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The “Utilization Controversy”: Demand and Utilization in Alternative Theories of Economic Growth and Distribution

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  • Michalis Nikiforos

Abstract

This chapter discusses the “utilization controversy,” the debate on whether or not demand plays a role in the determination of the rate of utilization in the long run. First, it explains why utilization has a central role in the various theories of growth and distribution. Second, it examines the theory of utilization and explains how the standard model does not recognize a role of demand and outlines recent theoretical advancements that justify an endogenous-to-demand long-run rate of utilization. Finally, it examines different estimates of utilization. It argues that the Federal Reserve measure of utilization, commonly employed in the debate, is inappropriate to capture long-run variations in utilization. Other measures such as the Average Workweek of Capital or the National Emergency Utilization Rate are better suited. These estimates provide empirical support for a utilization rate which is endogenous to demand in the long run.

Suggested Citation

  • Michalis Nikiforos, 2025. "The “Utilization Controversy”: Demand and Utilization in Alternative Theories of Economic Growth and Distribution," Working Papers PKWP2508, Post Keynesian Economics Society (PKES).
    • Handle: RePEc:pke:wpaper:pkwp2508
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    More about this item

    Keywords

    Accumulation; Growth; Distribution; Utilization;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D30 - Microeconomics - - Distribution - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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