138 EVSEY D. DOMAR wage rates, relative prices, structure of industry, and so on, many of which are in turn affected by the behavior of the variables analyze here. We shall nevertheless assume all these conditions as given and shall mean by the productive capacity of an economy(or an asset)its total output when all productive factors are fully employed under these conditions. 3 The economy will be said to be in equilibrium when its productive capacity P equals its national income Y. Our first task is to discover ne conditions under which this equilibrium can be maintained, or more precisely the rate of growth at which the economy must expand in order to remain in a continuous state of full employment The idea that the preservation of full employment in a capitalist economy requires a growing income goes back(in one form or another at least to Marx. It has been fully recognized in numerous studies (recently made in Washington and elsewhere) of the magnitude of gross national product needed to maintain full employment. But though the various authors come to different numerical results, they all approach their problem from the point of he size of the labor force. The labor force (man-hours worked) and its productivity full employment is to be maintained, national . ala or another, and if the combined rate For practical relatively short- run purposes this is a good method, but its analytical merits are not high, because it presents ally incomplete system: since an increase in labor force or in its productivity only raises productive capacity and does not by itself generate income(similar to that produced by investment), the demand side of the equation is missing. Nor is the difficulty disposed i of by Mr. Kalecki's method according to which capital should increase proportionally to the increase in labor force and its productivity. As) Mrs. Robinson well remarked, "The rate of increase in productivity of labor is not something given by Nature. 5 Labor productivity is not a function of technological progress in the abstract, but technological progress embodied in capital goods, and the amount of capital goods It should undoubted roductive capacity, but i prefer to leave the matter open, because a more pre- cise definition is not entirely necessary in this paper and can be worked out as See his essay," Three Ways to Full Employment""in The Economic of full Employment, Oxford, 1944, p. 47, and also his"Full Employment by Stimulating Private Investment?"in Oxford Economic Paper&, March, 1945, pp. 83 6 See her review of The Economics of Full Employment, Economic Journal, Vol. 55, april1945,p.79