Edited by Mark Blaug and Peter Lloyd
Barbara J. Spencer and Robert W. Dimand INTRODUCTION Robert M. Solow (1956) and Trevor W. Swan (1956, 2002) independently developed the neoclassical growth model. Swan (1956) was published ten months later than Solow (1956), but involved a more complete analysis of technical progress, which Solow treated separately in Solow (1957). The distinguishing feature of the neoclassical growth model is the assumption that inputs are substitutable in production. The earlier growth models of Harrod (1939) and Domar (1946) were interpreted by Solow (1956, p. 65) as assuming fixed-coefficient production technologies that gave their models ‘knife-edge’ equilibria, with the implausible implication that any deviation at all from equilibrium would cause the model to diverge further and further away from equilibrium. However, Swan (1956, p. 343) regretted that ‘some of his [Harrod’s] readers seem to have been misled into the belief that, in Harrod’s model, equality between the warranted and the natural rates of growth can occur only “by a fluke”’ and insisted that his own model only made explicit the implications of a mechanism that Harrod (1948) had ‘stated very clearly’.1 Swan went on to quote Harrod (1948, p. 96) on how a progressive decline in the interest rate (and hence of the marginal product of capital as capital accumulated) would equate the natural and warranted growth rates. Although the models of Solow (1956) and Swan (1956) are fundamentally the same, there are some significant differences, including differences in the diagrams that illustrate the model. The Solow diagram highlights the substitutability...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.