Capitalism, Economic Dynamics

By Jerzy Osiatyński; Chester Adam Kisiel et al. | Go to book overview
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A Theorem on Technical Progress [1] (1941)

I
1. The problems of technical progress, like all long-period problems, are usually considered from the angle of long-run equilibrium. This approach is particularly unrealistic in the case of technical progress. If we start from a position of long-run equilibrium and assume some changes in the technique of production, we may establish what will be the 'new' long-run equilibrium. But the results achieved in this way do not help us much in answering the question: what are the actual effects of technical progress upon economic development? For the adjustment which is necessary to reach the new equilibrium will require a certain time, and in the meantime technical progress goes on and therefore the new long-run equilibrium is actually never reached.2. We try in this paper to consider certain problems of technical progress without assuming long-run equilibrium but considering a more general case of long-period dynamic process. We make, however, certain simplifying assumptions about the economic system considered.
(i) We assume that this system is closed.
(ii) We assume that the short-period marginal-cost curves are horizontal over the relevant range of output. (This is obviously possible only with imperfect competition and oligopolies, for under perfect competition the increasing part of marginal-cost curve must be reached by any working firm.) According to recent information,1 this assumption seems to be realistic except, of course, for firms which--in prosperous times--work up to capacity. But since the percentage of such firms is usually small, we shall not much distort reality if we neglect their influence.

It is necessary to notice that by our assumption we confine our considerations to a dynamic process under conditions of less than full

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1
See e.g. the abstract of Prof. J. Dean's paper at the Philadelphia meeting of the Econometric Society, Econometrica, Apr. 1940, p. 188.

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