IDEAS home Printed from https://ideas.repec.org/a/agr/journl/v2(615)y2018i2(615)p69-104.html
   My bibliography  Save this article

How to build an economy free of recession and stagnation: results from a multi-commodity macro model

Author

Listed:
  • Samuel MENG

    (University of New England, Australia)

Abstract

Aggregate macro models used in existing studies have insufficient details to shed any light on the market saturation phenomenon and thus have failed to uncover the fundamental cause of economic recessions. A multi-commodity macroeconomic model is constructed reflecting three simple but revolutionary axioms, which summarize the important but often overlooked facts in an economy. The results from the model shows that, without product innovation, the economy will reach a consumption/income ceiling so that recessions are inevitable. In order to build an economy free of recession, the paper calls for stimulating innovation through a thorough revision of the current patent laws.

Suggested Citation

  • Samuel MENG, 2018. "How to build an economy free of recession and stagnation: results from a multi-commodity macro model," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(615), S), pages 69-104, Summer.
    • Handle: RePEc:agr:journl:v:2(615):y:2018:i:2(615):p:69-104
    as

    Download full text from publisher

    File URL: http://store.ectap.ro/articole/1331.pdf
    Download Restriction: no
    File URL: http://www.ectap.ro/articol.php?id=1331&rid=131
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
    2. Lluch, Constantino, 1973. "The extended linear expenditure system," European Economic Review, Elsevier, vol. 4(1), pages 21-32, April.
    3. Plosser, Charles I, 1989. "Understanding Real Business Cycles," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 51-77, Summer.
    4. Tor Jakob Klette & Samuel Kortum, 2004. "Innovating Firms and Aggregate Innovation," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 986-1018, October.
    5. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    6. Daron Acemoglu & Ufuk Akcigit & Harun Alp & Nicholas Bloom & William Kerr, 2018. "Innovation, Reallocation, and Growth," American Economic Review, American Economic Association, vol. 108(11), pages 3450-3491, November.
    7. E. K. Fisk, 1962. "Planning In A Primitive Economy Special Problems Of Papua‐New Gyuinea," The Economic Record, The Economic Society of Australia, vol. 38(84), pages 462-478, December.
    8. N. Gregory Mankiw, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model of Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(2), pages 529-538.
    9. repec:zbw:bofrdp:2013_022 is not listed on IDEAS
    10. Howitt, Peter & Aghion, Philippe, 2006. "Appropriate Growth Policy: A Unifying Framework," Scholarly Articles 4554121, Harvard University Department of Economics.
    11. W. R. Stent & L. Roy Webb, 1975. "Subsistence Affluence and Market Economy in Papua New Guinea," The Economic Record, The Economic Society of Australia, vol. 51(4), pages 522-538, December.
    12. Philippe Aghion & Peter Howitt, 2006. "Joseph Schumpeter Lecture Appropriate Growth Policy: A Unifying Framework," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 269-314, 04-05.
    13. David Cass, 1965. "Optimum Growth in an Aggregative Model of Capital Accumulation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(3), pages 233-240.
    14. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    15. Masanao Aoki & Hiroshi Yoshikawa, 2004. "Demand saturation – creation and economic growth," Chapters, in: Paolo Onofri (ed.), The Economics of an Ageing Population, chapter 4, Edward Elgar Publishing.
    16. Mankiw, N Gregory, 1989. "Real Business Cycles: A New Keynesian Perspective," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 79-90, Summer.
    17. Paul Davidson, 1984. "Reviving Keynes’s Revolution," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 6(4), pages 561-575, July.
    18. Chai Andreas & Moneta Alessio, 2014. "Escaping Satiation Dynamics: Some Evidence from British Household Data," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 234(2-3), pages 299-327, April.
    19. Lucas, Robert E, Jr, 1975. "An Equilibrium Model of the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1113-1144, December.
    20. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
    21. repec:bla:ecorec:v:51:y:1975:i:136:p:522-38 is not listed on IDEAS
    22. Pier Paolo Saviotti & Andreas Pyka, 2013. "The co-evolution of innovation, demand and growth," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 22(5), pages 461-482, July.
    23. Akerlof, George A & Yellen, Janet L, 1985. "Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?," American Economic Review, American Economic Association, vol. 75(4), pages 708-720, September.
    24. Wilhelm Ruprecht, 2005. "The historical development of the consumption of sweeteners - a learning approach," Journal of Evolutionary Economics, Springer, vol. 15(3), pages 247-272, August.
