The Solow Growth Model: Initial Computations

Comment of the Day: Phil Koop: Hoisted from teh Archives: Joseph Schumpeter on "Liquidationism": "'How very strange it is for Schumpeter to be laying out his depressions-cause-structural-change-and-growth theory of business cycles at the very same moment that he is also laying out his entrepreneurs-disrupt-the-circular-flow-and-cause-structural-change-and-growth-theory of enterprise'...

...Is it not equally odd that he recognizes the necessity of fiscal measures-"...relief: Not only imperative on moral and social grounds, but also an important means to keep up the current of economic life and to steady demand..."-but cannot accept their sufficiency? It is as though he is saying to Keynes, "yes, yes, to be sure, the magneto is broken and the car will not run until it is repaired, but do not let that distract you from the essential task of converting it to a dirigible!"

One seldom sees a clearer example of a keen intelligence deployed to rationalize an untenable position rather than to find one that is satisfactory:

The crucial point of these reforms lies in the coincidence of a political atmosphere exceptionally favorable, and an economic situation exceptionally unfavorable to their success. No doubt they will always be carried amidst enthusiastic clapping of hands. But they will also be stigmatized in the future by their tendency to prevent or retard recovery...

"Yes, in retrospect the measures that I advocate appear to have failed. But that is an illusion! If only the economic situation had been more favourable, such that these measures would have been unnecessary, they would surely have succeeded!" He never notices that this claim is incompatible with the belief that depressions are necessary to purge "maladjustments" and cure moral excesses...


#shouldread

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