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NOTES Introduction 1. "Competition as a Discovery Procedure," in C. Nishiyama and K. R. Leube, eds., The essence ofHayek, Stanford, Hoover Institution Press, 1984, pp. 254-65. Chapter I. The Roar That Became a Whisper 1. Henceforth CBS. 2. See, e.g., James M. Buchanan, "Post-Socialist Political Economy," mimeo, 1991. 3. "Sweden's Stock Market Stunner," The Economist (December 2-8, 1989). 4. See, e.g., H. Ben-Shahar, "The Israeli Economy- A Time for Reckoning," Economic Quarterly 121: 114-23; Y. Yoran, "Economy in Structural Crisis: The Israeli Economy Since the Oil Crisis and the Yom Kippur War of 1973," Economic Quarterly 131 (1987): 827-54; M. Bruno, "Israel's Crisis and Economic Reform in Historical Perspective," Economic Quarterly 141 (1989): 89-113 [all in Hebrew]. Fixing 1973 as the turning point is a novelty in itself. The predominant view used to be that 1977, when Likud ascended to power, constituted the start of the crisis, whereas the years 1975-76 signified the start of a recuperative process. More will be said about this. 5. The detailed data underlying Figures 1.1 and 1.2 is provided in the appendix to this chapter. 6. No figures are available for the period prior to 1960. Source: Central Bureau of Statistics. Gross Domestic Capital Formation in Israel 1950-1978. Special Series No. 635 (Jerusalem, Author, 1980). 7. The impression that rates of change of public sector investment swing more wildly than those of the private sector is not just visual: the sample standard deviation for the public sector is 27.82, whereas the sample standard deviation for the rates of change in private housing investment is 17.5. The coefficients of variation are 256.9 and 189.7 percent for the public sector and total construction, respectively. 8. Bank oflsrael (henceforth BOI), Annual Reporr 1964, p. 240. 9. CBS, Statistical Abstract ofIsrael, 1964 and 1969. 286 Notes 10. CBS, Statistical Abstract ofIsrael: 1964, Table M/6; 1974, Table xiv/5. II. A. Halperin, "The Recession and the Recovery in the Economy," Economic Quarterly 56 (1968): 287-97. 12. Arie Bregman, Industry and Industrial Policy in Israel (1965-1985) (Jerusalem: Bank ofIsrael. 1986) [Hebrew]. 13. BOI, Annual Report 1972, pp. 106-7. 14. Bregman, Industry and Industrial Policy in Israel, p. 25. 15. BOI, Anmwl Report 1975, p. 155. 16. BOI, Annual Report 1974, p. 8. 17. BOI, Annual Report 1973, p. 138. 18. BOI,Annual Report 1975. p. 172. 19. Computed from CBS, Statistical Abstract of Israel 1973, Table VI/2. The calculations were made at constant 1964 market prices. It is important to point out that the share of excess imports in investment does not represent the share of foreign investment in Israel, because a substantial share of excess imports has been financed over the years by unilateral transfers from abroad. Much more will be said about this later. 20. The idea that what is perceived as a recession in 1966-67 was engineered, at least partly, by the government, is expressed in, e.g., M. Sandberg, "Economic Independence and Political Independence," Economic Quarterly 56 (1968): 269-73 LHebrew]; Halperin, "The Recession and the Recovery in the Economy." 21. BOI, Annual Report 1966, p. 321. 22. Bregman, Industry and Industrial Policy in Israel. p. 62. 23. The result is based on a corporate survey, reported in ibid. 24. Ibid., p. 71. 25. Haim Levi, "Capital Structure, Inflation and the Cost of Capital in Israeli Industry, 1964-78," Bank ofIsrael Economic Review 53 (1982): 31-63. 26. Nachum Grosss et al., A Banker for the Nation in Its Revival: The History ofBank Leumi Le'lsrael (Jerusalem: Massada, 1977), p. 357. 27. BOI, Annual Report 1984, p. 122. 28. The daily Ha'arerz (December 9, 1959) [Hebrew]. 29. Ha'aretz (February 26, 1971). 30. According to a report in Ha'aretz (March II, 1966). Notes 287 31. Ha'aretz (October 29, 1967). 32. BOI. Annual Report 1974, p. 41. 33. Ibid., p. 90. 34. BOI, Annual Report 1972, p. 5. 35. 801, Annual Report 1973, p. 211. 36. BOI, Annual Report 1974, p. 41. 37. Data here refer not to the inflation rate during the year, but rather to the increase in the average annual price level. When the rate of inflation is on a continuous rise, the increase in prices during the year outraces the increases of year-on-year averages . The opposite is true when inflation declines. The data are drawn from CBS, National Accounts, various years. 38. BOI...


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