MARCH 1939 AN ESSAY IN DYNAMIC THEORY damping measures could be introduced, to counteract the oscilla tion caused by the lag, would the system be stationary or advanc ng? And at what rate Dynami hrow some light upon this Moreover it is possible, and this the following argument seeks establish, that the trend of growth may itself generate forces making for oscillation. This, if so, would not impair the im portance of the study of the effect of lags. But it may be that the attempt to explain the trade cycle by exclusive reference to them is an unnecessary tour de force. The study of the operation of the forces maintaining a trend of increase and the study of lags should go toge 3. The significance of what follows should not be judged solely by reference to the validity or convenience of the particular equations set forth. It involves something wider: a method of thinking, a way of approach to certain problems. It is necessary to"think dynamically. The static system of equations is set forth not only for its own beauty, but also to enable the economist to train his mind upon special problems when they arise. Fe instance, an economist may pose to himself the question, What would be the effect on the system an increase of e xports or of labour-saving invention By reference to the static equations, he then proceeds to work out the new equilibrium position sup- posing the new higher level of exports to be maintained in perpetuity or the labour-saving invention to be incorporated in the productive technique once for all But let the question be: Suppose the level of exports begins and continues to increase steadily, or suppose its rate of increase to increase, or suppose labour-saving inventions begin to be made suffice.The static theorist may hope to reduce this suppos oe in a steady or growing stream; then the static method will steady increase th a succession of steps up, each having the same effect. But if the following argument is correct, the effect on the moving equilibrium of advance may often be in the opposite direction to the effect on the static equilibrium produced by each of the steps considered singly. A new method of approach- indeed, a mental revolution--is needed Once the mind is accustomed to thinking in terms of trends of increase, the old static formulation of problems seems stale, flat and unprofitable. This is not to deny to static theory its own appropriate sphere. It will become apparent which kind of prob- lem belongs to each branch of study. 4. I now propose to proceed directly to the Fundamental