During the postwar period of Keynesian dominance, economcs focused much more on economic growth than it had in the past— growth being seen as the source of progress. In the Harrod–Domar model—named for its originators, economists Roy Harrod (1900–1978) and Evsey Domar (1914–1997)—increasing economic growth basically involved increasing the savings rate of a country, in some cases through the state budget, and using the resulting (saved) funds to invest in the growth of the economy. The key to economic growth is to expand the level of investment in terms of fixed capital (factories, machines) and “human capital” (people as workers). To do this, the state needs to encourage savings and generate technological advances that enable firms to produce more output with less capital (that is, lower their capital– output ratio). Harrod used several concepts of economic growth in this analysis: warranted growth, natural growth, and actual growth. The warranted growth rate is the growth rate at which all savings are absorbed into investment. The natural growth rate is the rate required to maintain full employment. In Harrod’s model, two kinds of problems could arise with growth rates. First, actual growth was determined by the rate of savings, while natural growth was determined by the growth of the labor force. There was no necessary reason for actual growth to equal natural growth and, therefore, no inherent tendency for the economy to reach full employment. This problem resulted from his overly simple assumptions that the wage rate is fixed and that the economy must use labor and capital in the same proportions. The second problem implied by Harrod’s model was unstable growth. If companies adjusted their investment according to their expectations of future demand, and the anticipated demand occurred, warranted growth would equal actual growth. But if actual demand exceeded anticipated demand, they would have underinvested and would respond with further investment. This investment, however, would itself cause growth to rise, requiring even further investment, resulting in explosive growth. But if the reverse happened, with actual demand falling short of anticipated demand, the result would be a deceleration of growth. This became known as Harrod’s knife-edge— between too much and too little growth. The “knife-edge” means that the economic growth path is unstable, in that slight shocks to the system lead to instabilities that are self-reinforcing rather than self-correcting (Harrod 1939, 1948; Domar 1947).