Long-period Positions Research Articles

The nature of money under a commodity standard: exogenous or endogenous?

The aim of the present article is to discuss the nature of money under a commodity standard. The notion of money supply endogeneity, endorsed by Post-Keynesian (PK) scholars within the institutional framework of modern credit economies, is extended to the case of a gold standard regime by recourse to the view of early classical economists, which highlights the endogenous determination of the supply of precious metals in a long-period position. This interpretation represents a more robust and natural extension of the PK approach than the neoclassical quantity-theoretic framework employed by several PK scholars to give account of the normal working of this monetary system.

Characteristics of Labor Markets Varying with Perturbations of Relative Markups

ABSTRACT This article examines a model of long-period positions with markup pricing. The variation in certain characteristics of the wage frontier with perturbations of relative markups is illustrated. This analysis provides a demonstration of the emergence of the reswitching of techniques and of capital reversing, for example, in non-competitive markets.

Growth Rate and Level Effects, the Stability of the Adjustment of Capacity to Demand and the Sraffian Supermultiplier

The paper presents a simple but complete formal version of the Sraffian supermultiplier model in which (i) growth is led by the autonomous components of demand that do not create capacity; (ii) private productive investment is an induced expenditure; and (iii) income distribution is exogenous. We show that the main results of the long-period and fully adjusted versions of the model in terms of growth rate and level effects are quite similar and therefore that such results in no way require the full adjustment of capacity to demand. We then analyze a simple set of sufficient dynamic local stability conditions that allow the long-period positions to gravitate towards the fully adjusted position in which capacity is adjusted to demand and that also provide the upper limit to demand-led growth paths. Finally, we show how some critics of the model have misinterpreted it as being supply-led and how this has led to a further confusion between the analysis of the tendency towards a constant value of the capacity-saving-determined warranted rate of growth and the proper stability analysis of the opposite process of adjusting capacity to demand (which tends to adjust the warranted rate endogenously to the growth rate of autonomous demand).

On Walras's Concept of Equilibrium

The view that Walras's equilibrium concept refers to a temporary general equilibrium with stationary expectations has come to be the conventional opinion within the history of economics. This interpretation overlooks salient aspects of Walras's original equilibrium concept: (i) that it refers to a centre of gravitation, thus equilibrium must be assessed together with the adjustment mechanisms that are supposed to bring the economy towards its position of rest; (ii) that it attempts to represent a persistent position of the economic variables; and (iii) that it must not be regarded as a mere artificial model disconnected from reality, but as a device to understand how actual economies work. We therefore conclude that the scope of Walras's work can be better grasped by interpreting his equilibrium system as aiming to describe a long-period position of the economy.

On the Inconsistence between the Long-Period Method and the Assumption of Given Quantities

According to Sraffian economists, both the aggregate and the general equilibrium versions of the neoclassical theory suffer from a logical inconsistence that prevents them from identifying a long-period position. The aim of this paper is to show that also Sraffa’s approach, based on the assumption of given sectoral outputs, brings about an inconsistence between his theory and the long-period method. The main upshot of our argument is that sectoral outputs can legitimately be left to a separate stage of the theory only insofar as the long-period method is dropped and the classical-type theory is reconstructed within the temporary equilibrium method.

On the Transition from Long-period to Short-period Equilibria

The paper examines the contributions of Myrdal, Lindahl, Hicks and Hayek that initiated the transition from the traditional long-period method to the methods of 'intertemporal' and 'temporary equilibria' in neoclassical general equilibrium analyses. It is shown that in the early contributions the idea of a tendency towards a long-period position was not completely abandoned, and that the new 'dynamic' equilibrium concepts were conceived by some of their originators as useful analytical devices for studying transitions between long-period equilibria only.

Growth and income distribution in a credit-money economy: introducing the banking sector into the linear production model

This paper attempts to incorporate the Post-Keynesian view of the endogenous money supply into the Sraffian linear production model. The framework presented here unifies some key contributions made by Sraffa (the price equations), Kaldor and Kalecki (the endogenous nature of money in the industrial economy and the framework of the institutional theory of income distribution) and Keynes (liquidity preference and the concept of the 'own rates of interest' with its implication for the long-period position). Two different positions in the endogeneity view--the 'accommodationist' and the 'structuralist'--are classified in terms of method of selecting exogenous and endogenous variables. In this way, we hope to show that credit and money can play an essential role--from the demand and-or the supply side--by having a permanent impact on the growth path and the state of income distribution of an economy. Copyright 2002, Oxford University Press.

