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Harrodian Instability: a Misleading Concept

Attilio Trezzini ()

No CSWP24, Centro Sraffa Working Papers from Centro di Ricerche e Documentazione "Piero Sraffa"

Abstract: The concept of Harrodian instability is reexamined taking into due consideration the fact that growth occurs through irregular fluctuations. This undermines the cornerstone of Harrodian instability, namely the way in which investment is assumed to react to a degree of utilization differing from its desired level. The methodo-logical consequence of Harrodian instability is reconsidered: the assumption that only theoretical positions in which capacity and demand are perfectly adjusted can be regarded as theoretically acceptable appears to be based on weak foundations. The relevance of the cumulative tendencies toward expansion and recession is greatly re-duced. Different ways of addressing these hypothetical phenomena are suggested.

Keywords: Harrodian Instability; Demand-led Growth Theory; Methodology (search for similar items in EconPapers)
JEL-codes: B41 E12 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2017-02
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