A Post-Keynesian Guide
Chapter 12: Conclusions
Based on some stylized facts on the trends of income distribution and economic development in mature capitalist economies, in this book we have reviewed theories of distribution and growth after Keynes, with a focus on post-Keynesian approaches and their empirical applications. The book is divided into two parts. First, Chapters 2–5 have given an overview of key contributions to the development of distribution and growth theories after Keynes. Second, Chapters 6–11 have introduced and developed in more detail different versions of the Kaleckian–Steindlian distribution and growth models, which have been prominently used and applied in post-Keynesian research during the last three decades or so. We started with the contributions of Domar and Harrod in Chapter 2. They were the first explicitly to treat the capacity effect of investment, which was omitted in Keynes’s (1936) General Theory and is usually disregarded in short-run macroeconomic theory. Domar merely formulated the conditions for a growth equilibrium in which capacity effects of investments are taken into account. Harrod went a step further and also studied the out-of-equilibrium dynamics, which he considered to be unstable. The determinants of long-run growth, however, were not treated by these two authors. In Chapter 2 we have also shown that the familiar and wellknown Harrod–Domar textbook growth model is a misinterpretation of the intentions of Domar and Harrod, in particular because it eliminates problems of aggregate demand by assumption.
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