Ricardo and Marx saw technological change as a possible cause of long-period unemployment. Neoclassical and Schumpeterian economists regard technological unem ployment as a transitory phenomenon. This paper argues that the capital critique (i) demolishes the neoclassical claim that market mechanisms will restore full employment whenever workers are displaced by technical change, and (ii) rehabilitates the old Ricardian argument that automatic compensation factors are generally absent. The neo-Schumpeterian notion of autonomous investment is also rejected, in favour of the view that, in the long period, all investment is induced. By extending Keynes's theory of effective demand to the long period through a model based on the supermultiplier, this paper suggests that the ultimate engines of growth are located in the autonomous components of effective demand--exports, government spending and autonomous con sumption. Technical change plays a role in the accumulation process through its effects on consumption patterns and the material input requirements. However, the impact of technical change is now seen to depend upon circumstances such as income distribution, the availability of bank liquidity and exchange rate policy.

Abstract Empirical works documenting highly persistent effects of negative demand shocks (‘hysteresis’) have questioned the prevailing wisdom that potential output is exogenous to aggregate demand fluctuations. We assess whether the effects of positive demand shocks also tend to persist beyond the short run. We estimate the impact of 126 aggregate demand expansions in OECD countries between 1960 and 2015 through local projections, using a dynamic two-way fixed-effects model and a propensity score-based specification. We find that demand expansions exert positive persistent effects on GDP, participation rate and capital stock. Effects on the unemployment rate and productivity are also strong and quite persistent, but evidence regarding their permanence is mixed. The effect on the inflation rate is positive but small and imprecisely estimated, and there is no sign of accelerating inflation. Our results bear relevant implications for existing models of hysteresis and for theories of demand-led growth.

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Moving from the current global and European imbalances and crises, and from the consideration of the German reaction to them, the paper explores the political economy origins of the conservative German policy stance. It emerges that an export-oriented economy was a deliberate decision of the German elite after WW II and that the external constraint may be regarded as appropriately designed for internal discipline and efficiency (and vice-versa) in a self-reinforcing process. The conclusions illustrate some possible future scenarios for Europe.

This paper integrates ideas concerning the influence of the interest rate on the rate of profits with an analysis of inflation and its relation with unemployment. Inflation is regarded, as in Kaleckian contributions, as resulting from inconsistent claims on income, but the approach taken leads to different conclusions concerning the effects of inflation (or deflation) on income distribution, and the circumstances giving rise to acceleration of inflation. The approach followed in the paper also provides explanations of phenomena that have appeared 'puzzling', particularly the association of different unemployment rates with stable inflation, and the persistence of high rates of unemployment.

The prevailing wisdom that aggregate demand shocks determine short-run cyclical fluctuations around a supply-determined equilibrium growth rate and an associated equilibrium unemployment rate (or NAIRU) has been called into question by various strands of literature over the last few decades. Specifically, a recently revived literature on hysteresis finds significant persistence in the effects of negative aggregate demand shocks (e.g.

A major contribution of Friedman's 1968 presidential address was the introduction of the long-run vertical Phillips curve. That view, which is consistent with neoclassical foundations, has become so profoundly entrenched in macroeconomists' thinking that increasing evidence of ‘hysteresis’ has not as yet dislodged it. The prevailing notion of the non-accelerating inflation rate of unemployment (NAIRU) is constructed in terms of the ‘natural’ unemployment rate, which has allowed for some changes regarding its microeconomic determinants. However, the macroeconomic features of Friedman's natural rate and the NAIRU remain very much the same and unchanged. The blatant path-dependence of empirically estimated NAIRUs creates a dissociation between macroeconomic theory and empirics which, in our view, is unacceptable and demands a change of perspective. Adopting an alternative theory of distribution and employment might rehabilitate the original approach taken by Phillips vis-à-vis Friedman's legacy.

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