Further Essays on Economic Theory and Policy

Further Essays on Economic Theory and Policy

Further Essays on Economic Theory and Policy

Further Essays on Economic Theory and Policy

Excerpt

Nicholas Kaldor died at Papworth Hospital, Cambridge on 30 September 1986. Before his death, he had published eight volumes of Collected Essays covering his writings in both theoretical and applied economics from 1932 to 1979. This ninth volume includes a selection of his most interesting and provocative papers since 1979. Apart from 'Recollections of an Economist', they are grouped under four heads: Keynesian Economics; Money and Monetarism; Growth and Trade; Memoirs.

In the three essays on Keynesian economics, Kaldor is primarily concerned with the limitations of the aggregate Keynesian model, as represented by the assumptions and concepts of The General Theory of Employment, Interest and Money, for an understanding of the economic performance of advanced industrialised capitalist countries and the world economy at large. We need to remember that Kaldor was one of the earliest converts in England to the Keynesian revolution, and he never deviated from the basic faith. While critical of certain aspects, the central Keynesian message remained for him a fundamental truth that it is decisions to invest that 'drive' a capitalist economy, not decisions to save; and it is 'effective' demand that determines the level of output and employment of an economy, not resource availabilities, which can always be augmented given time. In contrast to the neo-classical orthodoxy, supply does not create its own demand, but 'effective' demand creates its own supply. Kaldor notes how difficult it was for leading members of the economics profession, brought up on the prevailing orthodoxy, to accept Keynes' essential message. But for Kaldor, the limitations of The General Theory derive not so much from defects in the new concepts and ideas as from Keynes' failure to break loose completely from traditional modes of thought. Kaldor identifies four major limitations of the aggregate Keynesian model: first, the competitive assumptions on which the model is based; secondly, the assumption of a closed economy; thirdly, the static nature of . . .

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