Lectures on Keynesian Growth Theory

Mark Setterfield
New School for Social Research
mark.setterfield@newschool.edu

Two useful books that discuss the themes consider in these lectures (and much more besides) are:

Foley, D.K. And T.R. Michl (1999) Growth and Distribution, Cambridge, MA, Harvard University
Press

Hein, E. (2014) Distribution and Growth After Keynes, Cheltenham, Edward Elgar

Lecture 1: Keynesian growth theory and the Kalecki-Robinson tradition

This lecture will discuss the main traits of Keynesian growth theory vis-a-vis its Classical and Neoclassical
counterparts. The focus will then narrow to the Kalecki-Robinson tradition, and the comparative properties
of three models of growth and distribution: the Robinson (neo-Keynesian) model; the neo-Kaleckian model;
and the Bhaduri-Marglin model.

Suggested readings

Asimakopulos, A (1991) Keynes' General Theory and Accumulation, Cambridge, Cambridge University
Press, chpt. 8

Bhaduri, A. and S. Marglin (1990) “Unemployment and the real wage: the economic basis for contesting
political ideologies” Cambridge Journal of Economics, 14, 375-393

Blecker, R. (2002) “Distribution, demand and growth in neo-Kaleckian macro-models,” in M. Setterfield (ed.)
Demand-Led Growth: Challenging the Supply-Side Vision of the Long Run, Aldershot, Edward Elgar

Dutt, A.K. (1984) “Stagnation, income distribution, and monopoly power,” Cambridge Journal of Economics,
8, 25–40

Lavoie, M. (2014) Post-Keynesian Economics: New Foundations, Cheltenham, Edward Elgar, chpt. 6

Rowthorn, R.E. (1981) “Demand, real wages and economic growth,” Thames Papers in Political Economy,
London, Thames Polytechnic

Lecture 2: Is the rate of capacity utilization variable in the long run? Fully-adjusted positions,
Harrodian instability, and the plausibility of Neo-Kaleckian results

Building on the foundations of the first lecture, the second lecture will discuss a specific debate in Keynesian
growth theory (that also resonates with Classical theorists): is the rate of capacity utilization variable in the
long run? Variability of the capacity utilization rate is essential for Neo-Kaleckian results regarding the

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effects of redistribution on growth, as summarized by the paradox of costs (an increase in the real wage raises
the rates of capacity utilization, growth, and profit). The difference between equilibrium and a “fully-adjusted
position”, the spectre of “Harodian instability”, and possible Classical/neo-Keynesian and Neo-Kaleckian
resolutions of these issues will all be discussed.

Suggested readings

Hein, E., M. Lavoie, and T. van Treeck (2011) “Some instability puzzles in Kaleckian models of growth
and distribution: a critical survey,” Cambridge Journal of Economics, 35 (3), 587–612.

Hein, E., M. Lavoie, and T. van Treeck (2012) “Harrodian instability and the ‘normal rate’ of capacity
utilization in Kaleckian models of distribution and growth - a survey,” Metroeconomica, 63 (1), 139–169.

Lavoie, M. (2010) “Surveying short-run and long-run stability issues with the Kaleckian model of
growth,” in M. Setterfield (ed.) The Handbook of Alternative Theories of Economic Growth, Cheltenham,
Edward Elgar

Setterfield, M. (2016) “Long-run variation in capacity utilization in the presence of a fixed normal rate,”
New School for Social Research, mimeo.