Demand Constraints and Big Government

L. Randall Wray

Economics Working Paper Archive from Levy Economics Institute, The

Abstract: In a series of articles and books, Harold Vatter and John Walker attempted to make the case that the U.S. economy suffers from chronically insufficient demand that leads to growth below capacity. Of particular interest are a 1989 Journal of Post Keynesian Economics article that extends DomarÕs work on the supply side effects of investment spending and a 1997 book that provides a comprehensive analysis of the evolution of the U.S. ÒmixedÓ economy. Their analysis of secular growth complements the well-known writings of Hyman Minsky, who also emphasized the role of the Òbig governmentÓ and the Òbig bankÓ in stabilizing an unstable economy over the cycle. This article will summarize, provide support for, and extend the Vatter and Walker approach, concluding with an examination of some of the dangers facing the U.S. economy today. As appropriate, the ideas of Minsky will be used to supplement the argument.

New Economics Papers: this item is included in nep-pke
Date: 2007-01
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