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A ‘Walrasian Post-Keynesian’ model? Resolving the paradox of Oskar Lange's 1938 theory of interest

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  • Roberto Lampa

    (Università del Salento)

Abstract

This paper investigates Oskar Lange’s 1938 article, “The Rate of Interest and the Optimum Propensity to Consume”, with the intention of providing a thorough interpretation of this rather obscure work. We explore in depth Lange’s theory of interest and its relationship with both Keynes’ General Theory (1936) and Hicks’ synthesis (1937), developing two graphical models that show the non-linearity of Lange’s investment function as well as the consequentiality of his equilibrium solution. Through an unedited manuscript, we also reconstruct Lange’s beliefs about the chronic sub-optimality of the capitalist economy and his scientific endorsement of the socialist economy. We conclude that the purposes of Lange’s article predate and are independent of the General Theory. They consisted of a theoretical generalization and analysis of institutional data, intended to separate economic theory from the tacit assumption of a capitalist economy.

Suggested Citation

  • Roberto Lampa, 2011. "A ‘Walrasian Post-Keynesian’ model? Resolving the paradox of Oskar Lange's 1938 theory of interest," Working Papers 1115, New School for Social Research, Department of Economics.
    • Handle: RePEc:new:wpaper:1115
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    File URL: http://www.economicpolicyresearch.org/econ/2011/NSSR_WP_152011.pdf
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    Keywords

    Theory of Interest; Keynesian economics; Capitalism’s Instability; Neo-Classical Synthesis; Socialist Theory;
    All these keywords.

    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
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • P11 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Planning, Coordination, and Reform

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