IDEAS home Printed from https://ideas.repec.org/p/ris/sraffa/0029.html
   My bibliography  Save this paper

Demand-Led Growth Theory in a Classical Framework: Its Superiority, Its Limitations, and Its Explanatory Power

Author

Listed:
  • Smith, Matthew

    (University of Sydney)

Abstract

The main purpose of this paper is to show that the Keynesian-Kaleckian demand-led theory of growth proposed within the classical framework of prices and distribution as articulated by Sraffa (1960), is superior to the neoclassical supply-driven theory in explaining economic growth. After showing the fundamental theoretical problem with the neoclassical supply-driven approach to growth, we expound a demand-led model of growth that abandons ‘steady-state’ and, instead, adopts an ‘historical approach’ in which the data is specified for historical periods of time. The model incorporates the contribution of technical progress to demand-led growth and, thereby, provides the basis to identify the most important political, social, and institutional developments that historically explain growth and economic development since the advent of capitalism. Our historical analysis shows how demand-led growth theory can provide the foundation for a new and more coherent interpretation of the history of economic development.

Suggested Citation

  • Smith, Matthew, 2018. "Demand-Led Growth Theory in a Classical Framework: Its Superiority, Its Limitations, and Its Explanatory Power," Centro Sraffa Working Papers CSWP29, Centro di Ricerche e Documentazione "Piero Sraffa".
    • Handle: RePEc:ris:sraffa:0029
    as

