- Michal Kalecki et l'essor de la macroéconomie - Bibliographie générale - ENS Éditions
- Theory of Complex Systems and Economic Dynamics
- Edited by G. C. Harcourt and Peter Kriesler
- Journal of Economic Dynamics and Control
Lawrence E. Blume, Thomas J. Reading his Essay today, however, the reasons for his centrality are less clear. Looking forward from , we see that the main stream of economic growth theory is built on neoclassical distribution theory rather than on the Keynesian principles Harrod deployed. Looking back, we see that there were many antecedent developments in growth economics, some much closer than Harrod's to contemporary developments.
So what, then, did Harrod accomplish? Harrod supplemented his formal analysis with speculations about the consequences of deviations of actual aggregate income from warranted aggregate income. Harrod discussed these things in ways that readers today will find difficult to comprehend and appreciate, partly because of progress that the study of economic dynamics has made since , partly because Harrod chose not to use or extend some lines of work preceding that would be more familiar to today's reader and partly because his analysis, done without benefit of a formal model, is hard to follow and the analytic categories differ from those we use today.
The explicit parts of the article leading to the difference equation for warranted aggregate income are clear enough but the paper's informal and speculative parts are obscure. The modern reader cannot be blamed for sometimes being puzzled what the article is really about and how to relate Harrod's ideas to those prevailing today. Some of the difficulties the Essay presents are these: i What is capital?
Today we think of capital as a factor of production; consequently the marginal product of capital is crucial to determining interest and wage rates, the distribution of output between capital owners and workers and so forth. For Harrod, as for Keynes, capital is something quite different. The parameter g describes for Harrod the demand for saving, not as we read it today, the inverse marginal or average product of capital.
If the key parameters s and g in fact vary with endogenous variables, then equilibrium is not yet determined until these additional relations are appended to the model. The informal and speculative stability analysis is obscure in part to the modern reader. The source of the difficulty is the same as that of our question 3. Harrod's model is not closed.
Michal Kalecki et l'essor de la macroéconomie - Bibliographie générale - ENS Éditions
A decade later, Baumol made a first attempt to close the model so that these questions can be answered Baumol, , ;. Harrod himself did not emphasise the contribution to economic growth. The Essay was intended to develop arguments first put forth in his book The Trade Cycle. And at what rate? He acknowledges, as noted earlier, a dependence of g on the price of capital, but so much is missing. The business cycle analysis Harrod points to in the Essay , the instability of the equilibrium growth path, could not go far without an analysis of how the economy behaves off the warranted path.
In any event, the lag theorists won out.
Milton Friedman's distributed lag implementation of his permanent income model of saving as an important source of business cycle dynamics displaced Harrod's analysis. Friedman informally motivated his distributed lag in income as being an operational version of Irving Fisher's theory of intertemporal consumption choice. Reading the journals of the interwar years, one is struck by the paucity of footnotes.
By today's publishing standards, Harrod did not provide a reader much help in relating his analysis to earlier and contemporary work. This is a shame because the s and s were decades when some of the most important ideas underlying modern dynamic economic analysis were foreshadowed or created.
- Journal of Economic Dynamics and Control.
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From reading the article, it is impossible to tell whether Harrod was unaware of some of this work or knew about it and chose not to use it. Hicks Value and Capital created by including dated commodities within a Walrasian model of general equilibrium. Irving Fisher's Theory of Interest contained key ingredients that set the stage for Hicks. Hicks's work directly set the stage for Arrow's and Debreu's contingent commodities: if it is fruitful to index commodities by dates, why not also index them by random events?
When combined with the ideas of Hicks, Arrow, Debreu, Muth and Lucas, Ramsey's framework became the foundation of the dominant approach to equilibrium growth and business cycles that continues to be refined today;.
Theory of Complex Systems and Economic Dynamics
These were organised by Samuelson into his correspondence principle as a device for disciplining comparative static analysis. It is worthwhile to list some of the most important subsequent contributions that made progress in addressing issues that Harrod raised. We have already mentioned the permanent income theory of consumption and saving and how it developed in a way that featured a peculiar division of labour: Friedman used Irving Fisher's theory of optimal consumption choice conditional on exogenous forecasts of a stream of future disposal incomes i.
It is easy to read—conversational in tone—and yet it does not shy away from difficult material. But the book is more than just an introduction to dynamics for the mathematically challenged graduate student. It will also be an invaluable aid to the researcher as a reference book on stochastic dynamics.
Edited by G. C. Harcourt and Peter Kriesler
He makes these growth models accessible to researchers through the connection of theory and technique. Economic Dynamics covers foundational material useful for students and researchers. I highly recommend this book.
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Mirman , Department of Economics, University of Virginia. Quick search.
Journal of Economic Dynamics and Control
OSO version 0. University Press Scholarship Online. Sign in. Not registered? Sign up. Publications Pages Publications Pages. Search my Subject Specializations: Select Users without a subscription are not able to see the full content. Chaotic Economic Dynamics Richard M. Goodwin Abstract This collection of short essays provides an application of chaotic dynamics to economic systems. More This collection of short essays provides an application of chaotic dynamics to economic systems.