## Full text: Lecture Notes: Maturity and Stagnation

```LECTURE NOTES: MATURITY AND STAGNATION
J^^Sir Roy^ Harrods theory is a good starting point for an explanation
of maturity. a i gebra
In the following his XKMXjf is a tiny bit complicated by introducing
the concepts of capacity and NKX utilisation.
* . V
We define: Y output volume (i.e. its value in constant prices)
K capacity output ( as above)
2 u= Y /K degree pf utilisation
^ v= I/A K marginal capital coefficient ^<zZ-cofr&t*
Writing each variable with a subscript t we make them all depend on time.
We £btain
+ K*Au t (-,)
XK%
k Kt = (1/U t (A u t /u t ) K| (£)
I t = v^K|
i t = f v / u t )^Xf " V (A u t/ u t^ K t
I t = s t = sY^
T^jh propensity to save s and the capital coefficient v are assu med
to be constants, dividing the last *wo equations we obtain
(v/s u t )(A^t) = 1 + (v/s)^u t / u t ^
A Y t/ ^t =(f/ v ) u t + A V u t (4)
It follows that if the actual growth rate (left side)
is smaller than the warranted growth rate^s/v^u^. at a given rate of
utilisation - say, at the normal or desired rate - than the rate of
utilisation will hatre to decline. Harrod deals with the case where
the rate of growth cannot surpass a certain level for lack of manpower
-the so-called natural rate of growth - and where consequently
and unemployment
the system is driven into dBpression^because the low rate of
utilisation will discourage private investment.
This is a description of maturity even though this term
is not used by Harrod .
```

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