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Endogenous constraints on full productive capacity in a free-market economy

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  • Nicolas D. Cole

    (Formerly King’s College London University (BA)
    Cranfield University (MSc))

Abstract

The full employment interest rate implicit in classical economic theory is 4½%, deduced by including the rate of normal profit in a simple macroeconomic model. By not fixing the interest rate at this optimum, Central Banks endogenously maintain excess productive capacity, cause unemployment, and encourage the exploitation of Labour by Capital.

Suggested Citation

  • Nicolas D. Cole, 2023. "Endogenous constraints on full productive capacity in a free-market economy," Evolutionary and Institutional Economics Review, Springer, vol. 20(1), pages 111-121, April.
    • Handle: RePEc:spr:eaiere:v:20:y:2023:i:1:d:10.1007_s40844-023-00254-y
    DOI: 10.1007/s40844-023-00254-y
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    References listed on IDEAS

    as
    1. Jacob Viner, 1936. "Mr. Keynes on the Causes of Unemployment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 51(1), pages 147-167.
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    More about this item

    Keywords

    Rate of normal profit; Classical theory; Full employment interest rate; Productive capacity; Central Banks;
    All these keywords.

    JEL classification:

    • B0 - Schools of Economic Thought and Methodology - - General
    • E0 - Macroeconomics and Monetary Economics - - General

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