Production, Prices and Time: A Comparison of Some Alternative Concepts

This paper compares alternative concepts of production and prices with a special emphasis on time. First, it is demonstrated that the point-input point-output representation of processes used in von Neumann-Sraffa models is not restrictive and can be derived from general flow-input flow-output processes. Second, the concept of long-period positions, which can be traced back to the work of the classical authors, is discussed. Third, the von Neumann-Sraffa approach is compared with the neo-Austrian model and the flow-fund model developed by Hicks and Georgescu-Roegen respectively. It turns out that these latter two models are, at best, a special case of the former. Finally, some problems and intricacies concerning observable input-output coefficients are discussed and, as an alternative, a possibly applicable method to determine coefficients for general flow-input flow-output processes is presented.

Theory of Production: A Long-Period Analysis.

1. Free competition and long-period positions 2. A one-commodity model 3. Two-commodity models 4. Models with any number of commodities 5. Choice of technique 6. Alternative descriptions of a 'technique' 7. Fixed capital models 8. Joint production 9. Models with jointly utilized machines 10. Land 11. Persistent wage and profit rate differentials 12. On limits to the long-period method 13. Production as a circular flow and the concept of surplus 14. The neoclassical theory of distribution and the problem of 'capital' 15. On some alternative theories of distribution Mathematical appendix.

The Classical Approach and Long-period Positions: a comment on Cesaratto

This paper criticizes a recent article by Cesaratto for referring to Sraffa's analysis, and more generally to the classical approach, for implying the notions of long-period method, long-period positions, gravitation and persistency. A method of abstraction, based on the separation of different analytical issues, is instead proposed as an interpretation of the Sraffian-classical approach and as a means for dealing with technical change.

Long-period method and analysis of technological change: is there any inconsistency?∗

A recurrent theme in economic analysis is the criticism of the traditional method based on the investigation of ‘normal’ or long-period positions (LPP) considered as centres of gravitation for the actual positions of the economy. The paper discusses this criticism with particular reference to the consistency of the long-period method (LPM) with the analysis of technological change and competition. It is argued that the role of the tendency towards the LPP was seen by traditional economists as part of the process of selection from among competing technologies. This process was regarded as leading to the emergence of dominant techniques determining normal prices and profitability. The concept of competition covered by the notion of gravitation towards the LPP is not, therefore, restricted to the diffusion of given technologies, but includes the introduction of new techniques. In addition, traditional economists did not look at the adjustment towards the LPP as a fully accomplished process, but only as tende...

Keynes and the long-period theory of employment: a note

In the marginalist theory of value and distribution, capital and labour are seen as 'factors of production' with supply and demand schedules elastic with respect to the correspond ing 'factor prices'. This theory necessarily implies full employment of 'factors' given sufficient flexibility of their prices. In recent years, it has been argued by Garegnani, Eatwell and Milgate1 (hereafter GEM) that Keynes, in his General Theory, retained demand schedules for labour and investment derived along these marginalist lines, and could therefore explain unemployment only by invoking rigidities such as sticky money wages—a possibility fully recognised by Pigou and others. As a result, The General Theory is easily absorbed by the 'neoclassical synthesis' as a special case, and the capitalist econ omy's fundamental tendency towards full employment (in the absence of such rigidities) is reasserted. This outcome is, of course, very different from Keynes's own view of his work. GEM extend the Cambridge critique of the marginalist theory of value to the corre sponding theory of output and employment. They argue that the surplus approach to value and distribution provides an alternative theoretical framework into which the principle of effective demand can be fitted, and within which value and distribution are determined separately from the level of output. This rules out the market-induced adjust ment of output to a level compatible with full employment, for 'the mechanisms of demand-and-supply theory are just not there' (Eatwell and Milgate, 1983, p. 5). Keynes's really revolutionary contribution, his demonstration that the economy is normally in a state of less-than-full employment, from which market forces cannot shift it, is thereby vindicated. This state is established not as a temporary disequilibrium or aberration resulting from market imperfections—which is how many economists treated it2—but as a true long-period position of the economy. (The term 'equilibrium' is deliberately avoided by GEM because of its supply-and-demand connotations.) This long-period