93 Pages

Savings, investment and capital in a system of general intertemporal equilibrium


In Section 1.2 we shall introduce for this purpose, the very simple model of intertemporal equilibrium which Hahn put forward in 1982 to counter what he took to be the ‘neo-Ricardian’ critique. This model will allow us to bring out the decisions to save and to invest of any ‘year’ which are implied in an intertemporal general equilibrium (GE).3 In Section 1.3 we shall then define what can be described as the ‘general-equilibrium saving-supply schedule’ and the ‘general­ equilibrium investment-demand schedule’ for such a ‘year’. The detailed deter ­ mination of those schedules – which may be left aside at a first reading – has been postponed to Appendix I and to the Mathematical Note attached to the chapter. Section 1.4 will examine the general information which the schedules provide about the behaviour of the system, while Section 1.5 will deal with the effects on investment demand of changes in techniques and in consumption outputs as intertemporal prices change.