Multiplicity and not necessarily heterogeneity: implications for the long-run degree of capacity utilization

Abstract

The paper discusses the implications of disaggregation within the post-Keynesian debate on the long-run convergence of the degree of capacity utilization toward the normal one. The debate is related to the emergence of Harrodian instability inside multiplier–accelerator models and has been characterized by two “opposite” positions: the supermultiplier (SM) and the neo-Kaleckian approaches. These approaches solve the instability issue differently, but both share the postulate that an equilibrium position is such only if the desired state of firms is realized. In the long run, the economy converges toward a fully adjusted position where the realized degree of capacity utilization is equal to the normal/desired one. In this paper, we develop an Agent Based—Stock Flow Consistent version of the SM model showing that once multiplier–accelerator mechanisms are explicitly reproduced in a multi-firm economy, the accumulation process can be stable without requiring any convergence between the actual and normal rate. Conversely, the modeled economy displays two emergent properties: the fluctuations of the business cycle arise endogenously, and the long-run aggregate degree of capacity utilization persistently fluctuates around a level lower than the normal one. To this extent, the quasi-steady state corresponds to a situation where the desired state of agents is not realized and single elements are not in equilibrium, but the aggregate is. Finally, we compare outcomes produced from the model according to different scenarios on firms' heterogeneity and network symmetries.