Economic Structure and Policy

Since the first statement of the aims and methods of the Cambridge Growth Project, which appeared in 1962 as the first number of our former series A Programme for Growth, we have produced a volume on the state ofthe model and on projections derived from it at roughly five year intervals: Exploring 1970 (1965), Exploring 1972 (1970) and now the present book. A comparison of these publications shows the directions in which we have developed our model. First, we have been able to model more parts of the economy and to model them better; and, second, by adopting a targets-and-instruments approach, we have been able to tackle questions of policy. As a consequence of the first of these improvements, the model has become more closely knit and variables which were previously exogenous have become endogenous; and, as a consequence of the second, the model has become less rigid and can be used to suggest policies for correcting some ofthe undesir­ able features that emerge from the projections.

I An Overview.- 1 Models, Projections and Policies.- 1.1 The model as a framework for analysis.- 1.2 Why a ‘medium-term’ model?.- 1.3 The purposes of disaggregation.- 1.4 Models for policy-making in Britain: the need for an alternative approach.- 1.5 Targets and instruments in a medium-term model.- 1.6 An outline of the book.- 2 An Overview of the Model.- 2.1 A model of economic structure.- 2.2 Interactions between the relationships.- 2.3 The main relationships in the model.- 2.4 The condensed form as a numerical summary of the model.- 2.5 A comparison of some multisectoral models.- 3 Solving the Model.- 3.1 Complete model solutions.- 3.2 The theory of economic policy.- 3.3 A heuristic strategy for achieving targets.- 3.4 The target algorithm.- 3.5 Future directions.- II The Model: Specification and Estimation.- 4 Personal Consumption.- 4.1 A consumption function for non-durables.- 4.2 Consumers’ expenditure on durables.- 4.3 Projections of total consumption and of durables.- 4.4 Non-durables: a systematic explanation.- 4.5 New approaches to demand analysis.- 5 Investment.- 5.1 A model for industrial investment.- 5.2 Estimation methods and results.- 5.3 Social capital formation.- 5.4 Stockbuilding.- 5.5 Projections of investment by industry and by asset.- 5.6 Investment and government policy.- 6 Exports.- 6.1 A recursive system for export determination.- 6.2 The export price equations.- 6.3 The estimation of the price equations.- 6.4 The export quantity equations.- 6.5 The estimation of the quantity equations.- 6.6 Exports of services and of complementary imports.- 6.7 Projecting U.K. exports.- 7 Imports.- 7.1 The treatment of imports.- 7.2 The treatment of import prices.- 7.3 Estimates of activity and price elasticities.- 7.4 Projecting imports.- 7.5 Current research: the import and the import price functions.- 8 Employment.- 8.1 The supply of labour.- 8.2 A model of industrial employment and productivity.- 8.3 Estimates of the production functions.- 8.4 Projected employment, output and productivity.- 8.5 An alternative model with exogenous productivity.- 8.6 Future developments: a labour demand function.- 9 Prices and Profits.- 9.1 The theory of the prices of industrial outputs.- 9.2 Industrial differentials: wages and profits.- 9.3 The treatment of industrial and commodity taxes.- 9.4 Projected prices of industrial outputs.- 9.5 Commodity and final demand prices.- 9.6 The cost composition of industrial outputs and final demands.- 9.7 The direction of current research.- 10 Incomes and Expenditures.- 10.1 The personal sector.- 10.2 The company sector.- 10.3 Public corporations.- 10.4 Public authorities.- 10.5 The overseas sector.- 10.6 The inter-relatedness of sectors.- 11 Company Profits, Dividends and Retentions.- 11.1 Why a model of company behaviour?.- 11.2 An accounting framework.- 11.3 Company income.- 11.4 Company appropriations.- 11.5 The taxation of profits from the North Sea.- 11.6 The complete model of the company sector.- III Applications: The British Economy in 1980.- 12 The British Economy in 1980: A Standard View.- 12.1 Some characteristics of the standard view.- 12.2 The targets and instruments in the standard view.- 12.3 The main assumptions.- 12.4 Growth and the use of resources.- 12.5 The structural projections.- 13 Alternative Economic Environments.- 13.1 The model and the economic environment.- 13.2 Population and the labour supply.- 13.3 Investment.- 13.4 Domestic inflation.- 13.5 Alternative assumptions about energy supplies.- 13.6 World demand.- 13.7 World prices.- 13.8 A projection with pessimistic assumptions.- 14 Alternative Taxation Systems and Their Incidence.- 14.1 Tax incidence.- 14.2 Replacing corporation tax.- 14.3 Replacing local authority rates.- 15 Budgetary Policy, Public Expenditure and the Balance of Payments.- 15.1 Budgetary policy and public expenditure.- 15.2 Discretionary changes in public sector revenue and expenditure.- 15.3 Inflation and the public sector deficit.- 15.4 Conclusions on the operation of budgetary policy.- 15.5 Conclusions on public expenditure planning.- 16 Alternative Economic Policies.- 16.1 Social choice and the contribution of our model.- 16.2 Targets for economic policy.- 16.3 The effects of policy instruments.- 16.4 Some opportunity benefits of reduced personal consumption.- 16.5 Alternative economic policies.- 16.6 Some structural implications of the alternatives.- 16.7 An assessment of the results.- Appendix the Classifications Used and the Sources of Data.- A List of Works Cited.- Author Index.