IDEAS home Printed from https://ideas.repec.org/a/oup/oxecpp/v69y2017i4p1120-1137..html
   My bibliography  Save this article

Optimum saving and growth: Harrod on dynamic welfare economics

Author

Listed:
  • Mauro BoianovskyBy

Abstract

In the 1960s and 1970s Harrod shifted the emphasis of his research in economic dynamics from the study of business cycles (instability principle) to the investigation of the growth process. As part of that, he restated his concept of the natural growth rate as an optimum welfare rate. This paper examines Harrod’s dynamic welfare economics, built around his concept of optimum saving developed as a reaction to Ramsey’s approach to capital accumulation. It is shown that, according to Harrod, the saving rate does not affect the long-run growth rate of per capita income, which is determined by technical progress. Moreover, the economy will grow at the natural (full employment) rate only if economic policy is able to bring saving to its ‘optimum’ level in macroeconomic equilibrium. Harrod’s interest in optimal growth was motivated by his double concern with growth policy in mature economies and economic development in poor countries.

Suggested Citation

  • Mauro BoianovskyBy, 2017. "Optimum saving and growth: Harrod on dynamic welfare economics," Oxford Economic Papers, Oxford University Press, vol. 69(4), pages 1120-1137.
    • Handle: RePEc:oup:oxecpp:v:69:y:2017:i:4:p:1120-1137.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/oep/gpx015
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. King, Robert G. & Levine, Ross, 1994. "Capital fundamentalism, economic development, and economic growth," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 259-292, June.
    2. Daniele Besomi (ed.), 2003. "The Collected Interwar Papers and Correspondence of Roy Harrod," Books, Edward Elgar Publishing, volume 0, number 3068.
    3. Olivier Bruno & Muriel Dal-Pont Legrand, 2014. "The instability principle revisited: an essay in Harrodian dynamics," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 21(3), pages 467-484, June.
    4. G. C. Harcourt, 2008. "The Structure of Post-Keynesian Economics," Palgrave Macmillan Books, in: Mathew Forstater & L. Randall Wray (ed.), Keynes for the Twenty-First Century, chapter 0, pages 185-197, Palgrave Macmillan.
    5. Mauro Boianovsky, 2015. "Modeling Economic Growth: Domar on Moving Equilibrium," Center for the History of Political Economy Working Paper Series 2015-10, Center for the History of Political Economy.
    6. J. A. Kregel, 1980. "Economic Dynamics and the Theory of Steady Growth: An Historical Essay on Harrod's ‘Knife-edge'," History of Political Economy, Duke University Press, vol. 12(1), pages 97-123, Spring.
    7. Mauro Boianovsky & Kevin D. Hoover, 2014. "In the Kingdom of Solovia: The Rise of Growth Economics at MIT, 1956-70," History of Political Economy, Duke University Press, vol. 46(5), pages 198-228, Supplemen.
    8. Miguel A. LeÛn-Ledesma & A. P. Thirlwall, 2002. "The endogeneity of the natural rate of growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 26(4), pages 441-459, July.
    9. Sir Roy Harrod, 1962. "Economic Development and Asian Rgional Cooperation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 2(1), pages 1-22.
    10. Besomi, Daniele, 2001. "Harrod's Dynamics and the Theory of Growth: The Story of a Mistaken Attribution," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 25(1), pages 79-96, January.
    11. Mauro Boianovsky, 2015. "Beyond capital fundamentalism: Harrod, Domar and the history of development economics," Center for the History of Political Economy Working Paper Series 2015-12, Center for the History of Political Economy.
    12. Daniele Besomi, 2004. "Dynamics, Trade And Money In The Correspondence Between Roy Harrod And Dennis Robertson," Research in the History of Economic Thought and Methodology, in: A Research Annual, pages 1-64, Emerald Group Publishing Limited.
    13. Verena Halsmayer & Kevin D. Hoover, 2016. "Solow's Harrod: Transforming macroeconomic dynamics into a model of long-run growth," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 23(4), pages 561-596, August.
    14. A. Asimakopulos & J. C. Weldon, 1963. "Sir Roy Harrod'S Equation Of Supply," Oxford Economic Papers, Oxford University Press, vol. 15(3), pages 266-272.
    15. Mauro Boianovsky, 2014. "Robertson and the Cambridge approach to utility and welfare," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(4), pages 961-985.
    16. R. F. Harrod, 1953. "Full Capacity vs. Full Employment Growth: Comment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 67(4), pages 553-559.
    17. Phelps Brown, Henry, 1980. "Sir Roy Harrod: A Biographical Memoir," Economic Journal, Royal Economic Society, vol. 90(357), pages 1-33, March.
    18. Spear, Stephen E. & Young, Warren, 2014. "Optimum Savings And Optimal Growth: The Cass–Malinvaud–Koopmans Nexus," Macroeconomic Dynamics, Cambridge University Press, vol. 18(1), pages 215-243, January.
