A Basic Neomarxist Model of Economic Fluctuations

Yulia Plushchevskaya

Journal of the New Economic Association, 2017, vol. 35, issue 3, 53-69

Abstract: The world economic and financial crisis has revealed the weakness of modern economics mainstream theories and the related models in explaining the capitalist economy dynamics. These are first of all real business cycles and New Keynesian dynamic stochastic general equilibrium models. They treat economic fluctuations as a result of unexpected shocks. The Marx's reproduction theory can become an alternative as it analyses cyclicality as an immanent feature of the capitalist mode of production arising from fundamental contradictions between labour and capital. Some of its concepts have been formalized in the predator-prey "Class-Struggle Model" by R. Goodwin. The model was a theoretical tool to investigate interactions between changes in employment rate (a labour market indicator) and share of labour in national income (representing a distribution of the value produced between workers and capitalists). Nevertheless, nor it neither subsequent modifications were empirically valid. Researchers who tried to verify the models by bringing them to data have pointed to a misspecification as a possible reason. To our mind, the point is that the models by R. Goodwin and his disciples reflect a distributive conflict between labour and capital which is subordinate to the main contradiction regarding production relations. The article states a prey-predator type model version based on the reproduction theory by K. Marx. The variables are productive capital and surplus value which change in time along damped oscillations trajectories. Within the present framework the economic dynamics is seen as a subsequence of damped fluctuations each of which is characterised by own specific parameters (amplitude, duration), which in turn depend on fostered innovations and their diffusion in the economy.

Keywords: economic dynamics; theory of reproduction; Marx models of cycle; predatorprey model (search for similar items in EconPapers)
JEL-codes: E11 E32 (search for similar items in EconPapers)
Date: 2017
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