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Essays on a positive theory of economic growth

Listed author(s):
  • Heng-fu Zou

Departing from the conventional approach to economic growth, these papers collected here tackle the growth problems in capitalist economy, open economy and socialist economy with a novel definition of representative agent's preference: utility is function of both consumption and capital stock (or wealth). As essays one and two demonstrate, this modeling of preference captures the essential of Max Weber's "spirit of capitalism" and John Maynard Keynes¡¯s "psychology of capitalist society". Results derived from this modeling are in striking contrast to the conventional wisdom: different nations with different capitalist spirit tend to have different consumption, capital stock and endogenous rates in the long run; inflation affects steady state capital accumulation, and high inflation may lead to high rate of endogenous growth. Essays three and four extend this approach to the case of open economy. Foreign asset accumulation, foreign direct investment, and domestic fiscal and monetary policies are studies in the light of the new model. Essays five and six justify why we should define socialist planners' objective function in both consumption and capital accumulation. The regular phenomena in socialist economy, such as investment hunger, expansion drive, political investment cycles, and endogenous investment cycles, can be more sensibly understood within this positive framework than with the normative Cass model.

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Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 479.

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Length: 148 pages
Date of creation: 2011
Handle: RePEc:cuf:wpaper:479
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