Some instability puzzles in Kaleckian models of growth and distribution: a critical survey

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe tackle the issue of the possible instability of the Kaleckian distribution and growth model and the consequences for the endogeneity of the equilibrium rate of capacity utilization and for the paradox of thrift and the paradox of costs. Distinguishing between Keynesian and Harrodian instability, we review various mechanisms that have been proposed to tame Harrodian instability while bringing back the rate of utilization to its normal rate. We find that the mechanisms that have been suggested are far from being convincing. We thus review some approaches arguing that the adjustment towards a predetermined normal rate should not be expected at all, either because the normal rate reacts to the actual rate, or because of other constraints on the behaviour of entrepreneurs. We conclude that Kaleckian models are more flexible than their Harrodian and Marxian critics suppose when attacking the simple textbook version.JEL code: E12, E20, O41

Post-Keynesian macroeconomics since the mid 1990s: main developments

“…In these models, usually the paradox of saving, as well as the paradox of costs, and hence the possibility of wage-led growth, disappear in the long-run equilibrium. However, as discussed in detail in Hein/Lavoie/van Treeck (2011), the mechanism proposed by the critics in order to tame Harrodian instability and to bring back the economy to a normal rate of capacity utilisation are far from being convincing. 8 Furthermore, as has been reviewed and discussed by Hein/Lavoie/van Treeck (2012), Kaleckian and Steindlian authors have put forward different justifications for taking the rate of capacity utilisation as an adjusting and endogenous variable, probably within bounds, nonetheless: Normal or target rates of utilisation cannot be precisely determined in a world of fundamental uncertainty about future events and should thus rather be considered as a range, and within this range Harrodian instability disappears (Dutt , 2005a(Dutt , 2010a.…”

Finance-dominated capitalism and re-distribution of income: a Kaleckian perspective

“…What follows is not meant to present a detailed and exact analysis of pricing procedures in certain financialization, and by Zalewski and Whalen (2010), using the IMF Financial Index a as proxy. 10 See Hein, Lavoie, andvan Treeck (2011, 2012) for a discussion of the related problems. 11 See Lavoie (1992, pp.…”

Growth with Unused Capacity and Endogenous Depreciation

“…1 For a representative collection of recent non-mainstream models of growth and distribution, see for example Setterfield (2010) and Hein et al (2011). We introduce a normal degree of capacity utilization, which firms plan to have, but we show that firms may be unable to realize their plans even in the long period. This amounts to regarding the degree of capacity utilization as endogenously determined also in the long period.…”