The Investment Function

  • Douglas Fisher


The theory discussed in Chapter 4, on the production function, can also form the basis of a study of the demand for labour and the demand for capital, whether the equipment, structures, inventory, or cash of business firms, as well as, by stretching a point, the demand for consumer durables, including especially that for housing. We may, for businesses at least, assume a profit-maximizing neoclassical aggregate firm and investigate its optimal capital and labour decisions; we may also adopt a cost-minimization framework, and this is often recommended on account of its ease of manipulation (and the existence of certain types of data). Note that we get from the profit/cost framework to the investment decision of the aggregate firm by introducing some explicit dynamics involving both (a) a formal stock flow dimension and (b) lags in decision-making and in implementing capital spending (once decisions to invest have been made). These matters will be taken up in Section 5.3, after we have considered some of the work prior to the synthesis now in common use; this latter may be referred to as a “neoclassical investment function” with a “flexible accelerator” mechanism.


Interest Rate Monetary Policy Housing Market Real Interest Rate Capital Gain 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Copyright information

© Douglas Fisher 1983

Authors and Affiliations

  • Douglas Fisher
    • 1
  1. 1.North Carolina State UniversityUSA

Personalised recommendations