W.D.N. Sniadeckich 8, zam. 541/77 n. 10.000
POLSKA AKADEMIA NAUK
Insfyfuf Historii Nauki
Oswiafy i Techniki
ul. Nowy Swiat 72, pok. 9. tel. 26-87-54
00-330 WARSZAWA
Jerzy Osiatyriski
Warszawa, dnia 26 July 1978I
Professor Josef Steindl
Schwarzhorng 10/17
1050 Wien
Dear Professor Steindl,
Thank you for sending me the off-print of your "Ideas and concepts of
long run growth". I read it with great interest. I think your presen
tation of the essence of the J. von Neumann, Harrod, Neoclassics, and
Kalecki variety of growth theories illuminating and very lucid.
On p. 41 /1st complete para/ I’d perhaps mention, next to the impact
of a reduction of the interest rate, that of a reduction in the income
taxation - the more so that the tax reduction argument appeals nowa
days to many as an effective instrument of stimulating the business
upswing and dumping inflation at the same time. As you certainly re
member) Kalecki argued that as invfcase of interest rates, to have a
long-run impact on the trend the taxation of incomes whould have to Is
reduced not once but continuously /and also that these reductions
would influence demand not in toto but only in so far as they increased
spending/.
I am not certain that I follow your argument starting from the 3rd
complete para on p. 44 and continued to the middle of p. 45. For simpli
city I shall assume a closed system /no Import leak in multiplier/.
Additional investments of the innovator, of, say one unit, due to their
multiplier effect rise total investment and profits in a given period
to the amount of, say, three units. Given the capital-output ratio
this will have a negative effect on future investment decisions due t»
the new capacity whether this new capacity is large or small. Thus it
appears to me that the negative effect you mention in the last sentence
of the 3rd para on p. 44 must be felt notwithstanding the magnitude
of the new capacity, the latter depending on the innovator*s initial
investment, the multiplier coefficient and the capital output ratio.
From what follows in paragraphs 5 and 6 /pp.44/5/ it seems to me you
consider there the case of a once and for all Innovative investment
and study the process until the diffusion of that innovation is lahgely
completed. It is true that towards the end of this process the extra
profit of the innovator will disappear and the old m^rk-ups will be
re-establised. But this does not convince me that thpi, as you say,
"the situation generally becomes more favourable to growth", because
once the process is completed all competitors end up with new productive
capacities, which embody new technologies, and this will have a dumping
effect on the utilisation of capacities and hence also on new investment.
Thus I do not see how innovation need not have negative after effects
unless you intruduce a steady stream of new innovations /what you do
subsequently on p. 45/. Indeed I have an impression that in your argu
ment you somewhat escape the difficulty by assuming in the 1st complete
para on p. 45 that the "wage drift" will consume what there is to be
consumed from new capacities /since "workers spend what they earn"/ and
thus the level of capacity utilisation will ultimately remain constant.
However, if this is indeed what you argue - that a redistribution of
national income towards wages will offset the depressing impacj; of new
capacities due to a completed round of innovative investments^/this
could be made clearer to your readers.
./.