AN ESSAY IN DYNAMIC THEORY 1. THE following pages constitute a tentative and preliminary attempt to give the outline of a "dynamic"theory. Static theory consists of a classification of terms with a view to systematic hinking, together with the extraction of such knowledge about the adjustments due to a change of circumstances as is yielded by the " laws of supply and demand. It has for some time appeared to me that it ought to be possible to develop a similar classification and system of axioms to meet the situation in which certain forces are operating steadily to increase or decrease certain magnitudes in the system. The consequent "theory"would not profess to determine the course of events in detail, but should provide a framework of concepts relevant to the study of change analogous to that provided by static theory for the study of rest The axiomatic basis of the theory which I propose to develop onsists of three propositions--namely, (1)that the level of a community's income is the most important determinant of its supply of saving;(2)that the rate of increase of its income is an important determinant of its demand for saving, and (3)that demand is equal to supply. It thus consists in a marriage of the acceleration principle” and the“ multiplier” theory, and is a development and extension of certain arguments advanced in my Essay on the Trade Cycle 2. Attempts to construct a dynamic theory have recently been proceeding upon another line--namely, by the study of time lags between certain adjustments. By the introduction of an appropriate lag the tendency of a system to oscillate can be established. In these studies there is some doubt as to the nature of the trend on which the oscillation is superimposed apposing 1 Especially in Ch. 2, secs, 4-5. The"Acceleration Principle "was. there in this connection. The study of the condition in which demand and supply are flowing at an unaltered rate has long been known as Static Theor implies that the equilibrium of prices and quantities resulting therefrom is analogou state of rest. By analogy, therefore, a steady rate of ease of demand, which is our first matter for consideration in dynamic the d a major effect of which ig e by th However, the use of the expression Acceleration Principle in the sense of my relation is rapidly accelerating in current literature, and I reluctantly bow t the force majeure of usage