ABSTRACT
This chapter argues that obsolete capital goods should play a substantial role in modelling a growing economy where changes in capacity utilization depend on driving deviations of demand and income distribution from normal values. A simple approach to variable capacity utilization has been adopted in slightly different variants, either explicitly or implicitly, in many works which aim to extend Keynes theory of effective demand to the long period and to a growth theory. Obsolete machines are ubiquitous and their number is an important component of the capital stock of any capitalist economy, in comparison with the available non-obsolete machines. In the presence of obsolete machines, the margins of changes in capacity utilization driven by changes in effective demand are wider if prices and distribution are allowed to deviate from their long period values associated with free competition and a given conventional wage rate.
