Introduction

In criticizing Hicks's classification of technical inventions, Harrod has proposed a new definition of neutral inventions primarily intended for applications to the problem of economic growth. According to Harrod, a technical invention is defined as neutral if at a constant rate of interest it does not affect the value of the capital coefficient. Harrod's classification has been discussed by J. Robinson who showed graphically that a neutral invention is equivalent to “an all-round increase in the efficiency of labor” (p. 140). The first part of the present article is concerned with precisely formulating Robinson's proposition and characterizing analytically those inventions that are neutral in Harrod's sense.

Harrod's definition of neutral inventions, as indicated above, has been introduced to handle the problem of economic growth. Recent contributions, however, in particular those of Solow and Swan, are discussed for the case in which technical inventions are neutral in Hicks's sense. In the second part of this article we consider a neoclassical growth model with neutral inventions in Harrod's sense, and prove the stability of the growth equilibrium in such a model. The aggregate production function underlying the model is assumed only to be subject to constant returns to scale and to diminishing marginal rates of substitution; the Cobb-Douglas condition, as is customarily imposed in recent literature, is not required.