Investment Theory: An Integrative Framework

  • Marcel Savioz
Part of the Studies in Contemporary Economics book series (CONTEMPORARY)


The investment good market, together with the consumer good market, the money market and the labour market, are indeed the most extensively studied markets. The exhaustive survey of investment theory by Eisner and Strotz, already quoted four hundred references in 1963, although this work advocating for adjustment costs, was in fact only carried out at the very beginning of modern investment theory! This chapter gives an introduction of the extensive field and is an attempt to present some key ideas of investment theory.1) We show that modern investment theory is the integration of many traditional approaches.


Capital Stock Investment Equation Adjustment Cost Shadow Price Time Path 
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  1. 1).
    Recent surveys are: Abel (1988), Coen and Eisner (1987) Artus and Muet (1984). The book on investment theory by Nickell (1978) is outstanding. (1970), Hirschleifer (1970), Eisner and Strotz (1963), Haavelmo (1960). Readings and collected essays are: Artus and Muet (1986), (1990), Bombach, Gahlen and Ott (1980), Helliwell (1976).Google Scholar
  2. 2).
    Savioz (1988) is a survey of investment theory from a historical perspective.Google Scholar
  3. 4).
    This picturesque terminology is borrowed from Tobin (1967).Google Scholar
  4. 9).
    For recent introductions to dynamic optimization with economic applications, see Beavis and Dobbs (1990), Feichtinger and Hard (1986), Seiersted and Sydsaeter (1987).Google Scholar
  5. 13).
    The Q investment demand can be traced back to Keynes (1936). Notable work on Q-investment demand are: Tobin and Brainard (1977), von Fürstenberg (1977), Ciccolo and Fromm (1979), Summers (1981).Google Scholar
  6. 16).
    Mussa (1977), anticipating the results of Abel (1979), first derived such an equation.Google Scholar
  7. 17).
    The “microeconomic foundation of the accelerator” was a main target of the adjustment costs literature: Eisner and Strotz (1963), Lucas (1967a), (1967b), Gould (1968), (1969), Mortensen (19’73), Treadway (1969), (1970), (1971), (1974).Google Scholar
  8. 18).
    See Treadway (1969) for an investment model with returns to scale varying with the size of firm.Google Scholar
  9. 24).
    Typical work on the Keynesian investment hypothesis are: Clower (1954), Witte (1963), Hansson (1986), Precious (1987).Google Scholar
  10. 29).
    Arrow (1962), (1964), Jorgenson (1963), (1967) are the classical references.Google Scholar
  11. 32).
    See Abel and Blanchard (1986) for empirical evidenceGoogle Scholar
  12. 35).
    The classical references on investment and irreversibility are Arrow (1968) and Nickell (1974a), (1974b), Leban and Lesourne (1980).Google Scholar
  13. 36).
    Classical references are: Zagamé (1977), Blanchard and Sachs (1982), Artus and Muet (1984), Malgrange and Villa (1984), D’Autume and Michel (1985), Precious (1985)Google Scholar
  14. 37).
    This terminology is borrowed from Hayashi (1982)Google Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 1992

Authors and Affiliations

  • Marcel Savioz
    • 1
  1. 1.Volkswirtschaftliches InstitutUniversität BernBernSwitzerland

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