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An adaptive evolutionary behaviour for the demand-led growth adjustment

Author

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  • Bonaventura, Luigi
  • Caserta, Maurizio

Abstract

Investment activity produces effects on two different economic variables. On the one hand, it adds to the existing productive capacity, on the other, it represents a component of demand. What is required for demand may not be required for accumulation, and viceversa. As a consequence different adjustment mechanisms have been put forward in the economic literature to make the two aspects of investment compatible to each other. In all cases, a distinction has been made between the fundamentally macroeconomic nature of the demand aspect, and the fundamentally microeconomic nature of the capacity-augmenting aspect. This paper tries to discuss the foundations of a non-perverse adjustment mechanism based on the internalisation of the demand aspect of investment. The adjustment mechanism discussed earlier is based on investment reacting to positive or negative excess aggregate demand. Once it is shown that a collectively efficient equilibrium can be reached even on an entirely arbitrary basis, one may set out to show that a behaviour which gets selected in a small population can be easily extended to a large one.

Suggested Citation

  • Bonaventura, Luigi & Caserta, Maurizio, 2004. "An adaptive evolutionary behaviour for the demand-led growth adjustment," MPRA Paper 2527, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:2527
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    File URL: https://mpra.ub.uni-muenchen.de/2527/1/MPRA_paper_2527.pdf
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    References listed on IDEAS

    as
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    4. Mailath, George J., 1992. "Introduction: Symposium on evolutionary game theory," Journal of Economic Theory, Elsevier, vol. 57(2), pages 259-277, August.
    5. Korkut Erturk, 2002. "Revisiting the Old Theory of Cyclical Growth: Harrod, Kaldor cum Schumpeter," Review of Political Economy, Taylor & Francis Journals, vol. 14(2), pages 179-192.
    6. Ken Binmore & Larry Samuelson, 2002. "The Evolution of Focal Points," Economics Working Papers 0017, Institute for Advanced Study, School of Social Science.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Investment; demand; capacity-aumenting; coordination rule; evolutionary analysis;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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