Von Neumann's growth model and the ’classical‘ tradition

Abstract

The paper shows that the conventional neoclassical interpretation of von Neumann's growth model cannot be sustained. Other than in models in the tradition of Walras and Cassel, in his model there is no given ‘capital’ endowment that constrains productive capacity and provides the basis, in terms of its relative ‘scarcity’, for a determination of the interest rate. Von Neumann's model is rather fully compatible with, and has been anticipated in all relevant aspects by, authors whose contributions can be strictly located within, the classical tradition. This concerns in particular the asymmetric treatment of the distributive variables. Finally it is argued that von Neumann's model may be interpreted as containing inter alia, an answer to the ideas put forward by his fellow-mathematician Robert Remark. Both circumstantial evidence and a careful textual comparison of Remak's paper on ‘superposed price systems’ and von Neumann's analysis support this interpretation.