Abstract
The immediate aim of this paper is to clear up a point on which Sir John Hicks in his recent review (1967, chap. xii) of my earlier discussions (1931, 1939, 1942)1 of the relation between the demand for consumer goods and investment, is in error. It deserves careful analysis, as I believe he has been misled into this error by an erroneous assumption characteristic of much contemporary reasoning on this and similar subjects. I will attempt such an analysis in Part IL of this paper. But, as the general thesis of what I have called the Ricardo Effect 2 may not now be familiar to all readers, I shall first restate it in a manner which, though not wholly unobjectionable, I have often found to be more readily intelligible than the more precise statement I have given on earlier occasions. In Part III I shall answer another objection to my analysis. It was frequently raised during the earlier discussions, and I was not then able to supply a satisfactory answer. Now, however, it appears to me comparatively easy to reply to.
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