REPLY.

The article presents replies to a comment made by R.C.O. Matthews on the article of E.S. Phelps "The New View of Investment." It states that Matthews is excessively generous to offer his constructive paper. It informs that Phelps contains some results, which show that there are significant differences between the behavior of growth models which differ (in the postulates) only in respect to whether technical progress is of the embodied or disembodied type. These results are that normally the economy will make the tradition from one golden age to another (corresponding to a given change of the saving ratio) faster if technical progress is embodied and, second, the rate of return to saving is normally greater when technical progress is embodied, keeping the appropriate set of other things equal. Matthews's paper is concerned with another result, which may, unfortunately, be more striking. This is that the responsiveness of golden age or balance-growth output to a change of the saving ratio is the same whether progress is embodied or disembodied.