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Lange’s 1938 model: dynamics and the “Optimum propensity to consume”

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  • Michael Assous
  • Roberto Lampa
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    Abstract

    Oskar 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 Info

    Paper 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.

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    Length: 35
    Date of creation: 2014
    Date of revision:
    Handle: RePEc:hec:heccee:2014-2

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    Postal: Center for the History of Political Economy Box 90097 Durham, NC 27708-0097
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    Web page: http://hope.econ.duke.edu

    Related research

    Keywords: Lange; Kalecki; Marxian theory of the business cycle; marginal propensity to save; non-linearity;

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