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Kaleckian Effective Demand and Sraffian Normal Prices: Towards a reconciliation

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  • Marc Lavoie

Abstract

Sraffians and Kaleckians alike reject the belief that higher rates of accumulation need be associated with lower real wage rates or higher propensities to save. The rejection of this proposition is mainly based on the endogeneity of the rate of capacity utilization, both in the short and the long run. This endogeneity often relies on a discrepancy between the realized and the normal rates of profit, or between the realized and the target rate of capacity utilization, a discrepancy which some authors believe is unwarranted in long run analysis. Various models that eliminate this divergence are outlined. In all these models, the normal rate of profit itself is taken as an endogenous variable. In the first two models, the normal rate of profit depends either on the realized profit rate or the rate of interest. Supply-led results may then reappear in long run analysis. In the last model, one introduces the possibility of a divergence between the rate of return as assessed and targeted by firms, and the rate of return that is actually incorporated into prices. This divergence arises because of the bargaining power of workers and their real wage resistance. Under these conditions, the demand-led results of the Kaleckian tradition are recovered in a model with definite solutions.

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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal Review of Political Economy.

Volume (Year): 15 (2003)
Issue (Month): 1 ()
Pages: 53-74

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Handle: RePEc:taf:revpoe:v:15:y:2003:i:1:p:53-74

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References

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  1. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-93, December.
  2. Lavoie, M. & Ramirez-Gaston, P., 1993. "Traverse in a Two-Sector Kaleckian Model of growth with Target Return Pricing," Working Papers 9308e, University of Ottawa, Department of Economics.
  3. Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, vol. 82(325), pages 101-15, March.
  4. Park, Man-Seop, 1997. "Accumulation, Capacity Utilisation and Distribution," Contributions to Political Economy, Oxford University Press, vol. 16(0), pages 87-101.
  5. Boggio, Luciano, 1992. "Production Prices and Dynamic Stability: Results and Open Questions," The Manchester School of Economic & Social Studies, University of Manchester, vol. 60(3), pages 264-94, September.
  6. Steindl, Josef, 1979. "Stagnation Theory and Stagnation Policy," Cambridge Journal of Economics, Oxford University Press, vol. 3(1), pages 1-14, March.
  7. Lavoie, M., 1992. "The Kaleckian Model of Growth and Distribution and its Neo-Ricardian and Neo-Marxian Critiques," Working Papers 9201e, University of Ottawa, Department of Economics.
  8. Shipley, David D, 1981. "Pricing Objectives in British Manufacturing Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 29(4), pages 429-43, June.
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Citations

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Cited by:
  1. Marc Lavoie & Gabriel Rodriguez & Mario Seccareccia, 2004. "Similitudes and Discrepancies in Post-Keynesian and Marxist Theories of Investment: A Theoretical and Empirical Investigation," International Review of Applied Economics, Taylor and Francis Journals, vol. 18(2), pages 127-149.
  2. Angel Asensio & Dany Lang & Sébastien Charles, 2012. "Post Keynesian modeling: where are we, and where are we going to?," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 34(3), pages 393-412, April.
  3. Eckhard Hein & Marc Lavoie & Till van Treeck, 2008. "Some instability puzzles in Kaleckian models of growth and distribution: A critical survey," IMK Working Paper 19-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  4. Domenica Tropeano, 2011. "Income distribution, growth and financialization: the Italian case," Working Papers 65-2011, Macerata University, Department of Finance and Economic Sciences, revised Apr 2011.
  5. Araujo, Ricardo Azevedo & Teixeira, Joanílio Rodolpho, 2011. "A multi-sector version of the Post-Keynesian growth model," MPRA Paper 30331, University Library of Munich, Germany.
  6. Sergio Cesaratto, 2012. "Neo-Kaleckian and Sraffian controversies on accumulation theory," Department of Economics University of Siena 650, Department of Economics, University of Siena.
  7. Vasiliki Bozani, 2011. "NAIRU, Unemployment and Post Keynesian Economics," Working Papers 1105, University of Crete, Department of Economics.
  8. Loaiza Quintero, O.L., 2011. "La demanda agregada y la distribución del ingreso: Un estudio a partir de los modelos de crecimiento kaleckianos
    [Aggregate Demand and Income Distribution: A Kaleckian Growth Model Approach]    ," MPRA Paper 42667, University Library of Munich, Germany, revised 01 Apr 2011.
  9. Araujo, Ricardo Azevedo & Teixeira, Joanílio Rodolpho, 2011. "Decisions on investment allocation in the post-Keynesian growth models," MPRA Paper 33639, University Library of Munich, Germany.
  10. repec:hal:journl:halshs-00196500 is not listed on IDEAS
  11. Olivier Allain, 2006. "La modération salariale : le point de vue des (néo-)kaleckiens," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00196500, HAL.
  12. Amitava Krishna Dutt, 2006. "Aggregate Demand, Aggregate Supply and Economic Growth," International Review of Applied Economics, Taylor and Francis Journals, vol. 20(3), pages 319-336.

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