Unemployment, Recession and Effective Demand

Unemployment, Recession and Effective Demand

The Contributions of Marx, Keynes and Kalecki

Claudio Sardoni

In the midst of the current world economic crisis, many claim there is a necessity to return to the Marxian and Keynesian traditions in order to better understand the dynamics of market economies. This book is an important step in that direction. It presents a critical examination of the foundations of macroeconomics as developed in the traditions of Marx, Keynes and Kalecki, which are contrasted with the current mainstream. Particular attention is given to the problem of market forms and their relevance for macroeconomics.

Appendix A: Formalization of Marx’s Schemes of Reproduction

Claudio Sardoni

Subjects: economics and finance, history of economic thought, post-keynesian economics


The conditions for a balanced process of simple or expanded reproduction were determined by Marx through numerical examples. Here, we use a more general model that, although differing from Marx’s original analysis in several respects, retains the same basic features as Marx’s schemes.1 Let us consider an n-sector economy which produces consumer and capital goods (final goods). Each good can be either consumed or used up as a means of production. Moreover, for simplicity, it is assumed that all the goods are basic commodities, that is that each good is used, directly or indirectly, to produce all the others (Sraffa, 1960). Wages are paid at the end of the period of production; the workers’ propensity to consume is equal to 1. There is no technical change and returns to scale are constant. Goods exchange at their prices of production (natural or normal prices).2 Let Yt be a positive (n × 1) vector, whose generic element yi,t (i = 1, 2, … , n) is the output of the i–th sector at t. The (n × n) matrix Xt is the matrix of inputs xij,t (i, j = 1, 2, … n).3 The price system of the economy is Ytpt = Xtpt (1 + rt) + Ltwt where pt is the vector of the prices of production; Lt is the vector of the quantities of labour employed in the n sectors; wt is the wage rate and rt is the uniform rate of profits exogenously fixed. It is assumed that the matrix Xt...

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