Lange’s 1938 model: dynamics and the “Optimum propensity to consume”
AbstractOskar Lange’s 1938 article “The Rate of Interest and the Optimum Propensity to Consume”, is usually associated with the original IS-LM approach of the late 1930s. However, Lange’s article was not only an attempt to illuminate Keynes’s main innovations but the first part of a wide project that included the development of a theory of economic evolution. This paper aims at showing that Lange’s article can help illuminating critical aspects of this project: in particular, Lange’s idea that a synthesis between Kaldor’s and Kalecki’s theories and that of Schumpeter, might have been possible and that it represented (in intentions) a “modern” and consistent reconstruction of the Marxist theory of the business cycle. Section 1 clarifies Lange’s early reflection on dynamics. Section 2 centers on Lange’s 1938 static model and indicates the effects of a change of saving on investment. Section 3 suggests a dynamic reconstruction from which are addressed important arguments raised by Lange in a series of papers written between 1934 and 1942.
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Bibliographic InfoPaper provided by Center for the History of Political Economy in its series Center for the History of Political Economy Working Paper Series with number 2014-2.
Date of creation: 2014
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Lange; Kalecki; Marxian theory of the business cycle; marginal propensity to save; non-linearity;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-04-11 (All new papers)
- NEP-GER-2014-04-11 (German Papers)
- NEP-HIS-2014-04-11 (Business, Economic & Financial History)
- NEP-HME-2014-04-11 (Heterodox Microeconomics)
- NEP-HPE-2014-04-11 (History & Philosophy of Economics)
- NEP-PKE-2014-04-11 (Post Keynesian Economics)
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