146 EVSEY D. DOMAR 1.If o is equal or reasonably close to 8, the resulting amount of 7 investment of Ya will equal the volume of savings that will be made at that level of income, and equilibrium will be maintained. 8 Thus a mere guarantee of a rise in income(if taken seriously by the investors) will actually generate enough inwestment and income to make the guarantee good without necessarily resorting to a government deficit 2. If o is appreciably below s, investment will probably fall short of savings and equilibrium will be destroyed. The difficulty arises because a full-employment rate of investment in the face of a a<s makes the junking process(discussed on pp 143-145)inevitable, while a mere guarantee of a rise in income, as a general rule, lacks the instrument to force the capital owners to discard their equipment. They will simply invest Yao/s instead of Ya. Only if in the economy as a whole there is a considerable number of products the demand for which is highly elastic with respect to income, and therefore a good number of others the demand for which is negatively elastic with respect to income, will a larger amount than Yao/s be invested and a corresponding amount of capital junked. Of course, if the rise in income is accompanied by shifts in consumers' preferences, the appearance of new products, aggressive competition, and other changes, the junking process will be speeded up but if these changes do take place they m spontaneous investment of their own and the guaranteed rise in income will not be important: still, the assurance of a high and rising income is undoubtedly one of the best methods for aging investment. As explained before, a substantial difference between s and o simply indicates that with the available labor force and the current progress of technology, the maintenance of full employment under a given a requires the accumulation of capital at a faster rate than it can be used As a general rule this applies equally well to both private and public investment, though there may be special cases when, owing to the development of particular consumers'preferences(e.g, for vacations) r to technological reasons (e. g, need for power), or to institutional conditions(as in urban redevelopment), considerable need for public investment still exists. 3 18 There is a slight error in the magnitudes in the text because of the use of 19 As soon as the government enters the picture we find ourselves in a maze of definitional problems. From the point of view of this paper, saving and invest- ment should be understood in reference to the whole economy, including the government, and not to its private sector only. But which governmen tures should be regarded as investment? The difficulty is present in sector as well, except that there we can take refuge in formal definitie cannot be well applied to government. I leave the question open. investment need not be limited to inventories, steel, and concrete