A Device which is much used in growth theory is the comparison of steady-state growth paths. This is the equivalent for dynamic theory of static comparisons between firms or industries in long-run equilibrium. Where a firm or an industry is in long-run static equilibrium, it is possible to specify its inputs and outputs precisely, and to use these results to compare firms or industries in differing conditions to ascertain the long-term effects of a variety of influences. Many of the conclusions of microeconomics depend on this kind of analysis, but it suffers from two major weaknesses.
KeywordsLabour Force Production Function Technical Progress Growth Theory Growth Path
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- 1.R. F. Harrod, ‘An essay in dynamic theory’, Economic Journal. vol. XLIX (Mar 1939).Google Scholar
- 1.See R. M. Solow, ‘A contribution to the theory of economic growth’, Quarterly Journal of Economics, vol. LXX (Feb 1956); and H. G. Johnson, ‘The neo-classical one-sector growth model : a geometrical exposition and extension to a monetary economy’, Economica, vol. xxxIII (Aug 1966).Google Scholar
- 1.R. F. Harrod, Towards a Dynamic Economics (Macmillan, 1948) pp. 22-3.Google Scholar
- 1.See Alvin L. Marty, ‘The neoclassical theorem’, American Economic Review, vol. LIV (Dec 1964), and Johnson, op. cit., for diagrammatic demonstrations of this proposition. See also Joan Robinson, ‘A neo-classical theorem’, Review of Economic Studies, vol. XXIX (June 1962), and the articles by J. E. Meade, D. G. Champernowne and J. Black in the same issue.Google Scholar
- 2.See, for instance, Joan Robinson, The Accumulation of Capital (Macmillan, 1956).Google Scholar
- 1.Harrod, in Economic Journal (June 1939) p. 299.Google Scholar