This monograph starts with a survey of the One-Relative-Price (Q value) Theory of Investment and then explores therichness of the Many-Relative-Price Theory of Investment:Firstly a tractable model of modernization investment ispresented which recognizes that in modern economies morethan half of the gross investments consists of replacementinvestments, and that the main motive for replacementinvestments is to modernize the capital stock. This modelpredicts that an activation of investments by fiscal policyis only possible at the cost of causing an ageing of capitalstock. Secondly a model is presented in which initial over-or underinvestments cause further over- or underinvestmentsand thus have a persistent effect on the structureof thecapital stock. This model explains why in centrally plannedeconomies a rapid and persistently extensive growth waspossibleand had to be followed by stagnation.
