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Theory of Economic Growth$
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Michio Morishima

Print publication date: 1969

Print ISBN-13: 9780198281641

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198281641.001.0001

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Towards More Disaggregated Models

Towards More Disaggregated Models

(p.67) V Towards More Disaggregated Models
Theory of Economic Growth

Michio Morishima

Oxford University Press

Returns to the neoclassical model where the full employment of resources and labour is automatically attained and the Rule of Profitability and the Rule of Free Goods control behaviour of activities and prices. The previous two‐good model (consumption and capital good) is complicated to include many kinds of commodities, and it is found that the neoclassical analysis of stability of long‐run equilibrium is not necessarily the same. The stability criterion may be different from model to model if the capital‐good industry is divided into many sectors, although it is shown that it is still valid in models with many consumption goods and one capital good. This means the two‐sector model is inadequate to explain the actual process of capital accumulation, so an approach with merits over the Walrasian‐type analysis is offered, which starts on the road to more disaggregated general equilibrium models. The different sections of the chapter discuss the case of many consumption goods, the finding that that heterogeneity of consumption goods does not affect the stability criterion, the finding that many capital goods may lead to the possibility of ‘stability–instability’, the generalized Leontief model, the shift in the saving function from the ‘uniclass’ to the Cambridge type (the Golden Equilibrium), and the dual stability–instability theorem.

Keywords:   capital goods, consumption goods, dual stability–instability theorem, economic growth, employment, general equilibrium models, instability, labour, W. W. Leontief, Leontief model, long‐run equilibrium, neoclassical economics, prices, resources, Rule of Free Goods, Rule of Profitability, savings, stability, L. Walras

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