ABSTRACT
Many of the models of economic growth which have been developed in the post-war period have been concerned with the implications of the capacity-creating effects of investment expenditure for the level and rate of growth of national income. This was the natural next step to take, once the Keynesian questions about the employment-creating effects of investment expenditure in the short run had been answered. Unfortunately, most of these models either ignore, or do not take sufficient account of, the following features of advanced industrial economies:
Manufacturing firms are usually price-makers rather than price-takers.
Capital goods, once created, are specific, not malleable, so that responses to both technical progress and changes in relative factor prices can only occur as additions, at the margin, to existing capital stocks.
Money wages are the outcome of bargaining processes between wage-earners and profit-earners in which the levels of effective demand and employment, and the rate of price inflation, play prominent roles.
The economic process can be viewed as a succession of short periods in which the levels of the principal aggregates, prices and the distribution of income are the outcomes of decisions made, short period by short period, which are themselves influenced by the actual happenings of past short periods and the expected happenings of future short periods.
