IDEAS home Printed from https://ideas.repec.org/a/oup/cambje/v38y2014i5p1043-1061..html
   My bibliography  Save this article

Thorstein Veblen on credit and economic crises

Author

Listed:
  • Guglielmo Forges Davanzati
  • Andrea Pacella

Abstract

The aim of this paper is to provide an interpretation of Veblen’s theory of economic crises, based on the view that banking policy is a major factor in generating crises. It will be shown that, in Veblen’s thought, crises may emerge due to the banking system’s non-accommodating behaviour according to the following sequence: as firms are not homogeneous, the credit system spontaneously tends to help bigger firms increase in size, due to the increase in their capital turnover, which allows them to produce and sell before their competitors. This produces two effects: (i) the reduction in profits of the smaller firms (or their bankruptcy) generates a decline of employment and output while, at the same time, (ii) the increase in the industrial concentration ratio produces a rise in prices and a consequent drop in real wages. This in turn reduces total demand for consumption goods, thus worsening entrepreneurs’ expectations and having an adverse effect on production and investment by firms.

Suggested Citation

  • Guglielmo Forges Davanzati & Andrea Pacella, 2014. "Thorstein Veblen on credit and economic crises," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(5), pages 1043-1061.
    • Handle: RePEc:oup:cambje:v:38:y:2014:i:5:p:1043-1061.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/cje/beu002
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bruce E. Kaufman, 2018. "How Capitalism Endogenously Creates Rising Income Inequality and Economic Crisis: The Macro Political Economy Model of Early Industrial Relations," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 57(1), pages 131-173, January.
    2. Baines, Joseph & Hager, Sandy Brian, 2021. "The Great Debt Divergence and its Implications for the Covid-19 Crisis: Mapping Corporate Leverage as Power," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue Latest Ar.
    3. Colacchio, Giorgio & Forges Davanzati, Guglielmo, 2017. "Endogenous money, increasing returns and economic growth: Nicholas Kaldor’s contribution," Structural Change and Economic Dynamics, Elsevier, vol. 41(C), pages 79-85.
    4. Faruk Ülgen, 2017. "Financialization and vested interests : the irrelevance of self-regulation and financial stability as a public good," Post-Print halshs-02002415, HAL.
    5. Gouthami Kothakapa & Samyukta Bhupatiraju & Rahul A. Sirohi, 2021. "Revisiting the link between financial development and industrialization: evidence from low and middle income countries," Annals of Finance, Springer, vol. 17(2), pages 215-230, June.
    6. Guglielmo Forges Davanzati, 2015. "Nicholas Kaldor on endogenous money and increasing returns," Working Papers PKWP1505, Post Keynesian Economics Society (PKES).
    7. Adewale Samuel Hassan & Daniel Francois Meyer, 2022. "Interplay between Finance and Institutions in the Development Process of the Industrial Sector: Evidence from South Africa," JRFM, MDPI, vol. 15(10), pages 1-20, October.

    More about this item

    Statistics

    Access and download statistics

    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:oup:cambje:v:38:y:2014:i:5:p:1043-1061.. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/cje .

    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.