Distribution and Growth after Keynes
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Distribution and Growth after Keynes

A Post-Keynesian Guide

Eckhard Hein

In the first part of the book, Eckhard Hein presents a comprehensive overview of the main approaches towards distribution and growth including the contributions of Harrod and Domar, old and new neoclassical theories including the fundamental capital controversy critique, the post-Keynesian contributions of Kaldor, Pasinetti, Thirlwall and Robinson, and finally the approaches by Kalecki and Steindl. In the second part of the book neo- and post-Kaleckian models are gradually developed, introducing saving from wages, international trade, technological progress, interest and credit. Issues of ‘financialisation’ are also explored and empirical results related to the different models are presented.
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Chapter 2: From Keynes to Domar and Harrod: considering the capacity effect of investment and an attempt at dynamic theory

Eckhard Hein

Extract

In The General Theory of Employment, Interest, and Money, John Maynard Keynes (1936) provided a general theory for the determination of the level of activity in a monetary production economy based on the principle of effective demand. For this purpose, he took as given the existing skill and quantity of labour, the existing quality and quantity of available equipment, the existing technique, the degree of competition, the tastes and habits of the consumer, the disutility of different intensities of labour and of the activities of supervision and organisation, as well as the social structure including the forces . . . which determine the distribution of national income. (Keynes 1936, p. 245) Neither growth nor distribution issues were thus in the focus of the General Theory. However, although not explicitly integrating distribution issues into his theory of effective demand, Keynes (1936, p. 262) was well aware that a transfer of income away from wage earners will have a dampening impact on the economy’s propensity to consume, and thus on aggregate demand, output and employment. Therefore, considering the aggregate demand effects of income and wealth distribution in Chapter 24, the final chapter, of the General Theory, he argues that ‘[t]he outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes’ (Keynes 1936, p. 372).

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