Conflict and Effective Demand in Economic Growth

185 Pages·2012·3.61 MB·English

by  Peter Skott

Conflict and effective demand
in economic growth

Conflict and effective
demand in economic
growth
PETER SKOTT
Institute of Economics
University of Aarhus
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CAMBRIDGE UNIVERSITY PRESS
Cambridge
New York Port Chester
Melbourne Sydney
CAMBRIDGE UNIVERSITY PRESS
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Published in the United States of America by Cambridge University Press, New York
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Information on this title: www.cambridge.org/978052 365963
l
Cambridge University Press 1989
©
This publication is in copyright. Subject to statutory exception
and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without the written
permission of Cambridge University Press.
First published 1989
This digitally printed version 2008
catalogue recordf or this publication is available from the British Library
A
ISBN 978-0-521-36596-3 hardback
ISBN 978-0-521-06631-0 paperback
Contents
Guide to text notation
V111
Acknowledgements x
Introduction
1
Methodologiiscsaule s 5
2 2.1 Introduction 5
2.2 A unified theory 6
2.3 Instability and the notion of equilibrium 7
2.4 Walrasian general equilibrium 10
2.5 Choice-theoretic foundations 11
2.6 Simultaneous equilibrium 16
surveoyfs omepo st-Keynesainadnn e o-Marxiiadne as 18
3 A3. 1 Introduction 18
3.2 Harrod 18
3.3 The neoclassical solution 21
3.4 Kaid or 23
3.5 Pasinetti 27
3.6 The neo-Pasinetti theorem 29
3.7 Wood 31
3.8 Kaldorian cycles 32
3.9 Goodwin 35
3.10 Kalecki 38
3.11 Concluding remarks 40
Them odel 42
4 4.1 Introduction 42
4.2 Prices and short-term expectations 43
4.3 Production 45
v
vi Contents
4.4 Adjustment costs 47
4.5 Demand 49
4.6 The output-expansion function 50
4.7 Investment 52
4.8 Investment -finance 55
4.9 Banks 56
4.10 Households 57
4.11 Wage rates and employment 59
4.12 Concluding comments 60
Appendix 4A 61
Ultra-shorsth-orrutn-,ar nudns teady-greoqwutihl ibria 63
5 5.1 Introduction 63
5.2 Ultra-short-run equilibrium 63
5.3 The short term -output adjustment 65
5.4 The medium term -utilisation and warranted growth 70
5.5 Choice of technique and the natural rate 76
5.6 'Accumulate, accumulate' 78
5. 7 Comparative dynamics 81
5.8 Concluding comments 84
Appendix 5A 86
Appendix 58 86
Appendix SC 87
Investmeinnts,t abialnidct yyc les 89
6 6.1 Introduction 89
6.2 The investment function 90
6.3 The equations 92
6.4 Analysis 94
6.5 Comparison with the Kaldor and Goodwin models 100
6.6 Effects of short-run diminishing returns 102
6. 7 Conclusions 103
Appendix 6A 104
Appendix 68 110
Appendix 6C 111
Finanacned m oney-wangeeu trality 114
7 7.1 Introduction 114
7.2 Pre-Keynesian ideas 115
7.3 The Asimakopulos critique 122
7.4 Alternative financial behaviour - a modified Eichner-
Wood hypothesis 125
Contents vii
7.5 Money-wage neutrality reconsidered 127
7.6 Exogenous money 129
7.7 Constant nominal interest rates 135
7.8 Concluding comments 137
Appendix 7 A 139
Distributqiuoensatli oinnns e o-Marxiaannd p ost-Keynesian
8 theory 141
8.1 Introduction 141
8.2 Target shares 142
8.3 An alternative specification 145
8.4 Inflation 145
8.5 Theories of monopoly capital 147
8.6 Effects of a rising degree of monopoly in the present
theory 151
8.7 Inflation and unemployment 156
8.8 Summary and conclusions 158
Finarle marks 159
9 9. Keynesians, monetarists and the real world 159
9 .2I Limitations of the theory 161
Bibliography 164
Index 171
Guide to text notation
Carets, and dots, , are used to represent proportional growth rates
·,
(logarithmic derivatives) and time derivatives, respectively; i.e.
= (dx/dt)(l/x), x = dx/dt. Subscripts are used to denote partial deriva­
xti ves; if, for instance, I/ Y = f(u, 7T) then a(I/ Y)/ au= <1// au =f;,.
For ease of reference, the most important variables used in chapters 4-8
are listed below. Symbols which are used only within a few pages are not
listed, and in the survey chapter, chapter 3, it has not always been possible
to follow the same notation. The subscript i denotes a firm specific
variable, and a star * is used to indicate an equilibrium value or a desired
value of a variable.
C = consumption in real terms
I =gross investment in real terms
=capital stock in real terms
K
L = labour
M = stock of money ( = amount of bank deposits = amount of bank
loans)
N = number of securities issued by firms
P = gross profits
S =gross saving in real terms
W = total wage bill
Y = gross output in real terms
= employment rate
e
g11• = warranted growth rate
= nominal rate of interest on bank loans and bank deposits
= rate of growth of the labour supply in efficiency units
n
p = price of output
=Tobin's
q q
= real rate of interest on bank loans and bank deposits
r
=corporate retention rate
sP
= rate of utilisation of capital
u
viii
Guide to text notation ix
=price of securities
v
= money-wage rate
w
= ratio of the value of securities to profits net of depreciation and
a
real interest payments
f3 = ratio of total nominal income to bank deposits (demand for
money). The parameters and f3 describe households' saving and
a
portfolio behaviour
= rate of depreciation of capital
8 = inverse of the own-price elasticity of conjectured demand
y
= cost of finance
i
.A = output-labour ratio
1T = share of gross profits in gross income
= elasticity of a firm's conjectured demand price with respect to the
p
price of rival firms
= output-capital ratio at full-capacity utilisation
u
j(u, 1T) = I/ Y = investment function
h( 1T, e) = Y = output-expansion function
Acknowledgements
Many colleagues and friends have helped me in the writing of this book. I
should like to thank, in particular, Paul Auerbach and Meghnad Desai.
They both read the entire manuscript and their detailed suggestions have
greatly improved the final version. Discussions with Victoria Chick have
influenced the treatment of financial issues, and comments and criticisms
from David Soskice, Malcolm Sawyer and especially Bob Rowthorn led to
substantial changes in chapter 8. I have also benefited from numerous
discussions with colleagues at the University of Aarhus as well as at the
University of Copenhagen and University College London. The research
was made possible by a Research Fellowship at the University of
Copenhagen, and large parts of the book were written while I was an
Honorary Fellow at University College London. Finally, I wish to thank
Margaret C. Last, Francis Brooke and Patrick McCartan. Margaret C.
Last has been a superb subeditor and Francis Brooke and Patrick
McCartan have been patient and encouraging throughout the preparation
of this book.
x