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Can a Natural Economy Operate in Macroeconomy? A Caution for Deviation from Natural Economy

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  • Koji Akimoto

    (Kurume University)

Abstract

The fundamental problem issue of this paper is that a fundamental cause of economic crises, such as the dot-com bubble, the Lehman crash, or PIIGS, from which the current capitalist economy is suffering, lies in a large deviation from a natural economy. Any large deviation from the natural economy entails high risk. Akimoto (Int J Econ Sci III(4):1–37, 2014) proved this proposition. This leads to a question of whether a mechanism,in which a natural economy operates to begin with, exists in the macroeconomy. First, we adopt the definition by Pasinetti (Structural change and economic growth; a theoretical essay on the dynamics of the wealth of nation. Cambridge University Press, 1981) from a macroeconomic viewpoint, because it depends on the structure of the production process. However, there is no guarantee that the natural economy defined by Pasinetti (Structural change and economic growth; a theoretical essay on the dynamics of the wealth of nation. Cambridge University Press, 1981) operates in the macroeconomy. If Akimoto’s (Int J Econ Sci III(4):1–37, 2014) analysis is correct, we need to prove that a mechanism through which the natural economy operates does in fact exist in the macroeconomy. We construct a macroeconomic game with capitalists and workers as players. The macroeconomy involves circulating players’ savings to investments via capital markets. This process constructs Kaldor’s fundamental equation. We prove that a Nash equilibrium exists, which carries out a natural economy and balanced economic growth. In addition, the theoretical analysis demonstrates that Kaldor’s fundamental equation, which is Keynesian, becomes an identity, i.e., 1 $$=$$ = 1. This implies that the Keynesian equation brings about a classical result.

Suggested Citation

  • Koji Akimoto, 2016. "Can a Natural Economy Operate in Macroeconomy? A Caution for Deviation from Natural Economy," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 2(1), pages 123-142, March.
    • Handle: RePEc:spr:italej:v:2:y:2016:i:1:d:10.1007_s40797-016-0027-x
    DOI: 10.1007/s40797-016-0027-x
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    References listed on IDEAS

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    1. Luigi L. Pasinetti, 1962. "Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 29(4), pages 267-279.
    2. Koji Akimoto, 2014. "A Fundamental Cause of Economic Crisis," Proceedings of International Academic Conferences 0702344, International Institute of Social and Economic Sciences.
    3. Koji Akimoto, 2014. "A Fundamental Cause of Economic Crisis―A Macro-economic Game between the Real Economic Sector and Monetary Sector," International Journal of Economic Sciences, Prague University of Economics and Business, vol. 2014(4), pages 01-37.
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    More about this item

    Keywords

    Non-corporative macroeconomic game; Natural economy; Balanced economic growth; Kaldor’s fundamental equation; Labor theory;
    All these keywords.

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B16 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Quantitative and Mathematical
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General

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