Study week on the econometric approach to development planning

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Monograph

Identifikator:: 1824422792

URN:: urn:nbn:de:zbw-retromon-217476

Document type:: Monograph

Title:: Study week on the econometric approach to development planning

Place of publication:: Amsterdam [u.a.]

Publisher:: North-Holland Publ. Co. [u.a.]

Year of publication:: 1965

Scope:: XLVII, 1259 S.; graph. Darst.

Digitisation:: 2022

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: A new theoretical approach to the problems of economic growth / Luigi L. Pasinetti, King's College - Cambridge - Great Britain

Collection:: Economics Books

550 PONTIFICIAE ACADEMIAE SCIENTIARVM SCRIPTA VARIA - 28 condition that total expenditure in the system as a whole must be equal to potential total income, also specifies a very definite division of this total expenditure between new investments, replacements and total consumption. Replacements are determ- ined by the rate of wear and tear, and new investments by the rate of change of demand for consumption goods. The sum of these three types of demand — as a proportion of total potential gross income — is required to be equal to unity. The right hand side of (V.11) represents gross equilibrium investment expressed as a proportion of gross potential income and the left hand side the proportion of gross income which is not spent on consumption goods. Let me point out explicitly (since a misunderstanding is possible) that the left hand side of (V.11) may, therefore, be regarded as expressing the saving ratio, but nothing more than that. It must not be interpreted, for example, as a propensity to save. No behavioural relation about savings has been introduced in the present analysis. We have simply been looking for the conditions that must be satis- fied to keep the system in equilibrium, independently of how individuals behave and of how institutions induce them to behave. And our results have been that — whatever individual behaviour may be — the equilibrium conditions are two. First of all, enough productive capacity must be provided, in each sector, to keep up with the expanding demand — condition (V.10). And secondly, given total equilibrium investment re- quired by all the (V.10), the system as a whole must spend on consumption goods the whole remaining part of gross potential income — condition (V.1I1). Total equilibrium investment — i.e. the right hand side of (V.11) — may of course be given the macro-economic inter- pretation we have already discussed. We may say that, in macro-economic terms, (V.11) expresses HARROD’s equation (4). (*) See footnote (1) in chapter III. 10] Pasinetti - pag. 80

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