Book contents
- Frontmatter
- Contents
- Guide to text notation
- Acknowledgements
- 1 Introduction
- 2 Methodological issues
- 3 A survey of some post-Keynesian and neo-Marxian ideas
- 4 The model
- 5 Ultra-short-run, short-run and steady-growth equilibria
- 6 Investment, instability and cycles
- 7 Finance and money-wage neutrality
- 8 Distributional questions in neo-Marxian and post-Keynesian theory
- 9 Final remarks
- Bibliography
- Index
- Frontmatter
- Contents
- Guide to text notation
- Acknowledgements
- 1 Introduction
- 2 Methodological issues
- 3 A survey of some post-Keynesian and neo-Marxian ideas
- 4 The model
- 5 Ultra-short-run, short-run and steady-growth equilibria
- 6 Investment, instability and cycles
- 7 Finance and money-wage neutrality
- 8 Distributional questions in neo-Marxian and post-Keynesian theory
- 9 Final remarks
- Bibliography
- Index
Summary
INTRODUCTION
I consider three types of agents: firms, banks and households. Firms decide the levels of employment, production and investment. The decisions are based on the maximisation of expected profits, but expectations will not always be fulfilled. Finance for investment is obtained from three different sources: retained earnings, new issues and bank loans.
Banks accept deposits from households and extend loans to firms, and there is no credit rationing: firms can borrow as much as they wish at the prevailing interest rate. The rate of interest, however, may vary over time, an assumption which makes the elastic supply of money (credit) compatible with a range of different monetary regimes.
Households supply labour, consume output and hold financial assets. There may be involuntary unemployment, but households are not quantity-constrained in any other market.
The model differs from standard Keynesian and Kaleckian theory in several respects. One important difference concerns price and output adjustments: production levels are only imperfectly flexible and firms’ short-term expectations may not be fulfilled. Consequently, the economy will not necessarily be in short-run equilibrium. Discrepancies between actual and expected demand may arise, and it is assumed that any such discrepancies cause accommodating price changes. In contrast to most Keynesian models, prices are thus flexible (in both directions) even in the very short run.
It is important to be clear about the reasons for this departure from Keynesian orthodoxy and about the structure of the model. The therefore opens with a discussion of price flexibility and disappointed expectations. This discussion is followed by a description of the behavioural assumptions for the three types of agents.
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- Conflict and Effective Demand in Economic Growth , pp. 42 - 62Publisher: Cambridge University PressPrint publication year: 1989