Breaking Say’s law in a simple market economy model

Carlos Humberto Ortiz Quevedo () and Rodrigo Castillo Rentería ()

Revista Cuadernos de Economia, 2020, vol. 39, issue 81, 897-918

Abstract: This paper analyses a multi-sector market economy where preferences are non-homothetic and satiable. Capital and labour are the production factors. Food and manufactured goods are produced with a constant-returns-to-scale technology and an increasing-returns-to-scale technology, respectively. Results include: an original capital accumulation process is required for manufacturing industrialization to take place, a minimum market size is needed for the economy to operate, and capital property concentration diminishes aggregate demand. Full general equilibrium is possible for intermediate degrees of capital concentration, but the price system collapses under high degrees as an economy regulator, labour unemployment is unavoidable, and a minimum wage is justified to enhance economic activity. ****** Este artículo analiza una economía de mercado multisectorial, donde las preferencias no son homotéticas y saciables. El capital y el trabajo son los factores de producción. Los alimentos y los productos manufacturados se producen con una tecnología de rendimiento constante y una tecnología de rendimiento creciente a escala. Los resultados incluyen: se requiere un proceso original de acumulación de capital para que tenga lugar la industrialización manufacturera, se necesita un tamano de mercado mínimo para que la economía funcione y la concentración de propiedades de capital disminuya la demanda agregada. Es posible un equilibrio general completo para los grados intermedios de concentración de capital, pero el sistema de precios colapsa bajo altos grados como un regulador de la economía, el desempleo es inevitable y se justifica un salario mínimo para mejorar la actividad económica.

Keywords: Extent of the market; capital property distribution; non-homothetic preferences; satiable preferences; increasing returns; economic activity (search for similar items in EconPapers)
JEL-codes: D31 D33 D51 E25 O11 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:col:000093:018269

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