IDEAS home Printed from
   My bibliography  Save this paper

Finance in a Classical and Harrodian Cyclical Growth Model


  • Jamee K. Moudud

    (The Jerome Levy Economics Institute)

  • Ajit Zacharias

    (The Jerome Levy Economics Institute)


This paper addresses two broad questions. The first one relates to the economic rationale for the existence of the welfare state. To address this question, we review the marginalist arguments and then counterpose a historical and institutional analysis of the rise of the U.S. welfare state. The second question concerns the macroeconomic impacts of welfare spending. We examine the standard neoclassical macroeconomic arguments for and against welfare cutbacks and then propose an alternative growth framework, rooted in the classical and Harrodian traditions, to evaluate social policy. We argue that the alternative framework provides both demand-side and supply-side mechanisms whereby social spending can be supported without harmful long-run macroeconomic effects. Our analysis suggests that, in general, because growth and crises are endogenous, there may be no tension between social policy and economic performance. Specifically, the recent cutbacks in the U.S. are hard to justify on purely economic grounds.

Suggested Citation

  • Jamee K. Moudud & Ajit Zacharias, 2000. "Finance in a Classical and Harrodian Cyclical Growth Model," Macroeconomics 0004037, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0004037 Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 58; figures: included

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Sharon J. Erenburg, 1993. "The Relationship Between Public and Private Investment," Economics Working Paper Archive wp_85, Levy Economics Institute.
    2. Haliassos, Michael & Tobin, James, 1990. "The macroeconomics of government finance," Handbook of Monetary Economics,in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 17, pages 889-959 Elsevier.
    3. A. B. Atkinson, 1999. "The Economic Consequences of Rolling Back the Welfare State," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011719, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • E - Macroeconomics and Monetary Economics

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0004037. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.