Professor Meade on Economic Growth

Professor Meade's analysis of economic growth is a substantial advance over the growth models which have appeared in the last decade. The core of the analysis, compressed into a fifty page mathematical appendix, will be read by students for many years. It is the purpose of this extensive review to describe his apparatus in nonmathematical terms, adopting a number of diagrammatic devices to this end. In addition I shall show that Meade's use of the traditional apparatus of neo-classical capital theory has shed new light on that theory and allows the resolution of a number of historic conflicts. We have become accustomed to growth models which elaborate Harrod's relation between the propensity to save and the marginal capital-output ratio. These models show us the unfortunate consequences which arise when growth fails to ensure full utilisation of resources. Meade's treatment by-passes this approach. He assumes full employment of resources at all times through the agency of a wise monetary authority in an environment of flexible prices. The authority varies the quantity of money to provide the appropriate interest rate and to stabilise the price of consumption goods. Meade's concern is the set of conditions which must be satisfied to ensure steady growth. His models are truly neo-classical in the sense that continuLed growth of capital and output depends upon the increase of population and the growth of productivity due to technological change. When these exogenous disturbances are absent, the models settle down toward a stationary state, through the process of diminishing returns to the accumulation of capital. In these models the ratio of income saved is dependent solely on the distribution of income. It is assumed that recipients of wage and non-wage incomes each save a constant but differing share of their incomes. Savings are not dependent upon the interest rate except in so far as the interest rate is itself one of the determinants of the distribution of income. Even then savings are not necessarily zero when the interest rate is zero. This raises a question about the stationary state. While under certain conditions these models may indicate a movement toward the stationary state, the possibility of arriving there with a non-negative interest rate requires that all savings (workers' and capitalists') diminish to zero. It is not clear how this

Agency (philosophy) · Capital (architecture) · Consumption (sociology) · Economics · Macroeconomics · Microeconomics · Neoclassical economics · Productivity · Set (abstract data type) · Economic theories and models · Economic Theory and Policy

• Patriotism and Neo-Traditionalism in Buganda

  Open Access•I R Hancock•The Journal of African History•1970

  Incluir item