Before going on to conclude that Victorian Britain was "not stagnating", McCloskey sums up the 3 main criticisms of economic performance during the period. The first is that output grew too slowly because of sluggish demand, the second that too much was invested abroad because of imperfect capital markets and the third was that productivity stagnated because of inept entrepreneurship.
On the subject of "sluggish demand" McCloskey said that if faltering demand had been a problem then this would have led to increasing levels of unemployment as aggregate demand fell. Figures from the trade unions show that unemployment was low at the time and actually fell on average between 1872 and 1907. He bases his argument on the fact that if the economy was in full employment, that the growth of output was determined by the growth of the factors of production, such as fixed capital and skilled labour, not by aggregate demand. He claims that in the environment of late Victorian Britain, "it is more plausible to assume that supply created its own demand rather than demand creating its own supply". Crafts disputes McCloskey's claims that growth of income was independent of the investment rate. Crafts" argument centres on the fact that McCloskey's model, which was also criticised by Kennedy for being inappropriate, shows a steady state rate of growth. He says that economies are rarely, if ever, in a steady state and in the short term investment does affect the steady state growth rate. He states that in the long run, in the steady state, higher investment would be offset by a rise in the capital to output ratio, but that during the interim period there would be a rise in the growth rate of output and capital would grow faster than output. He argues that if the investment rate had been raised, it would cause a higher capital to labour ratio and put the economy on a growth path with higher sustainable consumption per head.
