154 SECTIONAL ADDRESSES 



prediction can be based upon them, nor are they the source of the recom- 

 mendations of traditional economics. More specific laws would have to 

 be based on detailed empirical research and would be highly conjectural. 

 While great interest attaches to such empirical work, it is not clear that 

 this should be the main avenue for future developments ; but, if it is 

 not to be, then the general theory of value must itself be displaced from its 

 central position. 



III. 

 Dynamic Economics. 



There is no reason why the quest for causal laws should be limited to 

 those propositions which may be derived from the law of demand. We 

 may well expect future progress to lie outside that ambit. 



Out of the wide field of possibilities I choose for first consideration one 

 department, which I propose to call dynamic economics. In using this 

 terminology I am aware that I am departing from recent usage. There 

 has been a tendency to use the expression broadly for any set of generalisa- 

 tions lying outside static theory. More specifically it has been used for 

 the study of the influence of expectations — but these may find full ex- 

 pression in a system of static equations — or, again, for the study of time- 

 lags in a process of adjustment to a new static condition. These studies 

 all have their own place. 



I believe that there ought to be alongside of static theory a body of 

 laws relating to the increase (or decline) of economic magnitudes, and that 

 with the aid of a very few empirical generalisations, having high authority 

 if somewhat less than the law of demand itself, it may be possible without 

 more ado to construct such a body of laws. I conceive the analogy 

 between the relation of dynamics to statics in mechanics and that of this 

 branch of economics to the static theory to be much closer than that im- 

 plied in recent uses of the word dynamics in economics. While the equili- 

 brium price determined by the maintenance of a steady flow of demand 

 and supply corresponds to a state of rest, new equations would be formu- 

 lated to determine regular movements in the economic magnitudes under 

 the influence of growth of population, savings, inventions, etc. 



This line of thought is not, of course, new. The classical economists 

 attached great importance to the alleged tendencies of rent to rise and 

 profits to fall. Such considerations are not absent from Marshall. But 

 generalisations of this kind have tended to recede from view owing both 

 to their conjectural character and to the more precise formulation of static 

 propositions in a mathematical garb. The existence of this formulation 

 has in turn tended to lead monetary and trade cycle theorists, who are 

 interested in change as such, to regard the phenomena of their study in 

 terms of transitions from one static equilibrium to another. It may be 

 that they would be greatly assisted if they could regard them as departures 

 from or oscillations about a path of growth ; but they can only do this 

 eff'ectively if the laws governing increase are as precisely formulated as the 

 static laws. We need a system of fundamental equations using simplify- 



