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Endogenous Cycles and Chaos in a Capitalist Economy: A Circuit of Capital Model

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  • Xiao Jiang

Abstract

This paper introduces a firm-level simulation model of the circuit of capital with financially extended Harrodian investment behavior. The model demonstrates that capitalist economies with heterogeneous firms can endogenously generate chaotic cycles. Stability and bifurcation analyses show that the (Harrodian) instability of the system is caused by the firm's ‘aggressiveness’ regarding the size of the ‘rent’ between investiments in the financial and the goods markets. Furthermore, the heterogeneity of firms results in a chaotic pattern of capital accumulation. Finally, a set of steady states around which the system fluctuates chaotically is found by solving the balanced growth problem.

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  • Xiao Jiang, 2015. "Endogenous Cycles and Chaos in a Capitalist Economy: A Circuit of Capital Model," Metroeconomica, Wiley Blackwell, vol. 66(1), pages 123-157, February.
    • Handle: RePEc:bla:metroe:v:66:y:2015:i:1:p:123-157
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    File URL: http://hdl.handle.net/10.1111/meca.12065
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    Cited by:

    1. Jonathan F. Cogliano & Roberto Veneziani & Naoki Yoshihara, 2022. "Computational methods and classical‐Marxian economics," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 310-349, April.
    2. Stephen Thompson, 2018. "Employment and fiscal policy in a Marxian model," Metroeconomica, Wiley Blackwell, vol. 69(4), pages 820-846, November.
    3. Jonathan F. Cogliano and Roberto Veneziani, 2024. "Classical Competition and Equilibrium: An Agent-Based Analysis," Working Papers 2024-01, University of Massachusetts Boston, Economics Department.
    4. Frank Beckenbach, 2020. "A value-theoretic approach to economic dynamics and evolution—synthesizing different Marxian modules in a simulation model," Review of Evolutionary Political Economy, Springer, vol. 1(2), pages 221-243, August.
    5. Stephen Thompson, 2022. "“The total movement of this disorder is its order”: Investment and utilization dynamics in long‐run disequilibrium," Metroeconomica, Wiley Blackwell, vol. 73(2), pages 638-682, May.
    6. Jonathan F. Cogliano & Roberto Veneziani, 2023. "Classical Competition and Equilibrium: An Agent-Based Analysis," Working Papers 977, Queen Mary University of London, School of Economics and Finance.

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