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

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

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