ECONOMIC POLICY IN A GROWTH CONTEXT: A CLASSICAL SYNTHESIS OF KEYNES AND HARROD

Authors

  • Anwar Shaikh

    Corresponding author
    1. New School for Social Research, New York
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      I wish to thank the Levy Institute of Bard College for its support on this project, and three anonymous referees for their very helpful suggestions.


Anwar Shaikh
Department of Economics
Graduate Faculty
New School For Social Research
79 Fifth Avenue
(16th Street entrance) Room 1124
New York
NY 10003
USA
E-mail: shaikh@newschool.edu

ABSTRACT

This paper clarifies key differences between Harrodian and Keynesian theories and policies, and develops a classical alternative to both. The stability of the Harrodian warranted path is proved, and the Keynesian paradox of thrift is shown to be transient. Distinct Harrodian fiscal policies are derived, and Post-Keynesian debates about Harrodian dynamics are addressed. Finally, it is argued that business and household savings are fundamentally different, and it is shown that if the business savings rate responds at all to the investment–savings gap, it becomes possible to have both profit-driven accumulation as in Keynes and normal capacity growth as in Harrod.

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