Domar, expectations, and growth stabilization

Abstract Evsey Domar investigated in the 1940s implementation of growth stabilization policy under assumption that makers and businessmen alike believed his theoretical model. Economic was supposed to work merely through impact its announcement on expectations. He claimed confident expectations, generated by government’s assurance future fiscal policy, would induce private investment decisions a scale bring about required rate justify without putting guarantee test. Domar’s framework contrasts with policy-ineffectiveness proposition New Classical macroeconomics advanced 1970s. plan is discussed detail context model, together similar ideas put forward Roy Harrod, as latter modified aspects original critical reactions Alvin Hansen.