SIL 
PONTIFICIAE ACADEMIAE SCIENTIARVM SCRIPTA VARIA 
welfare function under which the strange properties exhibited 
above could be an optimal choice if only the « real » cons- 
traints of the system. viz. capacity to produce, were to count. 
4. EFFECTS OF CYCLICAL VARIATIONS IN PRIVATE INVESTMENT 
ON THE RATE OF ECONOMIC GROWTH 
In order to illustrate the possible effects of variable private 
investment under a fiscal policy for full employment we shall 
now make a strict, but not entirely unrealistic, assumption 
about the behavior of private investment. We shall assume 
that it is cyclical with variable amplitude around some variable 
(but presumably positive) level. More specifically, we shall 
assume kp to have the following time shape: 
(4.1) ke = A(f) [sin wt+B1, 
where A(#) is some non-negative function and B a constant. 
We want to propose some fairly reasonable assumptions in 
order to determine the factor A(#) and the constant B. We shall 
suppose that when the desire of private investors to invest is 
at its peak, it is sufficiently high to exhaust whatever capacity 
is available for this purpose. When, on the other hand, the 
desire to invest is low, we shall assume that its practical lower 
level is zero. 
The second of these assumptions will be satisfied if we put 
(4.2) 
R= 
The determination of A(#) is a little more complicated. It 
depends on, among other things, to what extent it is possible 
to vary the government parameter m. 
In point of principle the available capacity for ke could 
8]. Haavelmo - pag. 8