ABSTRACT
The basic Keynesian model has probably contributed more to the welfare of the world’s population than any other advance in social science knowledge. The simplest of the models for explaining the continuous expansion of an economic system over time is a model which Roy Harrod was able to construct by taking Keynes’s own model, in particular the multiplier, as his starting point. The warranted growth rate is the rate of expansion that could be maintained indefinitely—if all the assumptions underlying the Harrod-Domar model were to hold. The steady-state rate of expansion given by the Harrod-Domar formula is an even more precarious one than has so far been indicated. The warranted growth rate, it turns out, is predicated some additional assumptions, or necessary conditions. The theoretical construct of a warranted growth rate may help explain the secular trends which can be observed historically.
