test that uses the appropriate statistical information and lends support to my hypothesis that the Bank War altered the public's liquidity preference. Second, Curran and Johnston do not correctly analyze and interpret their own results. Actually, the implications of their own evidence support my original hypothesis that the Bank War caused a shift in the liquidity preference of the public. Third, although the Chow test is a statistical test for stability, in this case it is not a direct test of the economic question at hand; that is, it is a weak test. I therefore provide a more direct statistical F test that provides evidence to support my hypothesis that the Bank War caused the Panic of 1837 and that refutes the Temin hypothesis that the Bank War left monetary behavior unaffected.1 Furthermore, the empirical evidence demonstrates that banks were quite interest sensitive during the years prior to the Bank War and that the Bank War altered commercial bank behavior before 1837 in a manner that, coupled with the shift in the public's liquidity preference, culminated in the Panic of 1837.

In recent years there has been a resurgence of interest in the phenomenon of economic growth. The interest was sparked by the introduction of new models by Paul Romer and Robert Lucas. The neoclassical Solow growth model, despite its influence over the years, has a fundamental flaw: growth is determined exogenously. The new models by Romer and Lucas solve for the growth rate of the economy endogenously. In these models, due to spillovers in capital or in human capital, growth can go on indefinitely. In a later work, Romer argued that increasing returns are necessary elements in models of technological innovations, which in turn form the foundation for endogenous growth models. The theoretical innovations in modeling growth stimulated a significant body of empirical work.

Susan Linz and I are fascinated, if somewhat puzzled, by Edward Saraydar's comments on our research note “The Cost of World War II to the Soviet People” (this Journal, 38 [Dec. 1978]). His comment demonstrates what we ourselves discovered: that there are many ways to measure war costs. We are pleased to note that Saraydar apparently accepts the fundamental conception that we presented of the cost of the war to the population. We are also pleased to see that, despite his criticisms, the range we presented for the cost of the war (that is, 3.2 to 7.4 years' earnings of the 1940 Soviet labor force) stands up quite well as lower and upper bounds.

From the days when John Hawkins peddled slaves at the cannon's mouth along the Spanish Main, the economic potentialities of Latin America have been a perennial lure to the mariners and merchants of northern Europe in general and to the English in particular. To them it seemed almost immoral that opportunities were being wasted there that could have been exploited to the advantage of both sides of the Atlantic. As long as those monopolistic colonial systems of Spain and Portugal lasted, contacts with the British had to remain spasmodic and often outside the law. The crop of revolutions that freed Latin America shortly after 1800 at last created a maritime and commercial vacuum. The English had done much to bring this about, and they were to do even more to exploit it. The economic development of Latin America during its first century of independence was thus greatly accelerated by the efforts of the British to secure new markets for their manufactures and new cargoes for the merchantmen flying their red ensign.

I am in entire sympathy with Mr. Nef's emphasis on historical synthesis or over-all interpretations, which is certainly in order after a period in which analytical fragmentation has been so stressed. We are also in agreement concerning the need for a study of the interrelationships between various aspects of history that are now usually treated as specialties.

Historians of medieval prices have relied very heavily on grain prices, which are abundant and easily available. In France, for example, there is an impressive run of biweekly figures from the grain market at Albi. A different category of data, that has not received much attention, concerns the cost of travel in fourteenth-century France.