CAPITAL EXPANSION RATE OF GROWTH, AND EMPLOYMENT 145 sumption or by charging higher prices(or paying lower wages). As a result, the total propensity to save may rise. This will be exactly the opposite measure from what is needed to avoid the junking process and will of course lead to greater trouble, though I am not prepared to ay to what extent capital owners will succeed in passing on these In so far as they are able to control new investment, they will try to avoid losses by postponing it. Consequently, the rate of growth may well be depressed below the required ao, and unused capacity will de- velop Our present model does not allow us to separate unused capacity into idle capital and idle men, though most likely both will be present. 5 Because of humanitarian considerations, we are more concerned with unemployed men. But unemployed capital is extremely important, because its presence inhibits new investment. 16 It presents a grave danger to a full-employment equilibrium in a capitalist society. IV GUARANTEED GROWTH OF INCOME In the preceding sections it was shown that a state of full employ-7 ment can be maintained if investment and income grow at an annual rate ao. The question now arises as to what extent the argument can I be reversed: suppose income is guaranteed to grow at the ao rate; will that call forth sufficient investment to generate the needed income? We are concerned here with a situation where spontaneous invest- ment (i. e, investment made in response to changes in technique, shifts in consumers'preferences, discovery of new resources, ete. )is not suffi cient, and therefore a certain amount of induced investment(made in esponse to a rise in income) is also required. 17 To simplify the argu ment, let us assume that spontaneous investment is absent altogether. It should also be made clear that the problem is treated from a theo- retical point of view, without considering the numerous practical ques- tions that the income guarantee would raise If an economy starts from an equilibrium position, an expected rise in income of Yao will require an investment equal to Yao/s. As before, two cases have to be considered he presence of unemployed men may be obscured by inefficient utilization of labor, as in agriculture. 16 It is true that a given capital owner may often have a hard time distinguish ing between capital idle because of a<s, and capital idle because of r<ao. The irst kind of idleness, however, is relatively permanent, and cannot be corrected by greater expenditures, while the second is temporary (it is hoped) and is due to poor fiscal and monetary policies IT Cf. Alvin H. Hansen, Fiscal Policy and Business Cycles, New York, 1944, Part Three, and particularly p. 297