Solow's 1956 Contribution in the Context of the Harrod-Domar Model

were concerned with the long-run development of an economy. This holds in particular for Karl Marx, who in chapter 21 of volume 2 of his Capital elaborated a two-sector steady-state growth model, comprising a capital goods and a consumption goods sector, which functioned as a reference path that irritated friends and foes alike. Thereafter, apart from very few exceptions, growth theory stopped being a major issue for most econo-mists until the end of World War II, when modern growth theory was born with the works of Roy Harrod (1939, 1948) and Evsey Domar (1946, 1947). Growth became almost everybody’s concern, fi rst because of fear of stag-nation and soon afterward because of refl ections on the remarkable growth process in the Western world since the early 1950s. The fi rst wave of interest in growth theory associated with the contribu-tions of Harrod and Domar came into existence as a by-product of John Maynard Keynes’s General Theory, as best seen in Harrod’s early cor-respondence with Keynes and in his seminal 1939 paper, “An Essay on Dynamic Theory, ” published in the Economic Journal. Harrod as well as Domar aimed to extend Keynes’s analysis into the long run by considering under what conditions a growing economy could realize full-capacity uti-lization and full employment. Whereas Harrod (1939, 21) regarded th