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It has become increasingly clear that there are serious problems with the concept of aggregate capital. It is now known, for instance, that, if there are many vintages of machines, the output of the economy can be described by a simple neoclassical production function with an aggregate capital stock if and only if technical change is purely capital augmenting (Fisher, 1965); that in steady states consumption per capita may not be a monotonic function of the rate of interest, even for rates of interest greater than the rate of growth; and that the value of the capital stock per man (using any price system) may not be monotonic in r (Wicksell effects) (Champernowne, 1953-54). The heterogeneity of capital goods, moreover, raises new problems for the dynamic behavior of the economy. Investment must be allocated, and to do this firms must form expectations of future prices, wages, and interest rates. The purpose of this paper is to investigate in detail the dynamics of a simple model with heterogeneous capital goods under alternative assumptions about expectations formation and saving. Before investment takes place, the entrepreneur has a choice over a large number (to be precise, a continuum) of types of machines; those which require more resources today require less labor per unit of output in the future. But once the machine has been constructed, it cannot be altered. This is just the exante smooth substitutability-ex post rigid complementarity model (or the putty-clay model), alternative versions of which have been studied by Johansen (1959) and Solow (1962). (See also Phelps, 1963; Akerlof, 1967; Sheshinski, 1967; and Stiglitz, 1968.) This model raises, moreover, the interesting problem of economic obsolescence: machines may be con-

The Implications of Alternative Saving and Expectations Hypotheses for Choices of Technique and Patterns of Growth