Full text: Distribution and Growth

4 
Let us for simplicity distinguish between ordinary 
investment y and innovative investment y. The special virtue 
of the latter is that it may with a rather long lag 
stimulate further innovative investment. The innovative 
investment will enter the business cycle equation as a 
term on the right hand side: 
Ay(t) + By(t-1) + Cy(t-2) = y(t) (1) 
The innovative investment is now determined separately 
by a random process. It will depend on past innovative 
investment with a long lag,and on the growth of the 
economy in the interval between the generating and the 
generated innovative investment. The generation of new 
innovative investment will happen with a certain probability 
and the lag will also be randomly distributed. We shall have: 
Prob { y(t+9 ) < v *^ t + " - 7 } = (1-e _V ) ( 1-e -0 ) (2) 
y(t) 
On the right hand side of equation (1) there will be not 
merely a random term but the result of a random process, 
which moreover will depend on the past growth of the 
economy. In addition we shall also have to allow for 
spontanouly arising innovative investment. Finally also 
symmetrical shocks as they are usually assumed in the 
trade cycle generation have to be assumed. 
These brief hints are but a small step in rendering the 
idea of a sfmi-autonomous trend more concrete. 
According to this idea it makes sense to apply the concepts 
of endogenous change, such as savings propensities and 
income distribution, the response of investment decisions 
to excess capacity, profits etc. even
	        

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