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Looking for the rationale of the instability principle in Harrod’s Essay in dynamic theory : who is adjusting what?

Author

Listed:
  • Rodolphe dos Santos Ferreira

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, Catolica Lisbon School of Business And Economics - Partenaires INRAE)

Abstract

Instability of the warranted growth path, an important property for business cycle theory, is central to Harrod's Essay. It is persuasively presented as the consequence of moving from statics (where stability is viewed as the normal case) to dynamics. How exactly? The paper suggests two reasons. The first lies in attributing to demanders (firms as investors) rather than to suppliers (firms as producers) the main response to market imbalances. The second results from the insidious introduction of an extrapolative component of expectations in Harrod's dynamic approach, replacing levels by trends and confining them to a single point in time.

Suggested Citation

  • Rodolphe dos Santos Ferreira, 2020. "Looking for the rationale of the instability principle in Harrod’s Essay in dynamic theory : who is adjusting what?," Post-Print hal-03208051, HAL.
    • Handle: RePEc:hal:journl:hal-03208051
    DOI: 10.1080/09672567.2020.1768424
    as

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