Wednesday, January 10, 2007

A Post Keynesian Model of Growth and Distribution (Part 4 of 4)


The previous three parts specify a steady-state growth model applicable to an advanced capitalist economy. Figure 2 summarizes the structure of this model. The arrows indicate how variables are determined, including accounting identities, in the mathematical structure of the model. Notice that the major macroeconomic variables are determined by decisions within the corporations. Household savings decisions can affect only the overall value of stocks and the personal distribution of income. Control over the means of production determines the functional distribution of income.
Figure 2: Dependencies Among Variables and Parameters
The above model is one of a family of models. Table 2 shows two important special cases in the development of this model. A generalization would assume saving propensities vary by source of income, as well as class.
Table 2: Variants
Kaldor (1966) variantNo class of pure capitalistssr = 0, j = 1
Pasinetti (1962) variantNo corporate sectorsc = 0, f = 1, v = 1
A number of research programs can be organized around these models. The generalization of the production models to more commodities has been long accomplished. Kaldor also included endogenous technical change in his models. One might assume industries exhibit various barriers to entry. This is Paolo Sylos Labini's (old) Industrial Organization. The model shows the rate of industrial profits as depending on corporate decisions about growth and finance. Related issues are explored in managerial theories of the firm, as developed by Edith Penrose, Robin Marris, Adrian Wood, Alfred Eichner, and Edward Nell. I don't think this family of models is particularly strong on environmental issues; nevertheless, the extension of the production model to include joint production provides an essential tool for environmental economics. Some work has been done on including government and international trade in this family of models. Some have examined the relationship of this family of models to other theories of distribution, such as a monetary theory of distribution. One might see this theory as a long period extension of Keynes' General Theory. Kregel, who emphasizes the role of money and uncertainty have questioned whether such elements were adequately incorporated into this family of models. Man-Seop Park, building on and criticizing recent work by Thomas Palley, is investigating incorporating more elements of the financial system into this family of models. I do not claim the above brief survey is comprehensive.

  • Kahn, R. F. (1959). "Exercises in the Analysis of Growth", Oxford Economic Papers, New Series, V. 11: 143-156
  • Kaldor, Nicholas (1956). "Alternative Theories of Distribution", Review of Economic Studies, V. XXIII: 83-100
  • Kaldor, Nicholas (1966). "Marginal Productivity and the Macroeconomic Theories of Distribution: Comment on Samuelson and Modigliani", Review of Economic Studies, V. XXXIII, N. 4 (Oct.): 309-319
  • Kregel, J. A. (1985). "Hamlet without the Prince: Cambridge Macroeconomics without Money", American Economic Review, V. 75, N. 2 (May): 133-139
  • Moss, S. J. (1978). "The Post-Keynesian Theory of Income Distribution in the Corporate Economy", Australian Economic Papers, V. 17, N. 31 (Dec.):303-322
  • Park, Man-Seop (2006). "The Financial System and the Pasinetti Theorem", Cambridge Journal of Economics, V. 30: 201-217
  • Pasinetti, Luigi L. (1962). "Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth", Review of Economic Studies, V. XXIX, N. 4 (Oct.): 267-279
  • Robinson, Joan (1962). Essays in the Theory of Economic Growth, Macmillan

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