SEMAINE D'ÉTUDE SUR LE ROLE DE L’ANALYSE ECONOMETRIQUE ETC. 563
MORISHIM/
My interpretation of voN NEUMANN's theory of growth is some-
what different from Dr. PASINETTI’s. He says that NEUMANN’s
model does not need any assumption about individual preferences,
which can be accepted as given, whatever they may be. But,
according to my interpretation which, I hope, is an orthodox one,
NEUMANN made drastic homogeneity assumptions, not only on pro-
ductions but also on the consumption side: He assumed that wages
are held at the subsistence level so that necessities of life consumed
oy a worker (the consumption coefficients) are biologically deter-
mined and independent of prices. On these assumptions he showed
‘hat an economy can expand in constant proportions.
Now, in order to make his model more realistic we must, first
of all, release it from the assumption of the subsistence wages. As
people get richer, the proportions in which they divide their expend-
ture between various consumption goods, will depend on prices
because they can now choose among goods); and the proportions
will vary when the per-capita income increases (ENGEL’s law). In
such a situation, it will be wiser and more profitable to forget as
a first approximation the effects of the per-capita income on the
consumption coefficients and to take full advantage of the assump-
ions for simplification than to confront the actual world directly
and to loose one’s way in its complexity. I believe it would be
aseful in making economic policies as well as in advancing theories
0 have found that a Neumannian growth equilibrium with constant
proportions is still possible even when the consumption coefficients
lepend on prices, unless the income-elasticity of the demand for
some consumption good is different from unity. It is of course
tue, however, that a second step toward the reality should take
account of increasing or decreasing returns to scale on the produc-
ion side and of deviations of the income-elasticities from unity on
‘he consumption side.
9, Morishima - pag. 35
