What is effective investment? To put it simply, it is the kind of investment that works promptly in putting together production capacity, boosts the supply of aggregate social product, and stimulates economic growth. What is rational investment? In short, it is the kind of investment that maintains basic price stability, creates many job opportunities, and raises labor force income while spurring economic growth. Whether investment is effective or not is determined by whether it has increased aggregate social product; and the effectiveness of investment is measured by the growth rate of aggregate social product. In contrast, whether investment is rational or not is determined by whether it has met the following goals: (1) boosting the economy; (2) maintaining basic price stability; (3) creating more jobs; and (4) raising labor force income. And the rationality of investment is measured by its actual results in meeting these goals. Effective investment may or may not be rational investment. Under socialism, it is not enough for investment to be merely effective. No effort should be spared to turn effective investment into rational investment, and with the largest possible degree of rationality at that.

Investment – primary dynamo behind economic growth

Economic activity is a dynamic process in which one period of production, distribution, exchange, and consumption circumscribes the next period. To allow production, distribution, exchange, and consumption to take place on a larger scale in the next period, a certain amount of national income from the previous period must be spent in investment.