ABSTRACT
At the lowest stage of development, where the economy of a country was characterised by abundance of labour and scarce capital, there seemed to be no possibility of doubt as to the most ‘economic’ policy to pursue regarding choice of technique and allocation of investment between industries. In the discussions of recent years among economists in England and America it has been the view that investment-policy should be judged primarily in terms of its effect on the rate of growth that has formed the main ground of criticism of traditional doctrine. There are two limiting factors which experience has shown to be particularly relevant to underdeveloped economies. Firstly, there is the supply of wage-goods available to meet the consumption-needs of workers employed in the investment sector of the economy. Secondly, there is the productive capacity of the industries producing capital goods of all kinds—a productive capacity consisting in the size of the installed capital equipment of this group of industries.
