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"Setterfield, Mark"
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Long-run variation in capacity utilization in the presence of a fixed normal rate
A generic Kalecki-Robinson model of growth is developed that, subject to different closures, illustrates the different channels through which the economy can adjust to a change in demand conditions in the long run. The closures are shown to have different implications for the behaviour of the rate of capacity utilization and hence whether and how the economy achieves a ‘fully-adjusted position’ (equalization of the actual and normal rates of capacity utilization). Assuming that the normal rate of capacity utilization is exogenously fixed, it is then shown that variation in the actual capacity utilization rate can nevertheless occur—at least within limits—without triggering ‘Harrodian instability’. This result emanates from a discontinuity in the investment function that is grounded in Harrod’s own macrodynamics, so that it is ultimately the combination of Harrodian and Kaleckian dynamics that gives rise to long-run variations in the actual rate of capacity utilization in the presence of a fixed normal rate. Aggregate and industry-level US capacity utilization data are then used to calculate possible bands within which the rate of capacity utilization may vary without triggering Harrodian instability. A key finding is that the conditions necessary for the latter appear to be relatively rare.
Journal Article
After the great recession : the struggle for economic recovery and growth
\"The severity of the Great Recession and the subsequent stagnation caught many economists by surprise. But a group of Keynesian scholars warned for some years that strong forces were leading the US toward a deep, persistent downturn. This book collects essays about these events from prominent macroeconomists who developed a perspective that predicted the broad outline and many specific aspects of the crisis. From this point of view, the recovery of employment and revival of strong growth requires more than short-term monetary easing and temporary fiscal stimulus. Economists and policy makers need to explore how the process of demand formation failed after 2007 and where demand will come from going forward. Successive chapters address the sources and dynamics of demand, the distribution and growth of wages, the structure of finance and challenges from globalization, and inform recommendations for monetary and fiscal policies to achieve a more efficient and equitable society\"-- Provided by publisher.
Book
The remarkable durability of Thirlwall's Law
This paper contemplates the robustness of Thirlwall's Law, a parsimonious expression that relates long run equilibrium growth in any one region to the product of world income growth and the ratio of the income elasticities of demand for exports and imports. Various extensions of the balance-of-payments-constrained growth model from which Thirlwall's Law is derived are contemplated. In each case, Thirlwall's Law is shown to reassert itself as a good approximation of the equilibrium growth rate. It is hypothesized that this robustness helps explain the widespread empirical success of Thirlwall's Law. JEL codes: O41, E12. Keywords: Thirlwall's law, balance-of-payments-constrained growth, export-led growth, demand-led growth, natural rate of growth
Journal Article
Managing the Discontent of the Losers Redux: A Future of Authoritarian Neoliberalism or Social Capitalism?
Neoliberalism eviscerated the value-sharing ethos of the postwar golden age (1945–1973), seeking to maintain social cohesion in civil society by \"managing the discontent of the losers\": reconciling working households to the realities of the neoliberal labor market by means of coercion, distraction, and debt accumulation (the last serving to limit the growth of consumption inequality in the face of burgeoning income inequality). The global financial crisis undermined the process of household debt accumulation, creating a crisis of neoliberal accumulation. Key to the institutional renewal required to address this crisis is managing the discontent of the losers inherited from the neoliberal era. One possibility is authoritarian neoliberalism, which involves amplification of the \"coerce and distract\" elements inherited from the previous regime. The alternative is social capitalism: a renewal of social democracy that eliminates the discontent of the losers and so reduces both the need and desire for illiberalism.
Journal Article
The social reproduction of labour and macro theory: A compelling and fruitful conjunction
The thesis advanced in this paper is that like class and technical change, gender and the social reproduction of labour routinely shape demand formation and/or the supply side of the economy - and as such, reference to the gendered social reproduction of labour should be more routinely incorporated into macro-theoretic analysis. The argument is developed with reference to two familiar issues in heterodox macrodynamics: reconciliation of the equilibrium and natural rates of growth; and the relationship between distribution and growth. Using an existing feminist macro model as a point of departure, it is shown that proper account of the social reproduction of labour and its gendered character creates important new insights into both the processes by which the equilibrium and natural rates of growth might be equalized, and the underlying character (wage- versus profit-led) of the relationship between distribution and growth.
Journal Article
The social reproduction of labour and macro theory
The thesis advanced in this paper is that like class and technical change, gender and the social reproduction of labour routinely shape demand formation and/or the supply side of the economy — and as such, reference to the gendered social reproduction of labour should be more routinely incorporated into macro-theoretic analysis. The argument is developed with reference to two familiar issues in heterodox macrodynamics: reconciliation of the equilibrium and natural rates of growth; and the relationship between distribution and growth. Using an existing feminist macro model as a point of departure, it is shown that proper account of the social reproduction of labour and its gendered character creates important new insights into both the processes by which the equilibrium and natural rates of growth might be equalized, and the underlying character (wage- versus profit-led) of the relationship between distribution and growth.
Journal Article
Tolerable ranges of variation in the rate of capacity utilisation and corridor instability
This reply to Botte (2019, Estimating normal rates of capacity utilization and their tolerable ranges: a comment on Mark Setterfield, Cambridge Journal of Economics, forthcoming) responds to criticisms of the methods used to estimate the normal rate of capacity utilisation and a tolerable interval of variation in the actual rate of capacity utilisation around the normal rate in Setterfield (2019a, Long-run variation in capacity utilization in the presence of a fixed normal rate, Cambridge Journal of Economics, vol. 43, no. 2, 443–63). It concludes with some further reflections on the concept of corridor instability.
Journal Article
Managing the discontent of the losers
During the 1990s, social structure of accumulation (SSA) theorists identified the solidification of a neoliberal SSA that included a capital-citizen accord based on 'managing the discontent of the losers'. This created social stability by reconciling working households to material hardships emanating from the neoliberal labour market by means of either coercion or non-economic distraction. This paper argues that there was, in fact, a material basis to the neoliberal capital-citizen accord, including the ability of households to accumulate debt in order to limit the growth of consumption inequality arising from burgeoning income inequality. The material basis of the capital-citizen accord broke down during the financial crisis of 2007-2009, destabilizing the accord itself. The result is that the neoliberal SSA is now threatened by rising populism. The outcomes of this process are highly uncertain - a key characteristic of the periods of inter regnum that separate successful SSAs.
Journal Article
The Macro Pedagogy Debate: Teaching DSGE to Undergraduates Symposium
Introducing DSGE modelling into undergraduate macroeconomics would be a mistake. DSGE modelling hasn't served the profession well, and won't enhance an undergraduate curriculum that is overwhelmingly populated by students who don't intend to pursue graduate training in economics. Undergraduate macro would be better served by focusing on basic tools and concepts, and by conveying to students a sense of the economy's complexity and the challenges this presents to good policy making.
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