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Out of Equilibrium$
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Mario Amendola and Jean-Luc Gaffard

Print publication date: 1998

Print ISBN-13: 9780198293804

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198293801.001.0001

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Rethinking the Basic Issues

Rethinking the Basic Issues

(p.231) 8 Rethinking the Basic Issues
Out of Equilibrium

Mario Amendola (Contributor Webpage)

Jean‐Luc Gaffard

Oxford University Press

The analysis carried out in the preceding chapter makes it possible to rethink some basic issues of economic theory, such as the relation between consumption, investment, and saving, the relation between structure and cycles, the wage–employment dilemma, the problem of flexibility, and finally, the problem of economic policy. Reference to the timing and coordination issues allows, e.g. reconsidering both the productivity paradox and what might be called the wage paradox. An introduction of a new and superior technology may generate a fall in labour productivity due to coordination failures. Wage flexibility may lead to explosive oscillations of output and an increasing unemployment by inducing excessive distortions in the structure of productive capacity. Only appropriate economic policies that are a blend of rules and discretion may render growth processes viable.

Keywords:   cyclical growth, distortion of productive capacity, flexibility, rules and discretion

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