The economics of the super‐multiplier: A comprehensive treatment with labor markets

Palley, Thomas I.

doi:10.1111/meca.12228

Cited by 38 publications

(28 citation statements)

References 18 publications

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“…Within the framework of supermultiplier models, two different (but not exclusive) strategies have been adopted to propose a solution to this ‘reconciliation problem’ between the growth of supply and demand. On the one hand, it can be assumed that the natural rate of growth is endogenous such that it converges toward the long‐run rate of economic growth, which is the line adopted by Nah and Lavoie (2019b), Palley (2019) and Fazzari et al. (2020).…”

Section: Introductionmentioning

confidence: 99%

A supermultiplier model of the natural rate of growth

Allain

2021

Metroeconomica

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We propose a supermultiplier model that includes formal and informal wage redistributive devices enabling everyone in the population to satisfy their primary needs. By introducing population growth and technical progress into the model, we show that wage redistribution gives rise to an autonomous consumption component, the growth rate of which corresponds to the natural rate of growth. The three main outcomes of the model are as follows: (a) Harrodian knife‐edge instability can be tamed, (b) the long‐run rate of growth of the economy converges toward the natural rate of growth, and (c) the rate of employment stabilizes but at a level that can differ from that of full employment.

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Section: Introductionmentioning

confidence: 99%

A supermultiplier model of the natural rate of growth

Allain

2021

Metroeconomica

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“…However, this model 16. For versions of the supermultiplier model that formally incorporate the long-run adjustments of the size of the labor supply to the growth of employment opportunities, see Fazzari et al (2018), Palley (2019), and Serrano (2019). 17.…”

Section: The Adjustment Of Capacity To Demand and The Relation Betweementioning

confidence: 99%

Stagnation and unnaturally low interest rates: a simple critique of the amended New Consensus and the Sraffian supermultiplier alternative*

Serrano

Summa

Moreira

2020

Review of Keynesian Economics

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This paper argues that the amended versions (financial wedge and secular stagnation) of the simple pragmatic New Consensus model are as open to theoretical criticism as the original one was. The authors show that: (i) the real natural rate of interest is unlikely to be negative, (ii) it (inconsistently) depends on the Neoclassical investment function drawn at a position of full employment in a model in which the economy is demand-constrained, and (iii) both investment and full employment saving are induced by the trend of demand in the longer run and this challenges the usefulness of the notion of a natural or neutral rate of interest, which (iv) are also subject to the Sraffian capital critique. This is then contrasted with an alternative simple Sraffian supermultiplier model in which the interest rate and the financial wedge are distributive instead of allocative variables, and there is no natural rate of interest since in the longer run there is no trade-off between consumption and investment and also no full employment of labor. As the capital stock adjusts to demand, potential (capacity) saving will be determined by investment, and both investment and capacity saving increase when consumption increases. Finally, we briefly illustrate how this alternative model could begin to make sense of the recent relevant stylized facts.

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“…Introducing an autonomous growth rate of a non‐capacity creating component of aggregate demand, Kaleckian authors have shown in basic and more elaborate models, which allow for convergence towards a normal or target rate of capacity utilisation in the long run, the following. First, under some weak conditions autonomous demand growth is able to tame Harrodian instability, and, second, the paradox of saving and a potential paradox of costs can be preserved for the long‐run growth path (Allain, 2015, 2019; Dutt, 2019, 2020; Lavoie, 2016; Nah & Lavoie, 2017, 2018, 2019a, 2019b; Palley, 2019). In these models, the autonomous growth rate of a non‐capacity creating component of aggregate demand, that is, autonomous consumption, residential investment, exports or government expenditures, determines long‐run growth, and, under the conditions that Harrodian instability in the investment function is not too strong, provides for a stable adjustment towards the normal rate of capacity utilisation in the long run.…”

Section: Introductionmentioning

confidence: 99%