The Underlying Economic Theory: The Implications for Inflation, Employment and Growth of a Fall in the Share of Output that is Marketed

  • Robert Bacon
  • Walter Eltis


In 1974–5 the present authors,1 and economists in the Cambridge University Department of Applied Economics,2 and Mr Benn and those associated with him3 all drew attention to various aspects of the de-industrialisation that Britain has experienced and is experiencing. In addition Professor J. Johnston set out some of the implications of a shift in employment from industry to the provision of unmarketed public services in a most interesting model.4


Private Consumption Full Employment Steady Growth Market Sector Current Account Surplus 
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.


  1. 1.
    R. W. Bacon and W. A. Eltis, ‘A Budget Message for Mr Healey: Get More People into Factories’, Sunday Times, 10 November 1974; and ‘Stop—Go and De-industrialization’, National Westminster Bank Quarterly Review, November 1975;Google Scholar
  2. and Walter Eltis, ‘How Public Sector Growth Causes Balance of Payments Deficits’, International Currency Review, vol. 7, no. 1, January—February 1975.Google Scholar
  3. 2.
    See Vivian Woodward, ‘The Need to Avoid Higher Government Employment’, The Times, 7 July 1975;Google Scholar
  4. and (an article based on research by R. J. Tarling, C. J. Allsopp, V. Woodward, J. Morley and D. A. C. Heigham), ‘A View of Industrial Employment in 1981’, Department of Employment Gazette, May 1975.Google Scholar
  5. 3.
    See ‘Tony Benn Writes About Industrial Policy’, Trade and Industry 4 April 1975.Google Scholar
  6. 4.
    J. Johnston, ‘A Macro-Model of Inflation’, Economic Journal, vol. 85, June 1975.Google Scholar
  7. 5.
    The basic account of the classical theory of economic growth is set out in Book II of Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776).Google Scholar
  8. See J. R. Hicks, Capital and Growth ( Oxford University Press, 1965 ), Chapter IV;Google Scholar
  9. and W. A. Eltis, ‘Adam Smith’s Theory of Economic Growth’ (in Essays on Adam Smith ed. A. Skinner and T. Wilson, Oxford University Press, 1975) for modern restatèments of the theory.Google Scholar
  10. 20.
    L. L. Pasinetti, Growth and Income Distribution, Cambridge University Press, 1974, pp. 133–4.Google Scholar
  11. 21.
    The actual equations are set out in detail in R. W. Bacon and W. A. Eltis, ‘The Implications for Inflation, Employment and Growth of a Fall in the Share of Output that is Marketed’, Bulletin of the Oxford University Institute of Economics and Statistics, Vol. 37, November 1975.Google Scholar
  12. 22.
    M. Kalecki, ‘The Determinants of Distribution of the National Income’, Econometrica, vol. VI, April 1938.Google Scholar
  13. 24.
    Joan Robinson, The Accumulation of CapitalMacmillan, 1956, p. 48.Google Scholar
  14. 25.
    See M. Kalecki, ‘The principle of increasing risk’, Essays in the Theory of Economic Fluctuations, London, 1939.Google Scholar
  15. 27.
    K. J. Arrow, ‘The economic implications of learning by doing’, Review of Economic Studies, vol. X XIX, June 1962.Google Scholar
  16. See W. A. Eltis, Growth and DistributionMacmillan, 1973, ch. 6, for an account of further arguments which lead to this result.Google Scholar
  17. 28.
    N. Kaldor, Causes of the Slow Rate of Growth of the United Kingdom (inaugural lecture), Cambridge University Press, 1966.Google Scholar
  18. 29.
    See F. H. Hahn and R. C. O. Matthews, ‘The theory of economic growth; a survey’, Economic Journalvol. LXXIV, December 1964, p. 833, and W. A. Eltis, Growth and Distribution, ch. 11.Google Scholar
  19. 33.
    See W. M. Corden, ‘The geometric representation of policies to attain internal and external balance’, Review of Economic Studiesvol. XXVIII, October 1960, for theaccount of the underlying theory.Google Scholar
  20. 34.
    See T. Wilson, ‘Effective devaluation and inflation’, Oxford Economic Papers, vol. 28, no. 1, March 1976.Google Scholar

Copyright information

© Robert Bacon and Walter Eltis 1978

Authors and Affiliations

  • Robert Bacon
  • Walter Eltis

There are no affiliations available

Personalised recommendations