298 QUARTERLY JOURNAL OF ECONOMICS sponding categories and measures found in the available statistic data are congruent with them. The first such concepts for definition are the industry and the degree of industry concentration. For the purpose of such an hypothesis at least, the industry appears to be primarily a concept of demand- it is a group of outputs which to all (or most)of the buyers of each are generally close substitutes for each other and distant substitutes for all other outputs.6 The industry may be viewed in derivative fashion as a group of firms or divisions thereof, so far as the firms or divisions thereof all produce entirely (or, for rough purposes, almost entirely) within the close-substitute output group. The degree of industry concentration to which our hypothesis refers is the degree of concentration within an industry so defined -e.g the proportion of the combined production volume of such a group of close substitute outputs supplied by one, four eight, or twenty firms To test our hypothesis, we need to identify a number of such industries, obtain a measure of concentration within each of them and obtain also a measure of profit rates earned in producing their outputs. Ideally we might wish to make up theoretically significant industries de novo from the most basic data, and to calculate con- centration measures for them, but the magnitude of such a task has made this impossible for the present. As a result, we are forced to refer to already available groupings of firms or outputs and available measures of concentration within them, and to decide which of these groupings correspond approximately to theoretical industries as defined, or more generally for which groupings the received con ntration measures represent the true theoretical concentration affecting the outputs included. We may then select a sample of such groupings and related concentration measures in terms of which our For the time interval to be studied, 1936-40, the most compre- hensive available data identifying industries and measuring their concentration refer to about 340 manufacturing"industries"identi- fied in the Census of Manufactures for 1935. In addition there are concentration measures available for 1937 for about half of the 3600-odd manufactured"products which the Census recognizes as making up its"industries. Our general problem involves first deciding for which such "industries"or "products"the received group of outputs tied together by high eros elasticities of demand inter se which 7. Butit is quite possible for a firm or even a plant to produce simultaneously