Capital Lessons in Leaning against the Wind.

This paper examines how the nature of capital bears on the effectiveness of countercyclical policy. Underlying the inquiry is a macro model which postulates that capital in place differs from capital in design. It also postulates that fiscal and monetary actions follow asymmetric feedback rules keyed to unemployment. As the malleability or durability of capital lessens, the system is observed through simulation to respond more turbulently when disturbed. To moderate that response, feedback controls are altered in strength, and although they generally succeed in reducing system turbulence, their success rate is shown to depend heavily and complexly upon capital's makeup. Copyright 1987 by Ohio State University Press.