Post-Keynesian Economics: New Foundations, by Marc Lavoie
Chapter 6: Accumulation and Capacity

ABSTRACT

This article reviews the chapter on growth and distribution of the 2022 edition of the book Post-Keynesian Economics: New Foundations by Marc Lavoie. The review goes through most of the chapter’s main topics, including the main classes of growth and distribution models along post-Keynesian lines and the criticism and extensions of these models. It stresses the macroeconomic paradoxes that result from the relation between aggregate demand and either income distribution or debt dynamics in these models. The review also addresses the new additions to the chapter, among which the recent contributions on the controversy on the convergence towards the normal capacity utilization rate and the non-capacity creating autonomous demand growth models, and Lavoie’s new section on wealth and personal income distribution. At last, the review discusses three issues raised by the chapter’s reading: the relation between realism and complexity for a model’s calibration, the consequences of abstracting the financial side of growth models, and how we address financial issues in growth and stock-flow consistent (SFC) models. The chapter reviewed is balanced and constructive; it critically informs the reader and provides a good map of the post-Keynesian literature on growth and distribution, addressing the canons while bringing novelty.

KEYWORDS:

• Growth models
• income distribution
• post-Keynesian
• capacity utilization
• macroeconomic paradoxes

JEL CODES:

• E11
• E12
• E32
• O41

Acknowledgements

I thank Fabio Freitas for his tips on how to write this review and Ítalo Pedrosa for taking the time to read an early draft and giving me helpful feedback. I also thank the referees for their careful reading and comments. Last, I acknowledge the funding from FAPERJ - Fundação Carlos Chagas Filho de Amparo à Pesquisa do Estado do Rio de Janeiro (grant number SEI-260003/000636/2023).

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1 See, among other, Ciccone (1986) on the determinants of the normal capacity utilization rate.