- Elgar original reference
Edited by Mark Setterfield
Chapter 11: Reconciling the Growth of Aggregate Demand and Aggregate Supply
11 Reconciling the growth of aggregate demand and aggregate supply Amitava Krishna Dutt* 1 Introduction Theories of economic growth can be classified into two main types according to whether they view economic growth as being determined by the expansion of aggregate supply or that of aggregate demand. The former have generally dominated growth theory. The classical economists – including Smith and Ricardo – emphasized aggregate supply by viewing growth as being determined by capital accumulation and technological change, both of which augment the economy’s capacity to produce more goods; aggregate demand was not an issue because of what has subsequently been called Say’s law, that is, aggregate supply created its own aggregate demand.1 There were dissidents, of course: Malthus recognized the possibility of a general glut and Marx recognized the possibility of realization crises: insufficient demand for goods (perhaps because of low wages) could lead to production beyond what could be “realized” through sales. However, Marx did not develop an actual theory of crisis as a result of the lack of aggregate demand, let alone a theory of growth that emphasized the role of aggregate demand. Instead, he continued in the classical tradition of emphasizing capital accumulation and technological change (with labor being in unlimited supply from the reserve army of the unemployed at a real wage determined by the state of class struggle or by subsistence, broadly defined). It was not until the development of the theory of aggregate demand by Kalecki (1971) and Keynes (1936) that the role of aggregate...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.