A REPLY TO AMITAVA DUTT. THE ROLE OF AGGREGATE DEMAND IN THE LONG TERM
In an article in this journal, Amitava Dutt comments on our 1999 paper, "Being Keynesian in the Short Term and Classical in the Long Term: The Traverse to Classical Long-Term Equilibrium", contending that aggregate demand may affect the long-term equilibrium. We agree to some extent, but believe these mechanisms do not question the fundamental difference between the classical-Marxian perspective (in which the capacity utilization rate gravitates in the long term around its target value), and the postKeynesian perspective (in which the long-term equilibrium position depends on the level of aggregate demand). The basic controversy harks back to Harrod's investment function, in which the capacity utilization rate is equal to its target value in a long-term equilibrium. We solve the problem of Harrodian instability in reference to the action of monetary authorities and governments. Dutt's defence of the postKeynesian investment function is unconvincing.
G. Duménil, D. Lévy, "A Reply to Amitava Dutt. The role of aggregate demand in the long term", 2012, EconomiX, PSE : Paris.
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