Seminar

Wednesday 13 December 2017

In collaboration with Dipartimento di Economia, Università Roma Tre

Demand-led Growth Theory in a Classical Framework: Its Superiority, Its Limitations and Its Explanatory Power 

Matthew Smith (University of Sydney) 

Abstract:
The main purpose of this paper is to show that the Keynesian-Kaleckian demand-led theory of growth proposed within the classical framework of prices and distribution as articulated by Sraffa (1960), is superior to the neoclassical supply-driven theory in explaining economic growth. It begins by showing that a fundamental problem with the neoclassical supply-driven approach, which does not afflict the demand-led approach, is that it cannot suppose in general that planned aggregate demand systematically adjusts to the planned level of aggregate output to establish a long-run macroeconomic equilibrium along the trend growth path necessary for a valid growth theory. We then expound a demand-led model of growth that abandons ‘steady-state’ and, instead, adopts an ‘historical’ approach in which the data is specified for historical periods of time. The model incorporates the contribution of technical progress to demand-led growth and, generally, better identifies the main factors which are conceived to historically determine trend growth. The measurement problem in our demand-led theory of growth in the classical framework is then considered, which, notwithstanding the limitations identified, shows its superiority to the neoclassical supply-driven theory. From the standpoint of our demand-led growth model we next identify the most important political, social and institutional developments that historically explain growth and economic development of the past three hundred years since the beginning of industrialisation. The paper concludes by consideration of how demand-led growth theory can provide the foundation for a new interpretation of the history of economic development since the advent of capitalism.
 
 
Dipartimento di Economia - Via Silvio D'Amico 77, Roma
h 16:00 - room 22


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