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Money, Fiscal Policy and the Cambridge Theorem

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  • Palley, Thomas I

Abstract

This paper extends the Cambridge theory of income distribution to a monetary economy and explores the implications of fiscal deficits that are money financed. It is shown that the Pasinetti Paradox represents a special case applicable to either a nonmonetary economy or a monetary economy with constant prices. Once steady-state inflation is introduced, this generates an inflation tax on money holdings which affects saving. If the distribution of money holdings depends upon relative consumption shares, then the savings propensity of workers affects the distribution of the burden of the inflation tax, which in turn affects the profit rate and profit share. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Palley, Thomas I, 1997. "Money, Fiscal Policy and the Cambridge Theorem," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 21(5), pages 633-639, September.
    • Handle: RePEc:oup:cambje:v:21:y:1997:i:5:p:633-39
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    Cited by:

    1. Massimiliano La Marca, 2005. "The Public Sector In A Model Of Growth And Distribution À La Pasinetti: Existence Of One‐ Or Two‐Class Economies," Metroeconomica, Wiley Blackwell, vol. 56(2), pages 157-181, May.
    2. Luca Zamparelli, 2017. "Wealth Distribution, Elasticity of Substitution and Piketty: An ‘Anti-Dual’ Pasinetti Economy," Metroeconomica, Wiley Blackwell, vol. 68(4), pages 927-946, November.
    3. João Gabriel de Araujo Oliveira & Joanilio Rodolpho Teixeira, 2020. "A note reconsidering a post‐Keynesian model of growth and distribution in the globalization context," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 487-495, July.
    4. Thomas I. Palley, 2013. "Cambridge and neo-Kaleckian growth and distribution theory: comparison with an application to fiscal policy," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(1), pages 79-104, January.

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