IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Thorstein Veblen on credit and economic crises

Listed author(s):
  • Guglielmo Forges Davanzati
  • Andrea Pacella

The aim of this paper is to provide an interpretation of Veblen’s theory of economic crises, based on the view that banking policy is a major factor in generating crises. It will be shown that, in Veblen’s thought, crises may emerge due to the banking system’s non-accommodating behaviour according to the following sequence: as firms are not homogeneous, the credit system spontaneously tends to help bigger firms increase in size, due to the increase in their capital turnover, which allows them to produce and sell before their competitors. This produces two effects: (i) the reduction in profits of the smaller firms (or their bankruptcy) generates a decline of employment and output while, at the same time, (ii) the increase in the industrial concentration ratio produces a rise in prices and a consequent drop in real wages. This in turn reduces total demand for consumption goods, thus worsening entrepreneurs’ expectations and having an adverse effect on production and investment by firms.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1093/cje/beu002
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

Volume (Year): 38 (2014)
Issue (Month): 5 ()
Pages: 1043-1061

as
in new window

Handle: RePEc:oup:cambje:v:38:y:2014:i:5:p:1043-1061.
Contact details of provider: Postal:
Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK

Fax: 01865 267 985
Web page: http://www.cje.oupjournals.org/
Email:

Order Information: Web: http://www.oup.co.uk/journals

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:oup:cambje:v:38:y:2014:i:5:p:1043-1061.. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.