3 
As already mentioned the possibility of investment without 
additional capacity must be granted. It involves the 
premature retirement of an existing equipment and its 
replacement by a technically superior vintage. Now 
this also implies a shortening of the lifetime or else 
it means reducing the chance of future investment. 
It seems plausible that there are limits to this policy. 
If a lot of equipmeent has been replaced by brand new 
vintages this will for a time make it much more difficult 
to decide on further innovations i.e replacemt by 
newer vintages. The life time cannot be reduced continuously 
and the decision to scraj^ and replace becomes more and more 
difficult. 
..ve 
in fact the replacemt of old by new vintages has played 
a very great role in post-war history of Europe, 
but it is also plausible that this movement must gradually 
have lost force and that it faded out. There remained then 
only the more difficult path of increasing capacity which, 
as argued above, with great probability pushed the investor 
into the quest for foreign markets, using for this purpose 
an aggressive price policy which was made pcysible in many 
cases only by the write offs granted by the tax laws. 
We notice in fact in most countries that in the course of 
the 60s and early 70s the profit margins ( even when corrected 
for the effects of underutilisation ) gradually decreased. 
Significantly, there was a growing discrepancy between 
the development of profits before and profits after taxes, 
which seems to indicate that firms used the tax allowances