Escaping from a Blind Alley: Disequilibrium in the Dynamic Analysis of Harrod and Kalecki

The pioneers of dynamic Keynesian economics, Harrod and Kalecki, began with an analysis of the trade cycle, but are remembered for their contributions to growth theory. Unlike most twentieth century growth theory, they both had a major focus on disequilibrium situations and an examination of this aspect of their theory is the purpose of this paper. Harrod distinguished three stages in his dynamic analysis. The first was the derivation of the fundamental equation and consequent theorems. Fundamental meant underlying: even apart from random factors the equation may never hold exactly in real life. In the second stage, detailed analysis was made of the factors (in addition to the fundamental equation) which have a systematic effect on the path the economy follows. The final stage is policy prescriptions. Except in his 1936 book on the trade cycle, Harrod did relatively little “second stage” work but this did not stop him putting forward policy prescriptions. This three stage structure of analysis contributed to the widespread misunderstanding of the nature of his fundamental equation leading to a widely accepted view of a Harrod growth model which was completely different to what Harrod thought he was putting forward. Kalecki, on the other hand, rejected what Harrod had called “first stage analysis” as being of little interest. His main criticisms of growth theory were aimed at, what he saw, as the vacuousness of such theorising. Instead, his work concentrated on second and third stage analysis, that is, in attempting to understand the non-equilibrium, dynamics of the economy with a view towards policy prescription. For this reason, Kalecki’s contribution was less open to misunderstanding than was Harrod’s.

Improving the public house in Britain, 1920-40: Sir Sydney Nevile and 'social work'

The ‘improved public house’ movement in the inter-war years was a central part of the shift towards retailing by the brewing industry. An important part of the reform movement was the alliance between certain brewers, notably Whitbread, and ‘social workers’, particularly those associated with the University settlement movement in London. Using the papers of Sydney Nevile, the importance of a particular social milieu is outlined, calling into question attempts to align the movement to improve public houses with transatlantic Progressivism. Rather, this alliance drew upon longstanding English traditions of public service and religious affiliation amongst a fraction of the gentry

The Western Australian regional forest agreement: economic rationalism and the normalisation of political closure

This article explores the constraints imposed by economic rationalism on environmental policy-making in light of Western Australia\u27s (WA) Regional Forest Agreement (RFA) experience. Data derived from interviews with WA RFA stakeholders shed light on their perceptions of the RFA process and its outcomes. The extent to which involvement of science and the public RFA management enabled is analysed. The findings point to a pervasive constrainedness of WA\u27s RFA owing to a closing of the process by the administrative decision-making structures. A dominant economic rationality is seen to have normalised and legitimised political closure, effectively excluding rationalities dissenting from an implicit economic orthodoxy. This article argues for the explication of invisible, economic constraints affecting environmental policy and for the public-cum-political negotiation of the points of closure within political processes

Structural Deficits and Fiscal Policy Stance in Australia, 1966-67 to 1988-89

This study adjusts the total deficit (or net public sector borrowing requirement) of the whole of the public sector in Australia for the effects of changes in both the level of economic activity and the implicit tax that inflation imposes on the holders of government bonds. Both adjustments are important, even when looking at year-to-year changes in the structural deficit. When the stance of fiscal policy is measured by the structural deficit as a percentage of gross domestic product, four years stand out as years of major changes. In each of the years 1973-74, 1979-80 and 1987-88 the stance of fiscal policy was substantially tightened with the abrupt tightening in 1979-80 being the largest change, though not much larger than that in 1973-74. By far the biggest change relaxing the stance of fiscal policy was in 1983-84, and the change in this year was the biggest of any change in either direction in the period. Copyright 1990 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.