A DECADE OR SO ago, when the twin concerns about the balance of payments of the United States and the functioning of the international monetary system began to impinge on the consciousness of a public theretofore indifferent t o such esoterica, the opinions of those who were already paying attention fell into a neat dichotomy. Government officials and "men of affairs," on the one hand, insisted that the continued health of international trade, investment, and the world economy required the maintenance of the Bretton Woods system of pegged exchange rates, under which changes in rates were made infrequently and as a last resort. Academic experts, on the other hand, were nearly unanimous in pressing the advantages of greater flexibility of exchange rates, with many urging that governments abstain altogether from intervention and allow exchange rates to be determined by the interplay of supply and demand in the marketplace, just like any other price. The specter of competitive depreciation left over from the 1930s was replaced by concern about the rigidity of mechanisms for payments adjustment under the Bretton Woods system. Furthermore, the postwar wave of "elasticity pessimism" had given way to "elasticity optimism" as new empirical studies, better specified and using more sophisticated statistical techniques than their predecessors, indicated that demand elasticities were indeed high enough to ensure exchange-market stability and thus the effectiveness of exchange-rate changes as an instrument of balance-of-payments adjustment.