Book contents
- Frontmatter
- Contents
- Foreword
- Preface
- I Preference and demand
- II Duality and production
- III Concave programming
- IV Equilibrium and stability
- V Theory of economic growth
- 13 On a two-sector model of economic growth, I
- 14 On a two-sector model of economic growth, II
- 15 Time preference and the Penrose effect in a two-class model of economic growth
- 16 On the dynamic stability of economic growth: the neoclassical versus Keynesian approaches
- VI Optimum growth
- Index
16 - On the dynamic stability of economic growth: the neoclassical versus Keynesian approaches
Published online by Cambridge University Press: 04 May 2010
- Frontmatter
- Contents
- Foreword
- Preface
- I Preference and demand
- II Duality and production
- III Concave programming
- IV Equilibrium and stability
- V Theory of economic growth
- 13 On a two-sector model of economic growth, I
- 14 On a two-sector model of economic growth, II
- 15 Time preference and the Penrose effect in a two-class model of economic growth
- 16 On the dynamic stability of economic growth: the neoclassical versus Keynesian approaches
- VI Optimum growth
- Index
Summary
Introduction
Whether or not the dynamic allocation of scarce resources through the market mechanism can achieve stable economic growth is not simply a matter of theoretical interest, but also is indispensable in the consideration of the effects of public policy. However, there are two opposing approaches to the problem of the dynamic stability of the market mechanism. One approach bases its analysis on the neoclassical economic theory, the other considers the problem within the framework developed in Keynes's General Theory. The approach based on neoclassical theory concludes that the process of market growth is usually stable, and, but for exceptional situations, prices change stably and full-employment growth obtains. Keynesian theory, on the other hand, comes to the conclusion that the market allocation of scarce resources is an inherent cause of instability in a modern capitalistic system and that maintaining stable economic growth is akin to walking on the edge of a knife.
The primary purpose of this paper is to examine the kind of assumptions on which these two conclusions concerning the stability of the growth process in a market economy are based, and, if possible, to ferret out some of the more fundamental differences between the neoclassical and Keynesian approaches.
Basic assumptions of the neoclassical growth theory
The neoclassical theory of economic growth was first formulated in the works of Tobin, Solow, and Swan.
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- Chapter
- Information
- Preference, Production and CapitalSelected Papers of Hirofumi Uzawa, pp. 249 - 280Publisher: Cambridge University PressPrint publication year: 1989