1939] AN ESSAY IN DYNAMIC THEORY This question of the possible divergence of ea post inte saving must be kept entirely distinct from that of the varia tions in s in the different phases of the trade cycle, which not only are admitted, but also play a part in the argument. &may vary because the level of income or of profit is abnormally swollen or The neglect of these possible divergences has no importance for the argument, since they will have the same effect on growth as the divergences of Cp from C for which they may serve as substitute. Thus if G exceeds G o, the right-hand side of the equation must exceed &/C. If the whole of this effect is found in C, it will be less than C, and this is a stimulus to expansion. 1 Firms finding themselves short of stock or equipment will increase their orders. If. on the other hand, the whole of this effect found in a divergence of ex post 8 from ex ante 8, ea post s will be greater than ea ante 8. Savers will find that they have saved more than they would have done had they foreseen their level of income or the level of prices correctly. Consequently they will be simulated to expand purchases, and orders for goods will conse- quently be increased. Throughout the following pages the reader, whenever he finds a reference to the excess or deficiency of Cp compared with C, may substitute, if he prefers it, a su deficiency or excess of ex post saving compared with ex ante saving without affecting the course of the argument 9. We now come to a point of major importance, constituting he difference between the dynamic equilibrium(warranted rate of growth)and the static equilibrium. Normally the latter is stable and the former unstable. This gives a prima facie reason alys Some recent writers have been disposed to urge that the static quilibrium is not so stable as is sometimes claimed. Suppose hat an increased output of a commodity, constituting a departure from equilibrium, is tried, so that its supply stands at a point at which the supply curve is above the demand curve. It is argued that, instead of a relapse at once occurring, reducing supply to the point of intersection of the supply and demand curves this showing the stability of the old equilibrium-the upshot depends on how all parties now proceed. It is suggested that there may be a tendency to waltz round the point of intersection or, more broadly, that in the backward adjustment there may be 1 The reader who is surprised that an excess of G over Gw is stimulating will find the explanation in the next paragraph