Convergence towards the normal rate of capacity utilization in neo-Kaleckian models: the role of non-capacity creating autonomous expenditures

Marc Lavoie

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Abstract: Neo-Kaleckian models of growth and distribution have been highly popular among heterodox economists. Two drawbacks of these models have, however, been underlined in the literature: first, the models do not usually converge to their normal rate of capacity utilization; second, the models do not include the Harrodian principle of dynamic instability. Some Sraffian economists have long been arguing that the presence of non-capacity creating autonomous expenditures provides a mechanism that brings back the model to normal rates of capacity utilization, while safeguarding the main Keynesian message and without going back to classical conclusions. The present article provides a very simple proof of this, showing within a neo-Kaleckian model that the Harrodian principle of dynamic instability gets tamed by the presence of autonomous consumer expenditures.

Date: 2016
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Published in Metroeconomica, 2016, 76 (1), pp.172-201. ⟨10.1111/meca.12109⟩

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Journal Article: Convergence Towards the Normal Rate of Capacity Utilization in Neo-Kaleckian Models: The Role of Non-Capacity Creating Autonomous Expenditures (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01343732

DOI: 10.1111/meca.12109

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