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Normal utilization as the adjusting variable in Neo‐Kaleckian growth models: A critique

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  • Daniele Girardi
  • Riccardo Pariboni

Abstract

As well‐known, the canonical Neo‐Kaleckian growth model fails to reconcile actual and normal rates of utilization in equilibrium. Some recent contributions revive an old proposal for solving this problem—making the normal rate of utilization an endogenous variable that converges to the actual utilization rate—justifying it with new, micro‐founded premises. We argue that these new justifications for the convergence of normal to actual utilization do not stand closer scrutiny. First, the proposed microeconomic model relies on various restrictive assumptions, some of which are mutually inconsistent. Second, the derivation of the macroeconomic adjustment mechanism from the microeconomic analysis involves a logical leap that can be justified only by a very arbitrary assumption with little economic justification. Finally, we discuss the way in which this mechanism has been incorporated into the Neo‐Kaleckian growth model by proposers of this approach. We show that, even if one puts aside, for the sake of argument, the first two points, the existence of autonomous components of demand is sufficient to invalidate the resulting macroeconomic model.

Suggested Citation

  • Daniele Girardi & Riccardo Pariboni, 2019. "Normal utilization as the adjusting variable in Neo‐Kaleckian growth models: A critique," Metroeconomica, Wiley Blackwell, vol. 70(2), pages 341-358, May.
    • Handle: RePEc:bla:metroe:v:70:y:2019:i:2:p:341-358
    DOI: 10.1111/meca.12236
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    Cited by:

    1. Santiago José Gahn & Alejandro González, 2022. "On the empirical content of the convergence debate: Cross‐country evidence on growth and capacity utilisation," Metroeconomica, Wiley Blackwell, vol. 73(3), pages 825-855, July.
    2. Eckhard Hein, 2019. "Harrodian instability in Kaleckian models and Steindlian solutions," FMM Working Paper 46-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. Lorenzo Di Domenico, 2021. "Multiplicity and not necessarily heterogeneity: implications for the long-run degree of capacity utilization," Working Papers PKWP2116, Post Keynesian Economics Society (PKES).
    4. Daniele Girardi & Riccardo Pariboni, 2020. "Autonomous demand and the investment share," Review of Keynesian Economics, Edward Elgar Publishing, vol. 8(3), pages 428-453, July.
    5. Gahn, Santiago José, 2021. "On the adjustment of capacity utilisation to aggregate demand: Revisiting an old Sraffian critique to the Neo-Kaleckian model," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 325-360.
    6. Stamegna, Marco, 2022. "A Kaleckian growth model of secular stagnation with induced innovation," MPRA Paper 113794, University Library of Munich, Germany.
    7. Hein, Eckhard, 2025. "Kaleckian economics after Kalecki: A survey," IPE Working Papers 257/2025, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    8. Guilherme Spinato Morlin & Nikolas Passos & Riccardo Pariboni, 2024. "Growth Theory and the Growth Model Perspective: Insights from the Supermultiplier," Review of Political Economy, Taylor & Francis Journals, vol. 36(3), pages 1130-1155, July.
    9. Matteo Deleidi & Mariana Mazzucato, 2019. "Mission-Oriented Innovation Policies: A Theoretical And Empirical Assessment For The Us Economy," Departmental Working Papers of Economics - University 'Roma Tre' 0248, Department of Economics - University Roma Tre.
    10. Santiago J. Gahn, 2022. "Towards an explanation of a declining trend in capacity utilisation in the US economy," Working Papers PKWP2214, Post Keynesian Economics Society (PKES).
    11. Eric Kemp‐Benedict, 2020. "Convergence of actual, warranted, and natural growth rates in a Kaleckian–Harrodian‐classical model," Metroeconomica, Wiley Blackwell, vol. 71(4), pages 851-881, November.
    12. Deleidi, Matteo & Mazzucato, Mariana, 2021. "Directed innovation policies and the supermultiplier: An empirical assessment of mission-oriented policies in the US economy," Research Policy, Elsevier, vol. 50(2).
    13. Petach, Luke & Tavani, Daniele, 2022. "Aggregate demand externalities, income distribution, and wealth inequality," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 433-446.
    14. Biao Huang, 2020. "Normal utilization rate in the Sraffa framework," Metroeconomica, Wiley Blackwell, vol. 71(4), pages 767-780, November.
    15. Guilherme Haluska & Julia Braga & Ricardo Summa, 2021. "Growth, investment share and the stability of the Sraffian Supermultiplier model in the U.S. economy (1985–2017)," Metroeconomica, Wiley Blackwell, vol. 72(2), pages 345-364, May.
    16. Ettore Gallo, 2023. "How Short Is the Short Run in the Neo-Kaleckian Growth Model?," Review of Political Economy, Taylor & Francis Journals, vol. 35(3), pages 687-701, July.
    17. 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.
    18. Lorenzo Domenico, 2023. "Multiplicity and not necessarily heterogeneity: implications for the long-run degree of capacity utilization," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 18(4), pages 835-877, October.
    19. Michalis Nikiforos, 2020. "Notes on the Accumulation and Utilization of Capital: Some Theoretical Issues," Economics Working Paper Archive wp_952, Levy Economics Institute.
    20. Barbieri Góes, Maria Cristina & Deleidi, Matteo, 2022. "Output determination and autonomous demand multipliers: An empirical investigation for the US economy," Economic Modelling, Elsevier, vol. 116(C).
    21. Francesco Zezza & Dario Guarascio, 2024. "Fiscal policy, public investment and structural change: a P-SVAR analysis on Italian regions," Regional Studies, Taylor & Francis Journals, vol. 58(6), pages 1356-1373, June.
    22. Luke Petach & Daniele Tavani, 2021. "Aggregate Demand Externalities, Income Distribution, and Wealth Inequality," FMM Working Paper 66-2021, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

    More about this item

    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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