Within the realm of psycholinguistics there is a need to investigate linguistic performance based on the generative transformational concept of linguistic competence, i.e., based on the speaker-listener's knowledge of his language. Psycholinguistics must determine how underlying knowledge is related to overt performance. The nominalization and compounding processes of English provide an area for experimentation where the psychologist may investigate individual linguistic performance. After a grammatical sketch of compound nouns, the authors report on an experiment analyzing the ability of individuals to paraphrase compound nouns and to recognize paraphrases. A discussion of the results provides insight into individual performance of a particular linguistic operation. The appendix furnishes details of the experiment, and a bibliography is included. (VM)