Abstract
If the process of accumulation is to be left to free and independent decisions of firms operating in a market-oriented, monetary economy, then continuous steady rates of growth require that entrepreneurs (a) expect constant rates of growth in effective demand over time, and (b) these expectations are not disappointed.1 In reality, of course, these provisions are not likely to be continually met, but at an early stage of analysis it may be useful to explore the circumstances that would be necessary to bring these conditions about.
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Notes
Much of the following analysis is based on S. Weintraub, A Keynesian Theory of Employment, Growth, and Income Distribution (Philadelphia: Chilton, 1966), esp. pp. 30 ff.
Kalecki argues that current consumption by profit recipients is a function of last period’s profits. See M. Kalecki, Theory of Economic Dynamics. Revised ed. (London: Allen and Unwin, 1965) p. 53. This view tends to draw an arbitrary distinction between the variable which induces consumption spending and the source of finance of that spending. For example, if wage earners were to get paid at the end of each week, then, in general, they would finance this week’s spending from last week’s wages — but, in a monetary economy, this necessarily means that this week’s consumption is a function of last week’s income. If a fairly long period of clock time is chosen as the interval — say one year — this distinction between the variable inducing spending and the source of finance for this endogenous spending becomes less relevant, although ‘life cycles’ and ‘permanent income’ hypothesis suggests that even annual income magnitudes are inappropriate.
See J. Robinson, ‘A Further Note’, Rev. of Earn. Stud., 36 (1969) p. 260.
Cf. J. Robinson, ‘Harrod After Twenty Years’, Earn. Journal, 80 (1970) p. 735. Mrs. Robinson continually insists that her analysis is applicable only for comparisons between economies on equilibrium paths with different rates of growth, degrees of monopoly, etc., and not for analysing the effect of a change in a variable on the path of a single economy. Nevertheless, Mrs. Robinson does lapse into making such comparisons on occasion (e.g. Essays in Economic Growth, pp. 41, 46–7), while Kaldor and Pasinetti have less qualms about discussing the traverse of a single economy.
Interestingly, Kaldor and Pasinetti have assumed the same short-period aggregate supply function as Patinkin — despite their distaste for neoclassical economics. See D. Patinkin, Money, Interest and Prices, 2nd ed. (New York: Harper and Row, 1965) p. 211.
Joan Robinson suggests that financial constraints are only operative in cases of wage-price inflation at or near full employment. See J. Robinson, Essays in Economic Growth, p. 54. Kaldor indicates that his model is only applicable if market conditions are favourable for continuous full employment growth. N. Kaldor, ‘A New Model of Economic Growth’, Rev. Earn. Stud., 29 (1962) p. 175.
For a more complete discussion of the impossibilities of making intergenerational welfare comparisons see S. Weintraub, A Keynesian Theory, pp. 134–6 and J. de V. Graaff, Theoretical Welfare Economics (Cambridge, Cambridge University Press, 1967), chapter 9.
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© 1978 Paul Davidson
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Davidson, P. (1978). Accumulation and Growth in Effective Demand. In: Money and the Real World. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-15865-2_5
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