Full text: Study week on the econometric approach to development planning

In planning for the future, we should recognise, first, that 
what we do now affects to some extent what we can do in the 
future and, second, that what we shall want to do in the 
future, and what facilities we shall have to do it with, becomes 
less and less clear as we try to imagine times which are more 
and more remote. We cannot work forward into the future 
without setting a target and we cannot derive this target from 
the remote future because we have no information about it. 
Accordingly, we have set up our model of growth in two parts, 
and our solution comes from iterating between them. One part 
is concerned with the rates at which the outputs of different 
products might grow after a transitional period ending, say, 
in 1970; this is the long-run or steady-state model. The other 
part is concerned with the problem of adapting the economy 
during the transitional period to meet the initial conditions 
of the steady state of growth; this is the short-run or transient 
The structure of these two models and the relationship be- 
tween them can best be seen by concentrating on essentials and 
leaving all detail for subsequent treatment. The two structures 
are shown in diagram 3 below. 
Each structure involves a building block for each period, 
containing five components: assets, labour, output, investment 
and consumption. We can describe the relationships between 
these five components in two ways. On the one hand we may 
say that given amounts of assets and of labour enable us to 
produce a certain amount of final output which will be absorb- 
ed either by investment or by consumption: this is the order 
that appears in the transient model. On the other hand we 
may say that investment and consumption add up to final out- 
put and that, given the labour available, the production of this 
output will require certain quantities of assets: this is the order 
[1] Stone - pag. 28

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