Introduction, 173. — Statistical estimation of the model, 174. — The savings-income ratio, 175. — The capital-output ratio, 178. — Labor's share, 180. — Velocity of circulation, 184. — The capital-labor ratio, 186. — The model as a whole, 188. — Some remarks on the rate of interest, 192. — The aggregate production function and factor substitution, 195. — Another possible great ratio, 197.

SOME time ago, an attempt was made to develop a practical method for the appraisal of projects of road construction.1 The proposed method is one of comparative statics and compares the national product before and after the construction of a road. The essential elements of the method are the following. The whole economy is divided into a number of geographically separated centers. The movement of products from one center to another gives rise to transportation costs and, consequently, the price of the product of center i in center k depends on the costs of transportation from i to k. Supply and demand equations are assumed for each center and each product. The supply of each product i depends on the price of product i and the prices in i of all other products as cost elements. Two alternative assumptions are made with regard to the reactions of demand to price changes: