The thrust of this paper is to argus that technological advance is a neglected but important influence on the level of investment expenditure. The importance of changes in technology in the investment decision has recently merited the attention of Hicks (1977) and is of course very much in the tradition of Schumpeter (1934), but the majority of the recent theoretical and empirical literature in the field ignores it. We show that new technology is a quantitatively important factor in the investment decision, and thus ought to be incorporated into studies of investment. It is also shown that by turning to the literatire on the microeconomics of technical change, one can gain a number if insights into this and other aspects of the investment decision.
