Conflicting Claims and Equilibrium Adjustment Processes in a Stock-flow Consistent Macroeconomic Model

We revisit the old but still vibrant Post-Keynesian debate over ‘fully-adjusted positions', defined by the long-run equality of actual and standard utilisation rates. The central proposition of this paper is that in a world where different groups inside and outside firms have different objectives, the equality of actual and standard utilisation should not be treated as the only possible long-run equilibrium condition. The argument is illustrated in a model of target return pricing with conflict inflation, building on the work of Marc Lavoie. A ‘common language' for the conflicting claims by shareholders, managers and workers is developed in terms of target profit rates, and it is shown that these contradictory claims can be partly reconciled through variations in the utilisation rate. The analysis unifies history and equilibrium in the sense that the nature of final equilibrium position and the adjustment to it depend on the objectives of the dominant social groups. We distinguish a ‘Fordist regime' and a ‘financialisation regime' and produce simulation results within a simple stock-flow consistent model that are broadly consistent with the stylised facts of these distinct historical phases of capitalism.