Can a Natural Economy Operate in Macroeconomy? A Caution for Deviation from Natural Economy

Koji Akimoto ()
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Koji Akimoto: Kurume University

Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, 2016, vol. 2, issue 1, No 6, 123-142

Abstract: Abstract The fundamental problem issue of this paper is that a fundamental cause of economic crises, such as the dot-com bubble, the Lehman crash, or PIIGS, from which the current capitalist economy is suffering, lies in a large deviation from a natural economy. Any large deviation from the natural economy entails high risk. Akimoto (Int J Econ Sci III(4):1–37, 2014) proved this proposition. This leads to a question of whether a mechanism,in which a natural economy operates to begin with, exists in the macroeconomy. First, we adopt the definition by Pasinetti (Structural change and economic growth; a theoretical essay on the dynamics of the wealth of nation. Cambridge University Press, 1981) from a macroeconomic viewpoint, because it depends on the structure of the production process. However, there is no guarantee that the natural economy defined by Pasinetti (Structural change and economic growth; a theoretical essay on the dynamics of the wealth of nation. Cambridge University Press, 1981) operates in the macroeconomy. If Akimoto’s (Int J Econ Sci III(4):1–37, 2014) analysis is correct, we need to prove that a mechanism through which the natural economy operates does in fact exist in the macroeconomy. We construct a macroeconomic game with capitalists and workers as players. The macroeconomy involves circulating players’ savings to investments via capital markets. This process constructs Kaldor’s fundamental equation. We prove that a Nash equilibrium exists, which carries out a natural economy and balanced economic growth. In addition, the theoretical analysis demonstrates that Kaldor’s fundamental equation, which is Keynesian, becomes an identity, i.e., 1 $$=$$ = 1. This implies that the Keynesian equation brings about a classical result.

Keywords: Non-corporative macroeconomic game; Natural economy; Balanced economic growth; Kaldor’s fundamental equation; Labor theory (search for similar items in EconPapers)
JEL-codes: B12 B16 C72 E10 E12 P10 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s40797-016-0027-x

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