The chapters to follow display a somewhat technical character, describing in symbolic terms the adjustment path from a given level of dynamic equilibrium to a higher or lower level and, in particular, the expansion, contraction, and relative shifts of the sectors of production. Although the mathematics is quite elementary and the results obtained in most cases confirm our intuitive hunches, it may be helpful to introduce these exercises by a literary survey of the strategic processes. We shall confine ourselves here to surveying the consequences of an increase in the rate of labor supply. Knowing that in all such instances it is the formation of real capital that is at the center, we shall first consider the formation and application of additional fixed capital, to be followed by inspection of the changes in working capital.

The traverse movements affecting fixed capital, which serve to absorb an increase in the rate of labor supply, can be subdivided into four phases: partial liberation of existing capacity; augmentation of primary equipment output; augmentation of secondary equipment output; and augmentation of consumer goods output. We shall now explain the rationale for this sequence of movements and briefly describe the main characteristics of each phase.

1. Partial Liberation of Existing Capacity. On intuitive grounds the most appropriate place for the absorption of an increase in the labor increment seems to be the consumer-good sector.