Chapter

The Optimum Rate of Investment and Growth

Maurice FitzGerald Scott

in A New View of Economic Growth

Published in print June 1991 | ISBN: 9780198287421
Published online November 2003 | e-ISBN: 9780191596872 | DOI: http://dx.doi.org/10.1093/0198287429.003.0015

Series: Clarendon Paperbacks

 The Optimum Rate of Investment and Growth

More Like This

Show all results sharing this subject:

  • Economic Development and Growth

GO

Show Summary Details

Preview

Using post Second World War data for the USA and the UK up to 1973, marginal social returns to investment are tentatively estimated to have been about 13% per annum, and marginal post‐tax shareholder returns less than half of this. The large gap between these was due to four factors: taxation accounted for about a third, a learning externality for about two‐thirds, a market externality for rather more than a third, and animal spirits roughly negatived that. If all four factors could have been overcome, investment would have been far higher and growth perhaps 2% per annum faster in each country, though whether this would really have been optimal is doubtful. Nevertheless, governments should consider taxing savings less and increasing their own rate of saving. Other views of optimum growth, such as the Golden Rule, are attacked.

Keywords: animal spirits; Golden Rule; government saving; learning externality; marginal shareholder return; marginal social return; market externality; optimum growth; taxation

Chapter.  25329 words. 

Subjects: Economic Development and Growth

Full text: subscription required

How to subscribe Recommend to my Librarian

Buy this work at Oxford University Press »

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.