Description: Abstract: This article analyzes the relationship between real interest rates and real growth rates in wages. The stationary of these time series has been discussed in the literature. However, since the net discount ratio, (1 + gτ)/(1 + rτ), is a nonlinear transformation, it is not necessarily stationary even if the interest rate and growth rate in wages series are each stationary. On the other hand, the net discount ratio may be stationary even if the interest rate and growth rate series are both non-stationary. The significant finding of this article is that this ratio is stationary. This conclusion appears robust since it holds for at least four different Treasury securities analyzed: three month, six month, one year, and three year. Therefore, a real net discount ratio, (1 + gτ)/(1 + rτ), can be used with confidence in constructing present value forecasts of expected earnings.

Description: This article discusses net discount rates. Abstract: Gamber and Sorensen provide evidence suggesting that the net discount ratio experienced a level shift in the mean between 1977 and 1981. If such a shift occurred, the nonlinearity in the data shows up as a failure to reject the null hypothesis that a unit root is present; that is, the series is I(1). In this reply, evidence is presented - the Phillips-Perron test and a univariate version of the Stock-Watson q-test - suggesting that the net discount ratio is stationary. Hence, the mean is constant. In addition, if one extends the analysis to include the 1989 through 1993 period, the net discount ratio appears to be reverting.

Description: This article discusses input substitution in irrigated agriculture in the high plains of Texas. Abstract: The adaptability of irrigated agriculture in the High Plains region of Texas in the 1970-80 period is analyzed by estimating Allen partial elasticities of substitution for five key inputs (water, labor, center pivot, furrow, and wheel roll systems) used to produce two crops (cotton and grain sorghum). The results indicate that farmers have adapted to changes in a manner generally consistent with prior expectations concerning complementarity and substitutability among inputs. The output-constant price elasticity of water demand was statistically significant but relatively small (-.25).