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Lange's 1938 Model: Dynamics and the "Optimum propensity to consume"

Author

Listed:
  • Michaël Assous

    (GREDEG CNRS
    University of Paris 1)

  • Roberto Lampa

    (CONICET (National Scientific and Technical Research Council)
    University of Buenos Aires, Argentina)

Abstract

Oskar Lange’s 1938 article “The Rate of Interest and the Optimum Propensity to Consume”, is usually associated with the original IS-LM approach of the late 1930s. However, Lange’s article was not only an attempt to illuminate Keynes’s main innovations but the first part of a wide project that included the development of a theory of economic evolution. This paper aims at showing that Lange’s article can help illuminating critical aspects of this project: in particular, Lange’s idea that a synthesis between Kaldor’s and Kalecki’s theories and that of Schumpeter, might have been possible and that it represented (in intentions) a “modern” and consistent reconstruction of the Marxist theory of the business cycle. Section 1 clarifies Lange’s early reflection on dynamics. Section 2 centers on Lange’s 1938 static model and indicates the effects of a change of saving on investment. Section 3 suggests a dynamic reconstruction from which are addressed important arguments raised by Lange in a series of papers written between 1934 and 1942.

Suggested Citation

  • Michaël Assous & Roberto Lampa, 2014. "Lange's 1938 Model: Dynamics and the "Optimum propensity to consume"," GREDEG Working Papers 2014-02, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    • Handle: RePEc:gre:wpaper:2014-02
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    References listed on IDEAS

    as
    1. Mauro Boianovsky, 2004. "The IS-LM Model and the Liquidity Trap Concept: From Hicks to Krugman," History of Political Economy, Duke University Press, vol. 36(5), pages 92-126, Supplemen.
    2. Michal Kalecki, 1937. "A Theory of the Business Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(2), pages 77-97.
    3. O. Lange, 1935. "Marxian Economics and Modern Economic Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 2(3), pages 189-201.
    4. Cristiano Antonelli & Francesco Quatraro, 2014. "The effects of biased technological changes on total factor productivity: a rejoinder and new empirical evidence," The Journal of Technology Transfer, Springer, vol. 39(2), pages 281-299, April.
    5. Oskar Lange, 1987. "The Economic Operation Of A Socialist Society: I," Contributions to Political Economy, Cambridge Political Economy Society, vol. 6(1), pages 3-12.
    6. Oskar Lange, 1937. "On the Economic Theory of Socialism: Part Two," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(2), pages 123-142.
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    More about this item

    Keywords

    Lange; Kalecki; Marxian theory of the business cycle; marginal propensity to save; non-linearity;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B24 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Socialist; Marxist; Scraffian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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