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Growth theory after Keynes, part I: the unfortunate suppression of the Harrod-Domar model

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  • Hendrik Van den Berg

    (University of Nebraska-Lincoln)

Abstract

After Harrod and Domar independently developed a dynamic Keynesian circular flow model to illustrate the instability of a growing economy, mainstream economists quickly reduced their model to a supply side-only growth model, which they subsequently rejected as too simplistic and replaced with Solow’s neoclassical growth model. The rejection process of first diminishing the model and then replaced it with a neoclassical alternative was similar to how the full Keynesian macroeconomic paradigm was diminished into IS-LM analysis and then replaced by a simplistic neoclassical framework that largely ignored the demand side of the economy. Furthermore, subsequent work by mainstream economists has resulted in a logically inconsistent framework for analyzing economic growth; the popular endogenous growth models, which use Schumpeter’s concept of profit-driven creative destruction to explain the technological change that Solow left as exogenous, are not logically compatible with the Solow model.

Suggested Citation

  • Hendrik Van den Berg, 2013. "Growth theory after Keynes, part I: the unfortunate suppression of the Harrod-Domar model," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 7(1), November.
    • Handle: RePEc:bus:jphile:v:7:y:2013:i:1:n:1
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    References listed on IDEAS

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    Cited by:

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    2. Mahatma Kufepaksi & Gunawan -, 2018. "The Role of Intellectual Capital in Overcoming the Slowing Economic Growth in Indonesia," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(10), pages 1-97, October.
    3. Salvatore, Dominick & Campano, Fred, 2019. "Global implications of U.S. trade policies for reducing structural trade imbalances," Journal of Policy Modeling, Elsevier, vol. 41(3), pages 537-545.
    4. Pingle, Mark & Guerrero, Federico & Mahmoudi, Mina & Wuthisatian, Rattaphon, 2023. "A Descriptive Growth Model with Unemployment," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 482-500.
    5. Mustafa Orhan Özer, 2022. "The Relationship between Economic Growth and Unemployment Rate: Fractional Frequency Fourier ARDL Bounds Test Approach," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 72(72-1), pages 269-292, June.
    6. Salvatore, Dominick & Campano, Fred, 2018. "Simulating some of the administration’s trade policies," Journal of Policy Modeling, Elsevier, vol. 40(3), pages 636-646.
    7. Campano, Fred & Costantiello, Alberto & Laureti, Lucio & Salvatore, Dominick, 2020. "Why does Europe grow more slowly than the United States?," Journal of Policy Modeling, Elsevier, vol. 42(4), pages 903-912.

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    More about this item

    Keywords

    paradigm; macroeconomics; mainstream; Schumpeter; Solow;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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