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Normal utilization as the adjusting variable in Neo-Kaleckian growth models: a critique

Daniele Girardi and Riccardo Pariboni ()

UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics

Abstract: As well-known, the canonical Neo-Kaleckian growth model fails to reconcile actual and normal rates of utilization in equilibrium. Some recent contributions revive an old proposal for solving this problem – making the normal rate of utilization an endogenous variable that converges to the actual utilization rate – justifying it with new, micro-founded premises. We argue that these new justifications for the convergence of normal to actual utilization do not stand closer scrutiny. First, the proposed microeconomic model relies on various restrictive assumptions, some of which are mutually inconsistent. Second, the derivation of the macroeconomic adjustment mechanism from the microeconomic analysis involves a logical leap, that can be justified only by a very arbitrary assumption with little economic justification. Finally, we discuss the way in which this mechanism has been incorporated into the Neo-Kaleckian growth model by proposers of this approach. We show that, even if one puts aside, for the sake of argument, the first two points, the existence of autonomous components of demand is sufficient to invalidate the resulting macroeconomic model.

Keywords: Capacity Utilization; Normal Rate of Utilization; Neo-Kaleckian model; Economic Growth (search for similar items in EconPapers)
JEL-codes: B50 E11 E12 E22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-pke
Date: 2018
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Journal Article: Normal utilization as the adjusting variable in Neo‐Kaleckian growth models: A critique (2019) Downloads
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