Capitalism, Socialism and Effective Demand

  • Edward Nell


Comparing capitalism and socialism, it is important to remember that no actual economy is purely one type or another: all are mixtures bearing traces of their national histories, international relations and political compromises. Nevertheless, analytical study is best carried out at an abstract level in terms of pure types; prominent features of actual economies will be identifiable as belonging to one system or another and the logic of these features can be traced in the abstract system of which they are a part, where they have free play and full scope. We will treat capitalism and socialism as such abstract systems, and in doing so will draw on a central theme of Kaldor’s later years, the distinction between ‘demand-constrained’ and ‘resource-constrained’ systems, developed implicitly by Kalecki, but first explicitly defined by Kornai. This distinction requires replacing the scarcity-based theory of value with a Classical approach in which manufacturing prices are largely invariant to changes in demand.


Real Wage Informal Sector Socialist Enterprise Technical Progress Aggregate Demand 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Abraham-Frois, G. and Berrebi, E. (1979), Theory of Value, Prices and Accumulation (Cambridge: Cambridge University Press).Google Scholar
  2. Alessandrini, Sergio and Dallago, Bruno (1987), The Unofficial Economy: Consequences and Perspectives in Different Economic Systems (London Gower).Google Scholar
  3. Brus, W. and Kowalik, T. (1983), ‘Socialism and Development’, Cambridge Journal of Economics, 7 (3–4).CrossRefGoogle Scholar
  4. Davis and Charemza (eds) (1989), Models of Disequilibrium and Shortage in Centrally Planned Economies (London: Chapman & Hall).Google Scholar
  5. Dobb, Maurice (1960), An Essay on Economic Growth and Planning (London: Routledge & Kegan Paul).Google Scholar
  6. Domar, Evsey (1957), Essays in the Theory of Economic Growth (New York: Oxford University Press).Google Scholar
  7. Frisch, Ragnar (1936), ‘On the Notion of Equilibrium and Disequilibrium’, Review of Economic Studies, 3.Google Scholar
  8. Gandolfo, G. (1983), Economic Dynamics: Methods and Models (New York: North-Holland).Google Scholar
  9. Goodwin, Richard (1967), ‘A Growth Cycle,’ in C. H. Feinstein (ed.), Socialism, Capitalism and Economic Growth (Cambridge: Cambridge University Press).Google Scholar
  10. Harrod, Roy (1939), ‘An Essay in Dynamic Theory,’ Economic Journal, XLIX (March).Google Scholar
  11. Hare, Paul (1989), ‘The Economics of Shortage in Centrally Planned Economies,’ in Davis and Charemza (1989).CrossRefGoogle Scholar
  12. Kemme, David (1989), ‘The Chronic Excess Demand Hypothesis,’ in Davis and Charemza (1989).CrossRefGoogle Scholar
  13. Kaldor, Nicholas (1966), ‘Marginal Productivity and the Macro-Economic Theories of Distribution: Comment on Samuelson and Modigliani,’ Review of Economic Studies, XXXIII (4) (October).Google Scholar
  14. —— (1972), ‘The Irrelevance of Equilibrium Economics,’ Economic Journal, 82 (December).Google Scholar
  15. —— (1975), ‘What is Wrong With Economic Theory?,’ Quarterly Journal of Economics, LXXXXIX (3) (August).Google Scholar
  16. —— (1985), Economics Without Equilibrium (Armonk, NY: M. E. Sharpe).Google Scholar
  17. Kalecki, Michal (1986), Selected Essays on Economic Planning (Cambridge: Cambridge University Press).Google Scholar
  18. Kornai, Janos (1979), ‘Resource-Constrained versus Demand-Constrained Systems,’ Econometrica, 47. (Reprinted in Kornai, 1986).Google Scholar
  19. —— (1980), ‘The Dilemmas of a Socialist Economy: The Hungarian Experience,’ Cambridge Journal of Economics, 4.Google Scholar
  20. —— (1986), Contradictions and Dilemmas: Studies on the Socialist Economy and Society (Cambridge, Mass: MIT Press).Google Scholar
  21. Kowalik, Tadeuszc (1989), ‘Towards a Mixed Socialist Economy’ (New York: New School For Social Research).Google Scholar
  22. Kregel, Jan (1987), ‘Natural and Warranted Rates of Growth’, in Eatwell, J., Milgate, M. and Newman, P. (eds), The New Palgrave: A Dictionary of Economics (London: Macmillan).Google Scholar
  23. Lange, Oskar (1936), ‘On the Economic Theory of Socialism,’ Review of Economic Studies, IV.Google Scholar
  24. Marglin, Steven (1984), Growth, Distribution and Price (Cambridge, Massachusetts: Harvard University Press).Google Scholar
  25. Morishima, Michio (1969), Theory of Economic Growth (Oxford: Clarendon Press).CrossRefGoogle Scholar
  26. —— (1975), Theory of Economic Growth (London: Oxford University Press).Google Scholar
  27. Nell, Edward (1988), Prosperity and Public Spending (London: Unwin Hyman).Google Scholar
  28. —— (1990), Keynes After Sraffa (London: Unwin Hyman).Google Scholar
  29. —— (1991), Transformational Growth and Effective Demand (London: Macmillan).Google Scholar
  30. Nove, Alec (1988), The Economics of Feasible Socialism (London: Unwin Hyman).Google Scholar
  31. Pasinetti, Luigi. (1977), Lectures on the Theory of Production (New York: Columbia University Press).Google Scholar
  32. Schefold, Bertram (1989), Mr Sraffa on Joint Production (London: Unwin Hyman).CrossRefGoogle Scholar
  33. Shmelev, N. and Popov, V. (1989), The Turning Point: Revitalizing the Soviet Economy (New York: Doubleday).Google Scholar
  34. Sraffa, Piero (1926), ‘The Laws of Returns Under Competitive Conditions’ Economic Journal (December).Google Scholar
  35. —— (1960), Production of Commodities by Means of Commodities (Cambridge: Cambridge University Press).Google Scholar
  36. Steedman, Ian (1988) Sraffian Economics, Volume II (London: Edward Elgar).Google Scholar
  37. Szego, Andrea (1989), ‘The Economic and Political Contradictions of Market Socialism’ (New York: New School For Social Research).Google Scholar
  38. Williamson, Oliver (1986), Economic Organization (Brighton: Wheatsheaf Books).Google Scholar
  39. Young, Allyn (1928), ‘Increasing Returns and Economic Progress,’ Economic Journal, 18 (December).Google Scholar

Copyright information

© Edward J. Nell and Willi Semmler 1991

Authors and Affiliations

  • Edward Nell

There are no affiliations available

Personalised recommendations