Barkai, Haim
August 1969
Quarterly Journal of Economics;Aug69, Vol. 83 Issue 3, p396
Academic Journal
This article outlines an economic growth model based on the ideas of Scottish economist Adam Smith. Smith's vision of the economic system as an entity which could be represented by a small set of variables and their interrelated functional relationships -- social product, labor, capital, technology, "accumulation" (investment), saving, the profit rate -- is the conceptual framework of aggregate economics to this day. In what follows below, we attempt to single out the strategic hypotheses and theorems of his growth model, and restate them formally. We can thus study the nature of the relationships involved, follow the links which forge the various building blocks into a whole, and finally trace the workings of the integrated structure. The specification of the Smithian aggregate production function indicates the dominant role attributed to capital, and the strategic position of technology, specified as an endogenous variable, in his scheme. An analysis of the saving relation shows that it is different in a crucial sense from the conventional saving function attributed to the classics. The properties of the (implicit) investment function, and the assumed saving investment relationship brings into the open a specifically Smithian version of Say's law. Finally, the study of the time pattern of the model as a whole clarifies the significance of the Smithian version of the "infinity" of investment outlets hypothesis. This puts Smith's belief in tbe eternality of economic progress into its proper conceptual context.


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