    Download full text from publisher

    File URL: http://www.centrosraffa.org/public/923ecb9d-2371-48a0-8425-13913be3c4c3.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Alfonso Novales & Esther Fernández & Jesús Ruiz, 2022. "Numerical Solution Methods," Springer Texts in Business and Economics, in: Economic Growth, edition 3, chapter 5, pages 213-278, Springer.
    3. Matthew Smith, 2012. "Demand-led Growth Theory: A Historical Approach," Review of Political Economy, Taylor & Francis Journals, vol. 24(4), pages 543-573, October.
    4. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    5. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    6. Neri Salvadori (ed.), 2003. "Old and New Growth Theories," Books, Edward Elgar Publishing, number 2806.
    7. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    8. Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, vol. 46(2), pages 385-406, June.
    9. Neri Salvadori (ed.), 2003. "The Theory of Economic Growth," Books, Edward Elgar Publishing, number 2741.
    10. Fabio Petri, 2004. "General Equilibrium, Capital and Macroeconomics," Books, Edward Elgar Publishing, number 3438.
    11. Fremdling, Rainer, 1977. "Railroads and German Economic Growth: A Leading Sector Analysis with a Comparison to the United States and Great Britain," The Journal of Economic History, Cambridge University Press, vol. 37(3), pages 583-604, September.
    12. Alfonso Novales & Esther Fernández & Jesús Ruiz, 2022. "Economic Growth," Springer Texts in Business and Economics, Springer, edition 3, number 978-3-662-63982-5, September.
    13. Matthew Smith, 2014. "William Blake on the Effects of Government Fiscal Policy on Activity and Prices," History of Political Economy, Duke University Press, vol. 46(3), pages 491-523, Fall.
    14. Antonella Palumbo & Attilio Trezzini, 2003. "Growth without normal capacity utilization," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 10(1), pages 109-135.
    15. Susan Howson, 1987. "The origins of cheaper money, 1945-7," Economic History Review, Economic History Society, vol. 40(3), pages 433-452, August.
    16. J. Harvey & M. Johnson, 1973. "The Rate of Interest," Palgrave Macmillan Books, in: Introduction to Macro-Economics: A Workbook, chapter 10, pages 55-59, Palgrave Macmillan.
    17. Smith, Matthew, 1996. "A Monetary Explanation of Distribution in a 'Gold Money Economy.'," Contributions to Political Economy, Cambridge Political Economy Society, vol. 15(0), pages 33-61.
    18. Paul M. Romer, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter.
    19. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    20. Harcourt,G. C., 1972. "Some Cambridge Controversies in the Theory of Capital," Cambridge Books, Cambridge University Press, number 9780521096720, November.
    21. Tony Aspromourgos, 2012. "Keynes’s General Theory After 75 Years: Chapter 24 and the Character of ‘Keynesian’ Policy," The Economic Record, The Economic Society of Australia, vol. 88(s1), pages 149-157, June.
    22. Kurz,Heinz D. & Salvadori,Neri, 1997. "Theory of Production," Cambridge Books, Cambridge University Press, number 9780521588676.
    23. Garegnani, Pierangelo, 1984. "Value and Distribution in the Classical Economists and Marx," Oxford Economic Papers, Oxford University Press, vol. 36(2), pages 291-325, June.
    24. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    25. Tony Aspromourgos & Daniel Rees & Graham White, 2010. "Public debt sustainability and alternative theories of interest," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 34(3), pages 433-447.
    26. Tony Aspromourgos, 2014. "Keynes, Employment Policy and the Question of Public Debt," Review of Political Economy, Taylor & Francis Journals, vol. 26(4), pages 574-593, October.
    27. Philip Arestis & Stephen P. Dunn & Malcolm Sawyer, 1999. "Post Keynesian Economics and Its Critics," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 21(4), pages 527-549, July.
    28. Trezzini, Attilio, 1995. "Capacity Utilisation in the Long Run and the Autonomous Components of Aggregate Demand," Contributions to Political Economy, Cambridge Political Economy Society, vol. 14(0), pages 33-66.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jamee K. Moudud, 2010. "Strategic Competition, Dynamics, and the Role of the State," Books, Edward Elgar Publishing, number 4241.
    2. Amavilah, Voxi Heinrich, 2014. "Knowledge = Technology + Human Capital and the Lucas and Romer Production Functions," MPRA Paper 58847, University Library of Munich, Germany.
    3. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308, Elsevier.
    4. Taylor, Alan M., 1999. "Sources of convergence in the late nineteenth century," European Economic Review, Elsevier, vol. 43(9), pages 1621-1645, October.
    5. Kenneth Button, 2011. "The Economist’s Perspective on Regional Endogenous Development," Chapters, in: Robert Stimson & Roger R. Stough & Peter Nijkamp (ed.), Endogenous Regional Development, chapter 2, Edward Elgar Publishing.
    6. Voosholz, Frauke, 2014. "A survey on modeling economic growth. With special interest on natural resource use," CAWM Discussion Papers 69, University of Münster, Münster Center for Economic Policy (MEP).
    7. Long, N.V. & Wong, K.Y., 1996. "Endogenous Growth and International Trade: A Survey," Working Papers 96-07, University of Washington, Department of Economics.
    8. Magrini, Stefano, 2004. "Regional (di)convergence," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 62, pages 2741-2796, Elsevier.
    9. Knaap, T., 1998. "A survey of complementaries in growth and location theories," Research Report 98C44, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    10. Jesus Felipe & John S.L. McCombie, 2013. "The Aggregate Production Function and the Measurement of Technical Change," Books, Edward Elgar Publishing, number 1975.
    11. Alan M. Taylor, 1995. "Growth and Convergence in the Asia-Pacific Region: On the Role of Openness, Trade and Migration," NBER Working Papers 5276, National Bureau of Economic Research, Inc.
    12. repec:dgr:rugsom:98c44 is not listed on IDEAS
    13. Firth, Lucy & Mellor, David, 2000. "Learning and the new growth theories: policy dilemma," Research Policy, Elsevier, vol. 29(9), pages 1157-1163, December.
    14. repec:elg:eechap:14395_11 is not listed on IDEAS
    15. Jeon, Heesang, 2015. "Knowledge and Contemporary Capitalism in Light of Marx's Value Theory," Thesis Commons g5njk, Center for Open Science.
    16. Schilirò, Daniele, 2006. "Crescita economica, conoscenza e capitale umano. Le teorie e i modelli di crescita endogena di Paul Romer e Robert Lucas [Economic growth, knowledge and human capital. Theories and models of endoge," MPRA Paper 52435, University Library of Munich, Germany.
    17. repec:ebl:ecbull:v:2:y:2002:i:1:p:1-15 is not listed on IDEAS
    18. repec:zbw:bofrdp:2010_021 is not listed on IDEAS
    19. Michael Peneder & Karl Aiginger & Gernot Hutschenreiter & Markus Marterbauer, 2001. "Structural Change and Economic Growth," WIFO Studies, WIFO, number 20668.
    20. Matthias Firgo & Peter Mayerhofer, 2015. "Wissensintensive Unternehmensdienste, Wissens-Spillovers und regionales Wachstum. Teilprojekt 1: Wissens-Spillovers und regionale Entwicklung – Welche strukturpolitische Ausrichtung optimiert das Wach," WIFO Studies, WIFO, number 58342.
    21. Peter Mulder & Henri Groot, 2007. "Sectoral Energy- and Labour-Productivity Convergence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 36(1), pages 85-112, January.
    22. Stephen J. Turnovsky, 2000. "Growth in an open economy: some recent developments," Working Paper Research 05, National Bank of Belgium.
    23. Alejandro Díaz-Bautista, 2003. "Convergence And Economic Growth Considering Human Capital And R&D Spillovers," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 2(2), pages 127-143, Junio 200.
    24. Oukhallou, Youssef, 2016. "Analyzing economic growth: what role for public investment?," MPRA Paper 69772, University Library of Munich, Germany.

    More about this item

    Keywords

    Growth; J.M. Keynes; Classical Economics; Economic History; Development;
    All these keywords.

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • N00 - Economic History - - General - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:sraffa:0029. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Saverio M. Fratini (email available below). General contact details of provider: https://edirc.repec.org/data/sraffit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.