Demand-constrained systems and the supermultiplier in the history of economic thought

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Chapter 2 in The Supermultiplier, 2023, pp 6-22 from Edward Elgar Publishing

Abstract: Mainstream economics (both classical and neoclassical) assumed that capitalist market economies were supply-constrained systems. In the third decade of the 20th century, Keynes and Kalecki claimed that they were demand-constrained systems and should be analysed from the principle of effective demand and the multiplier. The supermultiplier is a variety of multiplier-accelerator models that includes in the same ratio induced consumption and induced investment. Harrod and Hicks foreshadowed the concept before 1950. Serrano (1995) addressed it from a Sraffian standpoint. Instability has been the Achilles heel of these models. The new macroeconomic model can be summarized in these sentences. (1) The equilibrium level of output at t is the supermultiplier times proper autonomous demand. (2) The growth rate of output will converge to the expected persistent growth of proper autonomous demand. (3) After a change in the autonomous trend, the supermultiplier forces a change in the investment share and the warranted growth rate.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2023
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