John Markus Blatt - Dynamic economic systems : a post Keynesian approach

First published 2000 by M.E. Sharpe

Published 2015 by Routledge
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Libray of congress cataloging in publication Data

Blatt, John Markus.

Dynamic economic systems.

1. Statics and dynamics (Social sciences)

2. Economic development. 3. Business cycles.

I. Title.

HB145.B55 1983 338.900724 82-24013

ISBN 0-87332-215-0

British Library Cataloguing Publication Data

Blatt, John M.

Dynamic economic systems.

1. Statics and dynamics (Social Sciences)

2. Economic development

I. Title

338.90151 HB145

ISBN 13: 9780873323062 (pbk)
ISBN 13: 9780873322157 (hbk)

The aim of this book is explained and a brief description of its organization appears in the introductory chapter. The purpose of this preface is to express my thanks and appreciation to the people and the organizations who have been so helpful to me in writing this work.

My first thanks go to those who have been kind enough to read all, or nearly all, of the manuscript in various draft stages and who have contributed extremely valuable comments and criticisms: Professor Alfred Eichner of Rutgers University, Professor Peter Groenewegen of Sydney University, Professor Geoffrey Harcourt of Adelaide University, Professor Murray Kemp of the University of New South Wales, Dr. Ulrich Kohli of Sydney University, Dr. Helen Lapsley of the University of New South Wales, and Mr. Brian Martin of the Australian National University. It is impossible to exaggerate the importance of their contribution, or my debt to them singly and collectively.

I am also greatly indebted to many others who have given me valuable advice on particular areas, including Professor Malcolm Fisher, Dr. Flora Gill, Professor Jules Ginswick, Dr. Josef Halevy, Dr. Peter Jonson, and Dr. Robin Pope.

It should not be thought that all, or even most, of them are in agreement with the views put forward here. These views have developed and their literary expression has been improved through continued interaction with kind people willing to give of their time and expertise in order to aid a man come to the field but recently. This has been equally helpful, and equally appreciated by me, whether it has come from a person generally in agreement, or strongly in disagreement, with my own views. Naturally, I take full responsibility for the contents of this book, including all its short-comings. These reflect on me only, not in any way on the many kind people to whom I owe so much gratitude.

The writing was greatly helped by a study leave of five months as a guest of the School of Economics at Sydney University. I thank the University of New South Wales for granting me this leave, and Sydney University for making my stay there such a thoroughly enjoyable, exciting, and stimulating experience.

Another area of indebtedness of any author is to the literature in his field. I am not, alas, an avid reader. As a result, I must now apologize to those scholars whose books and articles should have been, but have not been, cited. In all these cases, it may be taken for granted that the omission is due to my not having read the work in question, not to any deliberate decision on my part to omit citation of the work. Other omissions are associated with the very considerable delays before overseas books get into Australian university libraries. Partial amends are made, I hope, by citing review articles and books which contain fuller lists of scholarly references.

Mrs. Jill Pollock has been enormously helpful, particularly in connection with the list of references.

Last but not least, I owe profound gratitude to my wife, Ruth, for her love, good nature, and continued forbearance during an extended, and no doubt difficult, period with an author in the throes of writing.

John Blatt
Sydney

is an overall introduction to the book, explaining its purpose, its limitations, its structure, its organization, and its relationship to other work in theoretical economics.

is a preparatory study of pure steady-state input-output systems, both for the case of bare subsistence and for the case of a social surplus. To get a steady state in the latter case, one must assume that the surplus is not invested for growth, but rather that all of it is consumed. The purpose of this chapter is twofold: (1) to show, following Sraffa (1960), that the neoclassical mechanism of supply and demand for determining prices can be bypassed in favor of a much simpler procedure, and (2) to show why Sraffas procedure must be modified when we tum to dynamic economics, i.e., when steady-state conditions are no longer true for the system under study.

The bicentenary of The Wealth of Nations has passed, and so has the centenary of the neoclassical revolution in economics. Yet the present state of dynamic economic theory leaves very much to be desired and appears to show little sign of significant improvement in the near future.

From the time of Adam Smith, economic theory has developed in terms of an almost universal concentration of thought and effort on the study of equilibrium states. These may be either states of static equilibrium, or states of proportional and balanced growth. Truly dynamic phenomena, of which the most striking example is the trade cycle, have been pushed to the sidelines of research.

In defense of this concentration on equilibrium and the neglect of true dynamics, there are two arguments:

1. Statics or (what comes to much the same thing) balanced proportional growth is much easier to handle theoretically than true dynamic phenomena. A good understanding of statics is a necessary prerequisite for the study of dynamics. We must learn to walk before we can attempt to run.

2. In any case, while no economic system is ever in strict equilibrium, the deviations from such a state are small and can be treated as comparatively minor perturbations. The equilibrium state is, so to speak, the reference state about which everything turns and toward which the system gravitates. Market prices fluctuate up and down, but there exist natural prices about which this fluctuation occurs, and these natural prices can be determined directly, by ignoring the fluctuations altogether and working as if strict equilibrium obtained throughout.