The Basic Mechanism of Income Growth
W H A T exactly is the measurable mechanism whereby the net real national income of the economy as a whole is capable of growing steadily from one year to the next and decade after decade? To answer this question, it will be necessary to secularize and dynamize Keynes' theory of income determination in the operationally significant manner pioneered by Harrod and Domar. Leaving the complications arising from the public and foreign-trade sectors to the next chapter, the present chapter will concentrate on the elucidation of the basic mechanism of income growth by abstracting from those complications. Specifically, let us analyse (a) the technical determination of equilibrium growth, and (b) the 'determinants of determinants' involved.