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Cyclical Over-Investment and Crisis in a Labor-Scarce Economy

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  • James N. Devine

Abstract

This paper incorporates a post-Marxian view of investment in an overinvestment theory of cyclical economic crises. The Marxian crisis theory based on the tendency for the profit rate to fall (because of overmechanization) is replaced with a theory of overaccumulation of fixed capital, while the high employment profit squeeze is restated in terms of this overinvestment. Historical conditions determine overinvestment's results: when labor power is potentially scarce (precapitalist or agricultural labor reserves are largely gone), overinvestment means rising costs, falling profit rates, and crisis. Also, the resulting slump can cause either a recovery or lasting stagnation. Finally, post-1949 U.S. data are presented to argue the theory's plausibility.

Suggested Citation

  • James N. Devine, 1987. "Cyclical Over-Investment and Crisis in a Labor-Scarce Economy," Eastern Economic Journal, Eastern Economic Association, vol. 13(3), pages 271-280, Jul-Sep.
    • Handle: RePEc:eej:eeconj:v:13:y:1987:i:3:p:271-280
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    References listed on IDEAS

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    Cited by:

    1. Rudy Fichtenbaum, 1988. "'Business Cycles,' Turnover and the Rate of Profit: An Empirical Test of Marxian Crisis Theory," Eastern Economic Journal, Eastern Economic Association, vol. 14(3), pages 221-228, Jul-Sep.

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