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Theoretical foundations of the international interdependence of growth regimes: price system, income–demand linkage, and quantity adjustment

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This paper elucidates the theoretical foundations of the “growth regime” and its international interdependence, based on the results of recent research on the régulation theory and the post-Keynesian theory (Boyer, Economie politique des capitalismes: Théorie de la régulation et des crises. La Découverte, Paris, 2015; Lavoie, Post-Keynesian economics: new foundations, 2nd edn. Edward Elgar, Cheltenham, 2022). In so doing, the theoretical analyses of price determination and quantity adjustment are used as a fruitful contribution of current evolutionary and post-Keynesian economics. In particular, this pioneering analysis is based on the Shiozawa–Morioka–Taniguchi theory (SMT theory) (Shiozawa et al. Microfoundations of evolutionary economics. Springer, 2019). Furthermore, we also consider the dynamics of “growth regime,” paying attention to the macro linkages between income distribution and demand formation that M. Lavoie emphasizes (Lavoie, Post-Keynesian economics: New foundations, 2nd edn. Edward Elgar, Cheltenham, 2022). From this theoretical perspective, this paper attempts to theoretically examine the international Leontief-multiplier process and the international Keynes-multiplier process that mediate the international interdependence of “growth regimes,” while considering their dynamic processes with the time dimension. In this way, we aim to develop the theoretical foundations of the régulation theory and the post-Keynesian theory.

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Notes

  1. In the régulation theory, the “growth regime” is often called “accumulation regime.” R. Boyer explained this concept as follows: “the totality of regularities that ensure the extensive and consistent progress of accumulation, that is, regularities that absorb, or temporally shift, the distortions emerging from the process itself” (Boyer 2015). Moreover, the research has progressed from comparative growth regime analysis to the analysis of international interdependence of growth regimes (Boyer et al. 2018).

  2. As for “historical time,” Joan Robinson’ theoretical orientation is very famous (Robinson 1980). Nicolas Kaldor also emphasized “cumulative causation” in an economic process (Kaldor 1972, 1985). We understand that the régulation theory recognizes the economic process in historical time as a structurally stable and cumulative system by using the growth regime analysis (Yamada 1991; Boyer 2015).

  3. As for the international multi-layered structures of time and space in capitalism, also see Isogai and Uemura (2022) and Uemura (2023).

  4. The theoretical idea of the multiplier of matrix form was proposed early by Goodwin (1949).

  5. Michał Kalecki’s “the degree of monopoly” also assumes a price determination basically based on the mark-up principle (Kalecki 1954, 1971). Maurice Dob also pointed out the nature of Kalecki’s price theory (Dobb 1973). Furthermore, Nicolas Kaldor said, “the sellers are price-makers and quantity-takers” (Kaldor 1985, p. 31). Also see Shiozawa (2021)

  6. This framework of production price system based on “the mark-up principle” follows Shiozawa’s framework of price system (Shiozawa 2014; Shiozawa et al. 2019). This means the rehabilitation of the Classical value theory (Shiozawa and Aruka 2014).

  7. The meanings of row and column in this paper correspond to those in input–output tables. Accordingly, quantity vectors are row vectors, and price vectors are column vectors.

  8. In this paper, the analysis is conducted with the industry unit to be consistent with the input–output analysis, while the SMT theory is formulated with the commodity unit.

  9. L. Pasinetti and R. Goodwin, who were leading scholars at The University of Cambridge in the 1970s and 80 s, developed their multi-sectoral models, and this theorem was the theoretical foundations of those Cambridge economists (Pasinetti 1977; Goodwin and Punzo 1987). “The non-substitution theorem” is analyzed at the industrial level, but “the minimum price theorem” is analyzed at the commodity level (Shiozawa et al. 2019).

  10. Hiroyasu Uemura analyzed the process of obsolescence of fixed capital cause by technological innovation in the Sraffia-type fixed capital model (Uemura 1985). The set of production techniques available to firms evolves through technological innovation in a “technological paradigm” (Dosi 1984).

  11. Famous theories of over-determination of income distribution are J. Robinson’s “inflation barrier” (Robinson 1962), R. Rowthorn’s “conflict theory” (Rowthorn 1980), and S. Mrglin’s “the synthesis of Marx and Keynes” (Marglin 1984).

