The Irreversibility of Consumption as a Source of Endogenous Demand-driven Economic Growth

Abstract

In advanced capitalist economies, the asymmetry of aggregate consumption, which decreases to a lesser extent during recessions than it increases during expansions, implies an endogenous source of growth and accumulation. This thesis, put forward in a previous paper co-authored with Pierangelo Garegnani, is here scrutinized in detail and developed in terms of more general assumptions. The connection with similar assumptions on consumption to be found in the literature is also examined and some implications of the hypothesis are drawn regarding the significance of the savings rate

The theory of output in the modern classical approach: main principles and controversial issues*

“…In this direction, Garegnani and Trezzini (2010) and Trezzini (2011), study the role in the growth process of what is generally called "autonomous consumption". The evolution of aggregate consumption is seen as influenced by the process of habit formation with the continuous acquisition of increasing standards of consumption as growth takes place; due to asymmetry of the propensities to consume in the different phases of the cycle, this constitutes a possible source of endogenous growth.…”

“…26 Aspromourgos (2013) also raises doubts on the possibility of regarding any component of demand as wholly autonomous in the long period, given the "inter-temporal budget constraints" of each sector. 27 Garegnani and Trezzini (2010) and Trezzini (2011) make use of numerical examples based on very simple quantitative…”

Growth without Normal Capacity Utilization and the Meaning of the Long-Run Saving Ratio

“…A different approach to the analysis of long-run tendencies has been developed more recently in Garegnani and Trezzini (2010), Trezzini (2011a), and Palumbo (2013), and explicit reflections on the methodological issue have been put forward recently in Smith (2013) and Trezzini (2013). In these investigations, the growth path is not conceived as a theoretical entity that exists independently of the fluctuations of the economy but as a trend determined by the fluctuations themselves and, as such, not independent of them.…”

Trend and business cycles with external markets: Non‐capacity generating semi‐autonomous expenditures and effective demand

“…Duesenberry () advanced an irreversible consumption function. The idea is that once households become accustomed to the higher consumption levels obtained in upswings, it is their reluctance to curb spending, which provides a floor under national income (Trezzini, ). Consumption emulation motivated by social status may be a factor in the upward trend in the consumption share of U.S. output since the early 1980s.…”