SEMAINE D’ETUDE SUR LE ROLE DE L’ANALYSE ECONOMETRIQUE ETC. 
507 
Assumption 4. The level of public investment activity is 
assumed to be proportional to total « desired savings » in the 
economy when operating at full capacity. The meaning of this 
needs a little further explanation. Available resources at full 
capacity, after allowing for public consumption xo, is equal 
'o (1-ÿ)aK. If an income corresponding to this flow of 
resources were at the disposal of consumers, they would want 
to spend «(1 - Y)aK +f of it for xp. The remainder, available 
for public and private investment activity, would be equal to 
(1—a)(1—7y)aK—_ (which is assumed to be initially positive). 
Our « assumption 4 » can then be written as 
2 6) 
« 
Ro - 
5 j\a —0)(1—y)aK—5 
where 8 is a constant over time. Alternative levels of à (includ- 
ing &=o or &=1) may be considered. 
Under the specifications describing the details of Assump- 
tion 4 the maximum flow of production available for private 
investment would be 7 gM NAN TU 
More special assumptions concerning the nature of fiscal 
policy on the one hand, and the nature of private investment 
activity on the other hand will be introduced in Section 4. 
The simplifying assumptions introduced above are, of 
course, very drastic and grossly unrealistic in many aspects. In 
one respect, however, they are not disturbingly unrealistic, 
namely in their degree of similarity to the kind of models on 
which much of the theory of fiscal measures for full employment 
is based. If this is correct, it would seem of interest and fair 
enough to study the efficiency of fiscal policy under the as- 
sumptions that we have introduced. 
Haavelmo - pag. _