A Device which is much used in growth theory is the comparison of steady-state growth paths. This is the equivalent for dynamic theory of static comparisons between firms or industries in long-run equilibrium. Where a firm or an industry is in long-run static equilibrium, it is possible to specify its inputs and outputs precisely, and to use these results to compare firms or industries in differing conditions to ascertain the long-term effects of a variety of influences. Many of the conclusions of microeconomics depend on this kind of analysis, but it suffers from two major weaknesses.
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- 1.R. F. Harrod, ‘An essay in dynamic theory’, Economic Journal. vol. XLIX (Mar 1939).Google Scholar
- 1.See R. M. Solow, ‘A contribution to the theory of economic growth’, Quarterly Journal of Economics, vol. LXX (Feb 1956); and H. G. Johnson, ‘The neo-classical one-sector growth model : a geometrical exposition and extension to a monetary economy’, Economica, vol. xxxIII (Aug 1966).Google Scholar
- 1.R. F. Harrod, Towards a Dynamic Economics (Macmillan, 1948) pp. 22-3.Google Scholar
- 1.See Alvin L. Marty, ‘The neoclassical theorem’, American Economic Review, vol. LIV (Dec 1964), and Johnson, op. cit., for diagrammatic demonstrations of this proposition. See also Joan Robinson, ‘A neo-classical theorem’, Review of Economic Studies, vol. XXIX (June 1962), and the articles by J. E. Meade, D. G. Champernowne and J. Black in the same issue.Google Scholar
- 2.See, for instance, Joan Robinson, The Accumulation of Capital (Macmillan, 1956).Google Scholar
- 1.Harrod, in Economic Journal (June 1939) p. 299.Google Scholar