i. The notion seems to run through Terborgh's book 1 (and indeed in part through Wright's review) 2 that the economy3 thesis holds that economic stagnation is unavoidable. In fact, the bulk of my writing has been devoted to an analysis of economic policies which would give us an expanding economy and full employment. The question really is: Would a policy of mid-nineteenth-century laissez faire, now, give us that degree of expansion and full employment which we experienced in that century? 2. The essential issue is: Are the automatic forces making for investment outlets as strong in our world today as in the century preceding World War I? From the classicals on, (a) the discovery and development of new territory and new resources, (b) population growth, and (c) inventions, have always been recognized as leading factors underlying investment opportunities. In the century preceding World War I the existence of a vast unexploited continent with rich natural resources, together with the phenomenal growth of population, everywhere gave rise to optimistic expectations with respect to investment. Invention, new products, and new industries were equally important. Undeveloped resources and population growth may be described as extensive expansionist factors, while invention may be termed an intensive expansionist factor. No one denies that the extensive factors play in the current world a relatively smaller role. The argument of the critics seems to be: Well, why worry? -The intensive factors are still present. If one member of a team drops out the other can pull the full load. This may indeed be so, but at least the probabilities are the other way. I do not think that anyone will deny that if we should wake up tomorrow and find that a vast new rich continent had suddenly emerged in the Pacific or in the Atlantic, equal in resources to the North American continent, the investment opportunities for private capital in the next few decades would be enormously improved. 3. With respect to population growth, let anyone consider (as Goeffrey Crowther did in a recent article in Foreign Affairs) the probable volume of capital formation in the United States in the year 2000 compared with that in Great Britain. In making such an estimate, one would surely want to take cognizance of the larger probable growth of population in this country. That capital formation is related to volume of output is, so far as I know, not questioned. Nor is it questioned that increase in volume of output is related to: (a) growth of labor force and (b) increase in per capita productivity. The relation of capital formation (investment outlets) to population growth is now, it should be stressed, fully recognized by Terborgh in his new book. He argues that population growth has accounted for about one-third of capital formation. This figure is in fact somewhat higher than my 50-60 per cent of net capital formation.4 4. While admitting the major role of popu'George Terborgh, The Bogey of Economic Maturity (Chicago, Chemical and Allied Products Institute, I945). 2Pp. I8-22, below. 'The term secular stagnation, it should be noted, is not applicable alone to mature economies. It is perhaps the best English rendition of Spiethoff's phrase Stockung-Spanne. Even in the nineteenth century, we had prolonged periods of stagnation in which there was a preponderance of hard times, recovery and prosperity being short-lived and depressions long and severe. (See Fiscal Policy and Business Cycles, Chapter I.) 4 Terborgh is in doubt whether I meant gross or net, though the context and the language used by me should have made that quite clear. No one else as far as I know has assumed that I meant gross. I do use the term new investment, but I am not aware that the word total has ever meant gross. I used total because I was analyzing two component parts of net investment: (a) that related to population growth and the development of new territory and (b) that related to invention and technological progress.

this brief comment I am going to limit myself to what I regard as essentials. I am not going to discuss details, important enough in themselves, but which I think can, among reasonable men, be settled in a fairly satisfactory manner. I do not think it is worth while to waste a lot of time on whether a high level of is a better term than employment. Both phrases need definition. Everyone is agreed that in a dynamic market economy there will be seasonal, frictional, and transitional unemployment associated with changes in the seasons, the introduction of new products and of new methods of production. Moreover, in a free society where wage earners work whom they please, there will of necessity be a degree of labor turnover. Full employment in the United States, in my judgment, means perhaps 4 or 5 per cent unemployed at any one time; assuming a labor force of around 6o million, this would mean unemployment of 2 /2 to 3 million. If on the average 5 weeks should elapse before a new job was found, this would mean that 25 to 30 million people would shift jobs in each 12-month period. Thus an average of 4 to 5 per cent unemployed provides enormous flexibility in the labor market. Important as these matters of detail and definition are, I turn now to what I regard as more fundamental considerations. What is really important is that the Murray Full Employment Bill, if enacted into law, would, in common with the British and Canadian state papers on Employment Policy, represent a new attitude, purpose, and responsibility of the central government with respect to the problem of unemployment. Instead of palliative and ameliorating measures, these state papers announce a positive national policy with respect to the maintenance of employment, production, and national income. The British and Canadian state papers recognize that these are novel experiments. This involves a new approach and a new responsibility the State, says the British White Paper, and adds, In these matters we shall be pioneers. Similarly the Canadian state paper states, We must determine therefore to learn from experience, to invent and improve the instruments of our new policy as we move forward to its goal.... The Government is inaugurating policies which break new ground and is confident that these policies, with full public understanding and support, will achieve . . . satisfactory results of decisive importance. later years as experience grows they can be made to yield ever improved results, which will mark a new era in Canadian development. Apart from announcing a new goal of national policy and a new responsibility of government, these documents are of the utmost significance in that each commits the government in question to a periodical and continuous assessment of the employment situation. The Murray Bill makes it the duty of the President to transmit to Congress at the beginning of each regular session (and thereafter supplemental reports from time to time) a National Production and Employment Budget setting forth the estimated trends and prospective developments with respect to the size of the labor force, the gross national product, national income, private consumption expenditures, private investment expenditures, state and local outlays, and alternative ranges of federal expenditures. The British White Paper stresses the importance of establishing a central staff qualified to measure and analyze economic trends, and it lists the principal classes of statistics which must be obtained for the efficient operation of an employment policy. These procedures assure that the government will continually take the pulse and temperature, so to speak, of the economy in order to measure how well its policies are succeeding in achieving one of its primary responsibilities. Thus the