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Was Harrod Right?

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  • Kevin Hoover

Abstract

Modern growth theory derives mostly from Robert Solow’s “A Contribution to the Theory of Economic Growth” (1956). Solow’s own interpretation locates the origins of his “Contribution” in his view that the growth model of Roy Harrod implied a tendency toward progressive collapse of the economy. He formulates his view in terms of Harrod invoking a fixed-coefficients production function. This paper, first, challenges Solow’s reading of Harrod, arguing that Harrod’s object in providing a “dynamic” theory had little to do with the problem of long-run growth as Solow understood it, but instead addressed the medium run fluctuations. It was an attempt to isolate conditions under which the economy might tend to run below potential. In making this argument, Harrod does not appeal to a fixed-coefficients production function – or to any production function at all, as that term is understood by Solow. The paper next traces the history of the dominance of Solow’s interpretation among growth economists. These tasks belong to the history of economics. The paper’s final task belongs to economic history. It offers an informal reexamination of economic history through the lens of Harrod’s dynamic model, asking whether there is a prima facie case in favor of Harrod’s model properly understood.

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File URL: http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2013-02.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis in its series GREDEG Working Papers with number 2013-02.

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Length: 37 pages
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:gre:wpaper:2013-02

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Keywords: economic growth; Roy Harrod; Robert Solow; dynamics; dynamic instability; dnife-edge; warranted rate of growth; natural rate of growth;

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  1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
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