CAPITAL THEORY AND THE RATE OF RETURN.

The paper presents a review article on capital theory and rate of return by researcher Robert Solow. The three lectures in the volume under review consolidate and extend Robert Solow's previous examination of the relationship between capital and economic growth. What is crucial is to know the social rate of return on investment. The first lecture begins by asking why capital theory is in a so unsettled state. One cause is that capital has many forms and several characteristics and different writers stress different aspects. There is no reason to suppose a single object called capital can be defined to sum up in one number all facts about time lags, gestation periods, and all the different kinds of capital goods. Solow's prescription for progress is to narrow issues by concentrating on causes and consequences of saving and investment. Because consequences are so important, the central concept in capital theory should be the rate of return on investment, which yields an unambiguous answer to almost any important planning question about the saving-investment process. Solow states that rates of return on investment can be calculated without measuring the capital stock.