5, 
4 
PONTIFICIAF ACADEMIAE SCIENTIARVM SCRIPTA VARIA - 2. 
is to be interpreted from a welfare point of view, could be a 
subject of considerable speculation. 
Another obvious characteristic of the model is that the part 
of total product which is consumed will, on the average, be 
the higher the larger is the share of private investment. But, 
consumption too, will be cyclical and will not be based on a 
consideration of the actual resources that the consumers, taken 
together, have at their disposal at any time. 
5. REMARKS ON POSSIBLE EFFECTS OF INDUCED PRIVATE IN- 
VESTMENT 
It might be argued that the assumptions made about private 
investment, kp, in the preceding section are unreasonable be- 
cause no account is taken of the possibilities of induced invest- 
ment. Such investment could have two main components. The 
first of these, relating investment to the level of total production 
activity, could be based on the hypothesis that when total 
activity is high, profit expectations are high, making some la- 
tent investment projects more attractive. The second main 
component could be some kind of acceleration effect. 
Without going into details it is, nevertheless, fairly obvious 
row such elements of induced investment would work in the 
model framework considered. Roughly speaking, the effect as 
far as the maximum need for deficit spending () is concerned, 
would be similar to that of a combined increase in « and in 8. 
As for the rate of growth of K, the effect (under a fiscal policy 
for full employment) would be similar to an increase in 3. 
Of course, one cannot say, without further investigation, 
whether the absolute magnitude of the cyclical variations in 
total investment, or the absolute maximum level of m at any 
given time, would be larger or smaller than they would have 
been without such induced investment. The obvious reason 
8] Haavelmo - pag. 12