The authors derive some interesting conclusions about the relative importance of the cost of capital and output during periods of economic crisis and relative prosperity. In essence as a result of output constraints during periods of economic recession the level of output is seen to dominate the demand for capital goods with real cost of capital playing a minor role. These conclusion result from a theoretical development of investment behaviour that allows for the introduction of rationing when a sector is operating under an output constraint. The following points arise from a detailed study of the paper.

Initial experiments with standard investment functions of the Jorgenson & Eisner-Nadiri type give the familiar result that they are unstable. If attention is turned to the results presented in Tables 2 and 3 it can be clearly seen that elasticities and mean lags are very sensitive to small changes in the data set. This can be interpreted as indicating the severe problems of mispecification that are present but may also result from severe multicollinearity between the explanatory variables or the presence of an outlier in the data set. If the values of σ and μ are used to calculate v, the degree of homogeneity of the production function, it is worrying to find that it takes unrealistic values with a large number of estimates exceeding 2 and several exceeding 20. In addition, the interpretation of the mean lag should be treated with caution. The mean lag is meaningless if, as for some sectors appear likely from the information given, the value of βj alternate in sign. The use of the median lag may however overcome these problems.