    19. Harold Pilvin, 1953. "Full Capacity vs. Full Employment Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 67(4), pages 545-552.
    20. Mauro Boianovsky, 1998. "Wicksell, Ramsey and the theory of interest," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 5(1), pages 140-168.
    21. Roy Harrod, 1955. "Les relations entre l'investissement et la population," Revue Économique, Programme National Persée, vol. 6(3), pages 356-367.
    22. Harrod, Roy, 1970. "Harrod after Twenty-one Years: A Comment," Economic Journal, Royal Economic Society, vol. 80(319), pages 737-741, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michaël Assous & Muriel Dal Pont Legrand, 2020. "Growth Without Expectations: The Original Sin of Neoclassical Growth Models," Springer Studies in the History of Economic Thought, in: Arie Arnon & Warren Young & Karine van der Beek (ed.), Expectations, pages 121-130, Springer.
    2. Michaël Assous & Muriel Dal Pont Legrand & Sonia Manseri, 2020. "Samuelson's Neoclassical Synthesis in the Context of Growth Economics, 1956-1967," GREDEG Working Papers 2020-12, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    3. Mark Setterfield, 2019. "Long-run variation in capacity utilization in the presence of a fixed normal rate," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(2), pages 443-463.
    4. Jamee K. Moudud, 2010. "Strategic Competition, Dynamics, and the Role of the State," Books, Edward Elgar Publishing, number 4241.
    5. Mendieta-Muñoz, Ivan, 2017. "On The Interaction Between Economic Growth And Business Cycles," Macroeconomic Dynamics, Cambridge University Press, vol. 21(4), pages 982-1022, June.
    6. Mendieta-Muñoz, Ivan, 2015. "Is potential output growth falling?," MPRA Paper 68278, University Library of Munich, Germany.
    7. Akanbi, Olusegun A. & Du Toit, Charlotte B., 2011. "Macro-econometric modelling for the Nigerian economy: A growth–poverty gap analysis," Economic Modelling, Elsevier, vol. 28(1), pages 335-350.
    8. G. C. Harcourt, 2015. "Fusing indissolubly the cycle and the trend: Richard Goodwin’s profound insight," Cambridge Journal of Economics, Oxford University Press, vol. 39(6), pages 1569-1578.
    9. Matheus Assaf & Pedro Garcia Duarte, 2018. "Utility Matters: Edmond Malinvaud and growth theory in the 1950s and 1960s," Working Papers, Department of Economics 2018_03, University of São Paulo (FEA-USP).
    10. Michaël Assous & Muriel Dal Pont Legrand & Harald Hagemann, 2016. "Business cycles and growth," Chapters, in: Gilbert Faccarello & Heinz D. Kurz (ed.), Handbook on the History of Economic Analysis Volume III, chapter 4, pages 27-39, Edward Elgar Publishing.
    11. Attilio Trezzini, 2021. "Harrodian Instability: An Unhelpful Analytical Concept," Review of Radical Political Economics, Union for Radical Political Economics, vol. 53(2), pages 320-336, June.
    12. repec:pra:mprapa:40684 is not listed on IDEAS
    13. Marwil Jhonatan Dávila Fernádez & José Luis Oreiro, 2016. "Capital In The Twenty First Century: Reinterpretando A Contradição Fundamental Do Capitalismo," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 096, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    14. Kawalec Paweł, 2020. "The dynamics of theories of economic growth: An impact of Unified Growth Theory," Economics and Business Review, Sciendo, vol. 6(2), pages 19-44, June.
    15. Alexandre Janiak & Paulo Santos Monteiro, 2011. "Inflation and Welfare in Long‐Run Equilibrium with Firm Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(5), pages 795-834, August.
    16. Kevin S. Nell & Maria M. De Mello, 2019. "The interdependence between the saving rate and technology across regimes: evidence from South Africa," Empirical Economics, Springer, vol. 56(1), pages 269-300, January.
    17. Luca Fiorito & Matías Vernengo, 2009. "The Other J.M.: John Maurice Clark and the Keynesian Revolution," Journal of Economic Issues, Taylor & Francis Journals, vol. 43(4), pages 899-916.
    18. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1996. "The Poverty of Nations: A Quantitative Exploration," NBER Working Papers 5414, National Bureau of Economic Research, Inc.
    19. Brogi, Marina & Lagasio, Valentina, 2022. "Better safe than sorry. Bank corporate governance, risk-taking, and performance," Finance Research Letters, Elsevier, vol. 44(C).
    20. Kronenberg, Tobias, 2010. "Finding common ground between ecological economics and post-Keynesian economics," Ecological Economics, Elsevier, vol. 69(7), pages 1488-1494, May.
    21. Kevin S. Nell & A.P. Thirlwall, 2017. "Why does the productivity of investment vary across countries?," PSL Quarterly Review, Economia civile, vol. 70(282), pages 213-245.

    More about this item

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:69:y:2017:i:4:p:1120-1137.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/oep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.