  12. If the exogenous wage-rate resist is just one shot with the “productive” input coefficient matrix A, the dynamic process converges. However, if the exogenous wage-rate resist happens over and over again, the dynamic process does not necessarily converge, and this leads to a spiral process.

  13. The term, “the income attribution function of price” is originally used by Kishimoto (1975). There are “the dual roles of costs” that costs are expenditures and become others’ incomes and induce further expenditure—demand formation. This is originally Michał Kalecki’s idea. Furthermore, Robert Rowthorn formalized “the paradox of costs” that an increase in costs leads to an increase in incomes and eventually an increase in profits (Rowthorn 1981). This idea has been developed as “the dual roles of wages” (Uemura et al. 2007), which is extended in the multi-sectoral framework (Uemura 2007). The synthesis of Sraffian and Kaleckian theories is a promising research subject in political economy (Lavoie 2003).

  14. M. Lavoie assesses Shiozawa et al. (2019) as follows: “A key achievement of the authors is the demonstration that a multi-sectoral economy, where production takes time and with production inputs, can adjust to changes in demand through the realistic decisions of managers to change quantities without any change in prices—something that previously was not thought to be possible. The only drawback of Shiozawa et al.’s book is the lack of aggregate demand feedback” (Lavoie 2022, p. 191).

  15. “De-industrialization” is an important research topic on the multi-sectoral economic dynamics of “growth regime” in advanced countries. As for the analysis of de-industrialization, see a series of studies by Uemura and Tahara (2014, 2018). As for the dynamics of multi-sectoral price system, “productivity differential inflation” is an original contribution by Takasuka (1965). Furthremore, the dynamics of international price system with productivity differentials is referred to the Balassa–Samuelson effect (Balassa 1964; Samuelson 1964). It must be a very important research agenda to reformulate these theories based on the SMT theory.

  16. Landesmann and Scazzieri (1996) developed the theory of production and structural dynamics under the influence of Luigi Pasinetti’s theory (Pasinetti 1981).

  17. In the formulation of SNA and input–output tables, there are usually product inventory, semi-finished product inventory, work-in-progress inventory, distribution inventory, raw material inventory, etc., but here we are developing the discussion with only product inventory in mind. Semi-finished product inventories and raw material inventories play an important role in the analysis of global supply chains.

  18. It is our important research agenda to make clear the relationship between Morioka and Taniguchi’s theory of quantity adjustment in the SMT theory and the cumulative disequilibrium process in the goods market in a business cycle. We should also consider the different patterns of disequilibrium in different sectors.

  19. This understanding of “international interdependence” between national economies in the international economy has already been analyzed by Cambridge economist, Michel Landesmann from a structural perspective (Landesmann 1988, 2022; Cardinale and Ladesmann 2022).

  20. Kuenne (2004) has already analyzed the impact of oligopolistic prices on input–output tables. Analyzing the impact of multinational firms’ pricing strategies on international input–output tables is an important future research agenda.

  21. The structure of domestic purchase and foreign purchase of intermediate goods cannot be explained by the international value theory. When we consider this problem, the international division of labor at the task level caused by the “unbundling” of international supply chains is important, as suggested Baldwin and Lopez-Gonzalez (2013).

  22. The formulation of “the international Keynes-multiplier process”' is based on the Miyazawa model (Miyazawa 1963, 1969, 1976). In particular, according to Kaldor's theory of income distribution, it should be assumed that the value added (income) is distributed into wages and profits, leading to demand formation. In fact, Miyazawa (1969) and Miyazawa (1976) also refer to Kalecki and Kaldor and show the possibility of developing an analysis that considers income distribution among heterogeneous households.

  23. In the input–output analysis that makes income distribution and consumption endogenous, the equilibrium value of the simple convergence is often treated as an actual value. However, we have to be careful about its validity for the real economy.

  24. This investment function follows Kaleckians’ ideas such as R. Rowthorn and M. Lavoie (Rowthorn 1981; Lavoie 1992). S. Margin and A. Bhaduri set a slightly different investment function that depends on profit share and capacity utilization (Marglin and Bhaduri 1990). This paper uses the Rowthorn-type investment function as this seems to reflect the “investment behavior” as a driving force of economic growth.

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    Hiroyasu Uemura

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Uemura, H. Theoretical foundations of the international interdependence of growth regimes: price system, income–demand linkage, and quantity adjustment. Evolut Inst Econ Rev 20, 425–455 (2023). https://doi.org/10.1007/s40844-023-00269-5

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