Growth theory after Keynes, part I: the unfortunate suppression of the Harrod-Domar model
Hendrik Van den Berg ()
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Hendrik Van den Berg: University of Nebraska-Lincoln
The Journal of Philosophical Economics, 2013, vol. 7, issue 1
After Harrod and Domar independently developed a dynamic Keynesian circular flow model to illustrate the instability of a growing economy, mainstream economists quickly reduced their model to a supply side-only growth model, which they subsequently rejected as too simplistic and replaced with Solow’s neoclassical growth model. The rejection process of first diminishing the model and then replaced it with a neoclassical alternative was similar to how the full Keynesian macroeconomic paradigm was diminished into IS-LM analysis and then replaced by a simplistic neoclassical framework that largely ignored the demand side of the economy. Furthermore, subsequent work by mainstream economists has resulted in a logically inconsistent framework for analyzing economic growth; the popular endogenous growth models, which use Schumpeter’s concept of profit-driven creative destruction to explain the technological change that Solow left as exogenous, are not logically compatible with the Solow model.
Keywords: paradigm; macroeconomics; mainstream; Schumpeter; Solow (search for similar items in EconPapers)
JEL-codes: E10 (search for similar items in EconPapers)
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Persistent link: http://EconPapers.repec.org/RePEc:bus:jphile:v:7:y:2013:i:1:n:1
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