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Was Harrod Right?

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  • Kevin D. Hoover

Abstract

Modern growth theory derives mostly from Robert Solow’s “A Contribution to the Theory of Economic Growth” (1956). Solow’s own interpretation locates the origins of his “Contribution” in his view that the growth model of Roy Harrod implied a tendency toward progressive collapse of the economy. He formulates his view in terms of Harrod invoking a fixed-coefficients production function. This paper, first, challenges Solow’s reading of Harrod, arguing that Harrod’s object in providing a “dynamic” theory had little to do with the problem of long-run growth as Solow understood it, but instead addressed the medium run fluctuations. It was an attempt to isolate conditions under which the economy might tend to run below potential. In making this argument, Harrod does not appeal to a fixed-coefficients production function – or to any production function at all, as that term is understood by Solow. The paper next traces the history of the dominance of Solow’s interpretation among growth economists. These tasks belong to the history of economics. The paper’s final task belongs to economic history. It offers an informal reexamination of economic history through the lens of Harrod’s dynamic model, asking whether there is a prima facie case in favor of Harrod’s model properly understood.

Suggested Citation

  • Kevin D. Hoover, 2012. "Was Harrod Right?," Center for the History of Political Economy Working Paper Series 2012-01, Center for the History of Political Economy.
  • Handle: RePEc:hec:heccee:2012-1
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    File URL: http://hope.econ.duke.edu/node/479
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    References listed on IDEAS

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    1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
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    Keywords

    economic growth; Roy Harrod; Robert Solow; dynamics; dynamic instability; knife-edge; warranted rate of growth; natural rate of growth;

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals

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