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What exactly do I picture as this capital reserve? Is it vodka distilleries that might be converted to orange juice plants in a pinch? I don’t really know. Human capital itself is versatile. Some retirees could unretire, and vodka plant workers might convert with not much retraining. I will explore some of this idea later. Harrod’s Knife Edge Solow’s neoclassical growth model developed from ideas published a decade earlier by Roy Harrod. Harrod had described a “warranted growth path” given by the pace of technological innovation. He reasoned correctly that any effort to push investment faster must soon founder in the diminishing returns foreseen by Malthus, Ricardo and West in 1815. But how could we get investment exactly right? There was a critical “knife edge” with little margin for error. He was right to stress the dangers of overinvestment. I do the same. But free growth theory, and the overwhelming evidence that it is right, bring a new perspective. What Solow and other economists teach today , judging from the textbooks I read, is more or less Harrod without the knife edge. We are taught to figure out the warranted growth path, meaning the rate of technological growth, and then invest just enough, ex ante, to exceed depreciation by that margin. But my charts and tables show that any investment beyond depreciation recovery is deadweight loss. There is no need to know the warranted growth path because optimum investment is nota function of whatever it might be. Depreciation investment captures the whole of technological growth, and further investment adds no more. It is money left on the table. Optimum ex ante investment, at the collective scale, is depreciation investment. Ex post results will reveal the warranted growth path. What about Underinvestment? One indication in the charts and tables might leave us puzzled. It is easy to understand the futility of ex ante investment (consumption restraint) beyond Chapter 4 Mill’s Idea 1/11/16 26 HOUSE_OVERSIGHT_011017