National Income and Flow-of-Funds Analysis

By John P. Powelson | Go to book overview

Chapter 15
THE STRATEGIC ROLE OF INVESTMENT

The aim of this chapter is to discuss the economic goals of society, to point out the strategic role of investment in achieving full employment and growth, and to show how Keynesian doctrine influences the belief that goals are not necessarily achieved by an automatic process. A subsidiary purpose is to show how certain elements of Keynesian theory can be illustrated within the framework of the national product accounts. Although no knowledge of Keynesian economics is presupposed (other than what has been covered in earlier chapters of this book), it is not the purpose of this chapter to teach Keynesian theory; nor does the author pretend that his discussion of wage and interest theory is complete. For further study of Keynesian economics, the reader is referred to other sources.*


ECONOMIC OBJECTIVES

What are a nation's economic objectives? Your answer to this question probably reflects your philosophical idiosyncracies, as well as those of the generation and country in which you live. At all times and all places, you might say they ought to include supplying people's wants and making them happier. But this is a vague statement, which begs the practical question of whose wants we shall satisfy first, and what it is that makes people happier. If you had lived in the United States during the thirties, you would probably have stressed the quest for full employment. In the early forties you might be concerned with carrying on a war. In the latter forties there would be a question of supplying consumer wants and expanding capital equipment, and in the fifties it might be the problem of inflation amid occasional recession. If you lived in India or in certain Latin American countries, you might stress the need for massive capital investment to convert an agrarian economy into an industrial one, while in the

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*
Try, for example, John Maynard Keynes, The General Theory of Employment, Interest, and Money, New York, Harcourt, Brace, 1936. Also see Alvin H. Hansen, A Guide to Keynes, New York, McGraw-Hill, 1953.

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