    25. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
    26. Modigliani, Franco, 1986. "Life Cycle, Individual Thrift, and the Wealth of Nations," American Economic Review, American Economic Association, vol. 76(3), pages 297-313, June.
    27. Paul Davidson, 1991. "Is Probability Theory Relevant for Uncertainty? A Post Keynesian Perspective," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 129-143, Winter.
    28. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    29. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    30. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    31. David Romer, 1993. "The New Keynesian Synthesis," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 5-22, Winter.
    32. Esben Sloth Andersen, 2001. "special issue: Satiation in an evolutionary model of structural economic dynamics," Journal of Evolutionary Economics, Springer, vol. 11(1), pages 143-164.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Franz, Wolfgang, 1992. "Neuere makroökonomische Kontroversen," Discussion Papers, Series II 168, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    2. King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007, Elsevier.
    3. Marcin Grela & Aleksandra Majchrowska & Tomasz Michałek & Jakub Mućk & Agnieszka Stążka-Gawrysiak & Grzegorz Tchorek & Marcin Wagner, 2017. "Is Central and Eastern Europe converging towards the EU-15?," NBP Working Papers 264, Narodowy Bank Polski.
    4. Adnan Haider Bukhari & Safdar Ullah Khan, 2008. "A Small Open Economy DSGE Model for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 963-1008.
    5. J.P.G. Reijnders, 2007. "Impulse or propagation? How the tides turned in Business Cycle Theory," Working Papers 07-07, Utrecht School of Economics.
    6. Pedro Garcia Duarte, 2012. "Not Going Away? Microfoundations in the Making of a New Consensus in Macroeconomics," Chapters, in: Microfoundations Reconsidered, chapter 6, Edward Elgar Publishing.
    7. Andrew Atkeson & Ariel Burstein, 2019. "Aggregate Implications of Innovation Policy," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 2625-2683.
    8. Athreya, Kartik B., 2014. "Big Ideas in Macroeconomics: A Nontechnical View," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262019736, April.
    9. Antulio N. Bomfim, "undated". "\"Forecasting the Forecasts of Others:\" Expectational Heterogeneity and Aggregate Dynamics," Finance and Economics Discussion Series 1996-41, Board of Governors of the Federal Reserve System (U.S.), revised 10 Dec 2019.
    10. Willem H. Buiter, 2003. "James Tobin: An Appreciation of his Contribution to Economics," Economic Journal, Royal Economic Society, vol. 113(491), pages 585-631, November.
    11. Prof. Neil D. Karunaratne, 1999. "Rival Macroeconomic Models And Australian Stylised Facts," Discussion Papers Series 261, School of Economics, University of Queensland, Australia.
    12. Bode, Eckhardt, 1996. "Ursachen regionaler Wachstumsunterschiede: wachstumstheoretische Erklärungsansätze," Kiel Working Papers 740, Kiel Institute for the World Economy (IfW Kiel).
    13. Pollak, Andreas, 2022. "A Unified Theory of Growth, Cycles and Unemployment - Part I: Technology, Competition and Growth," MPRA Paper 117768, University Library of Munich, Germany.
    14. Pedro Garcia Duarte & Gilberto Tadeu Lima, 2012. "Microfoundations Reconsidered," Books, Edward Elgar Publishing, number 14869.
    15. Amavilah, Voxi Heinrich, 2014. "Knowledge = Technology + Human Capital and the Lucas and Romer Production Functions," MPRA Paper 58847, University Library of Munich, Germany.
    16. Roberto Tamborini, 2007. "Rescuing the LM (and the money market) in a modern Macro course," Department of Economics Working Papers 0706, Department of Economics, University of Trento, Italia.
    17. Marvin Goodfriend, 2004. "Monetary policy in the new neoclassical synthesis : a primer," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 90(Sum), pages 21-45.
    18. Janos Varga & Werner Roeger & Jan in’t Veld, 2014. "Growth effects of structural reforms in Southern Europe: the case of Greece, Italy, Spain and Portugal," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(2), pages 323-363, May.
    19. J. Subrick & Andrew Young, 2010. "Nobelity and novelty: Finn Kydland and Edward Prescott’s contributions viewed from Vienna," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 23(1), pages 35-53, March.
    20. Emilio Fernandez-Corugedo, 2004. "Consumption Theory," Handbooks, Centre for Central Banking Studies, Bank of England, number 23, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:agr:journl:v:2(615):y:2018:i:2(615):p:69-104. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mircea Dinu (email available below). General contact details of provider: https://edirc.repec.org/data/agerrea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.