PONTIFICIAE ACADEMIAE SCIENTIARVM SCRIPTA VARIA - -
future. In terms of the highly simplified account I am now
giving, the purpose of the steady-state model is to determine
the minimum initial stock of assets required in the post-transi-
tional period. This initial stock is, of course, the same as the
terminal stock of assets of the transitional period and is shown
in the left-hand top corner of the lower half of the diagram,
also enclosed in a double square to indicate that it is the link
between the two models.
Our first step is to use the steady-state model to determine
the stock of assets that must exist at the beginning of 1970.
This is done on the assumptions that consumption is to take
a certain value in 1970 and to grow steadily at a given rate
from 1970 onwards. For this rate to be possible, there must
take place in 1970 a certain amount of investment which can
be thought of as determined by the stock of assets and work
in progress needed at the beginning of 1971, which in turn is
determined by the assets and work in progress needed at the
beginning of 1972, and so on. In fact the whole future of the
structure of assets is involved although, if we do not try to
push the rate of growth of output up to the technological ceiling
of the system, we may expect subsequent requirements to have
a rapidly diminishing influence on the assets needed at the
beginning of 1970.
Once we have determined these initial assets which, given
the labour force and the technology expected to be available
in 1970, will depend partly on the level of consumption in 1970
and partly on the rates at which its components are to grow,
we can pass to the transient model. We have a known stock
of assets in the base year and a required stock at the end of
the transitional period. Given the labour force and technology
expected to be available throughout the transitional period, we
now try to maximise consumption over this period subject to
the base-year stock of, and terminal requirements for, assets;
and subject also to some restriction on consumption, for
[1] Stone - pag. 30