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- Title
"THE NEW VIEW OF INVESTMENT": COMMENT.
- Authors
Matthews, R.C.O.
- Abstract
The article comments on the article "The New View of Investment: A New Classical Analysis," by Edmund S. Phelps, published in the November 1962 issue of the "Quarterly Journal of Economics." It informs that it has been suggested by a number of writers that if part or all of technical progress requires to be embodied in new machines, a rise in the propensity to save may contribute to raising the level of output not only by raising the capital/labor ratio on machines of a given vintage but also by lowering the average age of machines, thus increasing the proportion of the capital stock that embodies the latest technology at any time. The article aims to show that on the type of assumptions used by Phelps this conclusion is valid in an economically significant sense only if the elasticity of substitution between labor and capital is equal to unity (as it is in his model). Phelps offers a proof that the average age of the machines in existence under steady growth depends only on the rate of growth and the rate of depredation.
- Subjects
TECHNOLOGICAL innovations; ECONOMICS literature; PHELPS, Edmund S.; LABOR; INVESTMENTS; CAPITAL stock
- Publication
Quarterly Journal of Economics, 1964, Vol 78, Issue 1, p164
- ISSN
0033-5533
- Publication type
Article
- DOI
10.2307/1880552