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Capitalism, Socialism and Effective Demand

In: Nicholas Kaldor and Mainstream Economics

Author

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  • Edward Nell

Abstract

Comparing capitalism and socialism, it is important to remember that no actual economy is purely one type or another: all are mixtures bearing traces of their national histories, international relations and political compromises. Nevertheless, analytical study is best carried out at an abstract level in terms of pure types; prominent features of actual economies will be identifiable as belonging to one system or another and the logic of these features can be traced in the abstract system of which they are a part, where they have free play and full scope. We will treat capitalism and socialism as such abstract systems, and in doing so will draw on a central theme of Kaldor’s later years, the distinction between ‘demand-constrained’ and ‘resource-constrained’ systems, developed implicitly by Kalecki, but first explicitly defined by Kornai. This distinction requires replacing the scarcity-based theory of value with a Classical approach in which manufacturing prices are largely invariant to changes in demand.

Suggested Citation

  • Edward Nell, 1991. "Capitalism, Socialism and Effective Demand," Palgrave Macmillan Books, in: Edward J. Nell & Willi Semmler (ed.), Nicholas Kaldor and Mainstream Economics, chapter 32, pages 577-611, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-10947-0_32
    DOI: 10.1007/978-1-349-10947-0_32
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    Cited by:

    1. Mathew Forstater, 1997. "Selective Use of Discretionary Public Employment and Economic Flexibility," Economics Working Paper Archive wp_218, Levy Economics Institute.
    2. Mathew Forstater, 1998. "Selective Use of Discretionary Public Employment and Economic Flexibility," Macroeconomics 9802014, University Library of Munich, Germany.

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