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Lange's 1938 model: dynamics and the "optimum propensity to consume"

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  • Michaël Assous
  • Roberto Lampa

Abstract

Oskar Lange's 1938 article "The Rate of Interest and the Optimum Propensity to Consume" is usually associated with the original IS-LM approach of the late 1930s. However, Lange's article was not only an attempt to illuminate Keynes's main innovations but the first part of a wide project that included the development of a theory of economic evolution. This paper aims at showing that Lange's article can help in illuminating critical aspects of this project: in particular, Lange's idea that a synthesis between Kaldor's and Kalecki's theories and that of Schumpeter, might have been possible and that it represented (in intentions) a "modern" and consistent reconstruction of the Marxist theory of the business cycle. Section 2 clarifies Lange's early reflection on dynamics. Section 3 centres on Lange's 1938 static model and indicates the effects of a change of saving on investment. Section 4 suggests a dynamic reconstruction from which are addressed important arguments raised by Lange in a series of papers written between 1934 and 1942.

Suggested Citation

  • Michaël Assous & Roberto Lampa, 2014. "Lange's 1938 model: dynamics and the "optimum propensity to consume"," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 21(5), pages 871-898, October.
    • Handle: RePEc:taf:eujhet:v:21:y:2014:i:5:p:871-898
    DOI: 10.1080/09672567.2014.934873
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    References listed on IDEAS

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    1. Oskar Lange, 1987. "The Economic Operation Of A Socialist Society: I," Contributions to Political Economy, Cambridge Political Economy Society, vol. 6(1), pages 3-12.
    2. Mauro Boianovsky, 2004. "The IS-LM Model and the Liquidity Trap Concept: From Hicks to Krugman," History of Political Economy, Duke University Press, vol. 36(5), pages 92-126, Supplemen.
    3. Oskar Lange, 1937. "On the Economic Theory of Socialism: Part Two," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(2), pages 123-142.
    4. Cristiano Antonelli & Francesco Quatraro, 2014. "The effects of biased technological changes on total factor productivity: a rejoinder and new empirical evidence," The Journal of Technology Transfer, Springer, vol. 39(2), pages 281-299, April.
    5. Michal Kalecki, 1937. "A Theory of the Business Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(2), pages 77-97.
    6. O. Lange, 1935. "Marxian Economics and Modern Economic Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 2(3), pages 189-201.
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    More about this item

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B24 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Socialist; Marxist; Scraffian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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