Fiscal Policy in a Growing Economy: A Further Word

pROFESSOR GURLEY has made a valuable contribution to the systematic formulation of the fiscal problems of economic development in his article "Fiscal Policy in a Growing Economy."' Of particular interest is his strong conclusion that the warranted rate of growth is independent of the size relative to income of a balanced government budget. This result seems remarkable because we have learned that under static conditions the size of the balanced budget does influence the size of equilibrium income. We might expect, therefore, to find that it could also affect the warranted growth rate. This note points out some of the restrictions in Gurley's formulation which prevent this result. But first a word regarding Gurley's undue strictures on static analysis. He writes