Capital and Credit: A New Formulation of General Equilibrium by Michio Morishima

By Michio Morishima

Modern normal equilibrium idea is routinely short-run, separated from financial points of the economic system, and as such doesn't care for long-run difficulties corresponding to capital accumulation, innovation, and the historic flow of the financial system. those phenomena are mentioned by way of development concept, which being brief time period, can't care for the basic challenge of the way the creation functionality is derived. This publication presents a much-needed synthesis of progress and financial thought, drawing at the paintings of Schumpeter, Keynes and the prewar neoclassical economists to formulate a capital-theoretic normal equilibrium idea.

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It is further noted that one of Malinvaud's references and that of Arrow's and Hahn's are not made to Schumpeter's Entwicklung but to his History of Economic Analysis. Even the remaining, exceptional discussion of Schumpeter by Malinvaud is merely less than half a page long. On the other hand, it seems that the position of Schumpeter is not correctly appreciated even by the so-called Schumpeterians. They emphasize the concepts of'entrepreneurs', 'entrepreneurial profits', 'innovations' and 'new combinations' as the key words of his economics.

Capitalist production 33 Let z1''be the initial endowments of land and labour of household/ It may withhold a part of the endowments which is denoted by z'>. Then the total value of household / s supply of land and labour amounts to q'o(z'J—z'J) which is spent on buying consumer goods. Obviously q'o is the vector of prices of services of land and labour which is a subvector of q0. 6) where x'J stands for the demand for consumer goods of the household and p'o, a subvector of p 0 , is the price vector of consumer goods.

Outputs £, are expected to be produced, but actual outputs turn out to be as large as *,. Without any stochastic disturbances f j equals x,, of course, but they may differ from each other because we may always be provided with windfalls or suffer from unexpected sabotages. Capitalists have no longer any stock of commodities, all of which have been sold to the firms or the individuals. They instead have shares, while the firms own their outputs JC, which they can sell. In period 1, capitalists, the owners of commodities in period 0, become shareholders and the firms, the original buyers of the physical means of production in period 0, turn out to be either their suppliers (the capital goods industry), or the producers and hence the suppliers of consumption goods forming the consumption goods industry.

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