PEACOCK-WISEMAN HYPOTHESIS The second hypothesis dealing with the growth of public expenditure was advanced by Peacock and

Wiseman in their study of public expenditure in the U.K. for the period of 1890 1955. The main essence of the hypotheses is that public expenditure does not increase in a smooth and continuous manner, but in jerks or step-like fashion as shown in Figure 13.2. The analysis of Peacock and Wiseman involves three related elements. They are: a. b. c. Displacement effect Inspection effect and Concentration effect

Static and dynamic models are constructed for the study of micro and macro economic problems. Model-building has also been extended to developing planning and growth economics. From the methodological view point, the use of econometrics and computers in model building represents an important step in evolving the integration of economic research process. Economic models help in taking policy decisions. Finally, economic models are essential aids to clear thinking. As opined by Prof. Myrdal, the first virtue of economic models is that they can make explicit and rigorous what might otherwise remain implicit, vague and selfcontradictory. Even if a model is totally unrealistic, it may have a therapeutic value. The most justifiable claims for the use of economic models are that they are curves for excessive rigidity of thoughts and energies in searching for interdependent relationships.