*Michio Morishima*

- Published in print:
- 1969
- Published Online:
- November 2003
- ISBN:
- 9780198281641
- eISBN:
- 9780191596667
- Item type:
- chapter

- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198281641.003.0001
- Subject:
- Economics and Finance, Development, Growth, and Environmental

Introduces multi‐sectoral growth analysis. Mainly devoted to examining a Walrasian general equilibrium model of capital formation on the smallest possible scale. It is assumed that the economy ...
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Introduces multi‐sectoral growth analysis. Mainly devoted to examining a Walrasian general equilibrium model of capital formation on the smallest possible scale. It is assumed that the economy concerned consists of many firms that are classified into two industries: the consumption‐good industry and the capital‐good industry. It is also assumed (as Walras and Leontief assumed) that there is no possibility of joint production: the consumption‐good industry only produces the consumption goods and the capital‐good industry only the capital goods (later in the book this assumption is shown to be undesirable). The remaining parts of the chapter give further mathematical treatment of the existence of short‐run equilibrium, its uniqueness, its Pareto optimality, and the investment function implied—a neoclassical growth.Less

Introduces multi‐sectoral growth analysis. Mainly devoted to examining a Walrasian general equilibrium model of capital formation on the smallest possible scale. It is assumed that the economy concerned consists of many firms that are classified into two industries: the consumption‐good industry and the capital‐good industry. It is also assumed (as Walras and Leontief assumed) that there is no possibility of joint production: the consumption‐good industry only produces the consumption goods and the capital‐good industry only the capital goods (later in the book this assumption is shown to be undesirable). The remaining parts of the chapter give further mathematical treatment of the existence of short‐run equilibrium, its uniqueness, its Pareto optimality, and the investment function implied—a neoclassical growth.

*Michio Morishima*

- Published in print:
- 1969
- Published Online:
- November 2003
- ISBN:
- 9780198281641
- eISBN:
- 9780191596667
- Item type:
- chapter

- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198281641.003.0003
- Subject:
- Economics and Finance, Development, Growth, and Environmental

Investigates whether a series of the short‐run equilibria starting from an arbitrarily (or historically) given capital–labour endowment will eventually approach the state of the long‐run or ‘Silvery ...
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Investigates whether a series of the short‐run equilibria starting from an arbitrarily (or historically) given capital–labour endowment will eventually approach the state of the long‐run or ‘Silvery Equilibrium’. Taking a neoclassical approach to growth equilibrium, it is found that once a more general model of flexible population growth is used, the Silvery Equilibrium may be unstable even though the relative capital‐intensity condition is satisfied. Also, the stability depends not only upon the capital intensities of the two industries but also upon the relative steepness of the warranted‐rate‐of‐growth and the natural‐rate‐of‐growth curve and the flexibility of workers’ and capitalists’ consumption–savings decisions.Less

Investigates whether a series of the short‐run equilibria starting from an arbitrarily (or historically) given capital–labour endowment will eventually approach the state of the long‐run or ‘Silvery Equilibrium’. Taking a neoclassical approach to growth equilibrium, it is found that once a more general model of flexible population growth is used, the Silvery Equilibrium may be unstable even though the relative capital‐intensity condition is satisfied. Also, the stability depends not only upon the capital intensities of the two industries but also upon the relative steepness of the warranted‐rate‐of‐growth and the natural‐rate‐of‐growth curve and the flexibility of workers’ and capitalists’ consumption–savings decisions.

*Michio Morishima*

- Published in print:
- 1969
- Published Online:
- November 2003
- ISBN:
- 9780198281641
- eISBN:
- 9780191596667
- Item type:
- chapter

- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198281641.003.0009
- Subject:
- Economics and Finance, Development, Growth, and Environmental

Devoted to establishing the optimality of competitive equilibrium paths of various orders. So far three kinds of equilibrium growth paths have been discussed in the book: the Cassel–von Neumann path ...
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Devoted to establishing the optimality of competitive equilibrium paths of various orders. So far three kinds of equilibrium growth paths have been discussed in the book: the Cassel–von Neumann path of balanced growth, the Lindahl–Hicks sequence of temporary equilibria, and the Hicks–Malinvaud perfect equilibrium over time. These are now examined for efficiency and optimality. Each of them is compared with any other in succession. The different sections of the chapter discuss definitions of efficiency and Pareto optimality, short‐run efficiency of temporary equilibrium and long‐run efficiency of full equilibrium, Pareto optimality of the Lindahl–Hicks and the Hicks–Malinvaud path, Farkas’ theorem of linear inequalities, the fact that shadow prices associated with a Pareto optimum obey the rules of competitive pricing, the conditions that should be satisfied in order for a given point of Pareto optimum to be a competitive equilibrium, and the Golden Rule of Accumulation.Less

Devoted to establishing the optimality of competitive equilibrium paths of various orders. So far three kinds of equilibrium growth paths have been discussed in the book: the Cassel–von Neumann path of balanced growth, the Lindahl–Hicks sequence of temporary equilibria, and the Hicks–Malinvaud perfect equilibrium over time. These are now examined for efficiency and optimality. Each of them is compared with any other in succession. The different sections of the chapter discuss definitions of efficiency and Pareto optimality, short‐run efficiency of temporary equilibrium and long‐run efficiency of full equilibrium, Pareto optimality of the Lindahl–Hicks and the Hicks–Malinvaud path, Farkas’ theorem of linear inequalities, the fact that shadow prices associated with a Pareto optimum obey the rules of competitive pricing, the conditions that should be satisfied in order for a given point of Pareto optimum to be a competitive equilibrium, and the Golden Rule of Accumulation.

*Michio Morishima*

- Published in print:
- 1969
- Published Online:
- November 2003
- ISBN:
- 9780198281641
- eISBN:
- 9780191596667
- Item type:
- chapter

- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198281641.003.0004
- Subject:
- Economics and Finance, Development, Growth, and Environmental

Among the assumptions underlying the analysis of stability of growth equilibrium already made in the book, the following two have played the most important roles in deriving the conclusions: first, ...
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Among the assumptions underlying the analysis of stability of growth equilibrium already made in the book, the following two have played the most important roles in deriving the conclusions: first, prices and the wage rate are perfectly flexible so that the price of any good or any factor of production will go down to zero if excess supply of it cannot be eliminated (the Rule of Free Goods); second, unless the price of the capital service is zero, the existing stock of capital is fully utilized and investment is made according to the Acceleration Principle. However, as soon as a progression is made from the Walras‐type ‘flexprice’ model (where quantities are fixed in the short run, and prices adjust faster than quantities) to a ‘fixprice’ model (where prices are fixed in the short run, and quantities adjust faster than prices), either full employment of labour or full utilization of capital is no longer automatically established. Also, in the absence of full utilization of capital, it is evident that investment decisions do not obey the Acceleration Principle. The first four sections of this chapter look at price flexibility and full employment, the possibility of a Keynesian short‐run equilibrium with unemployment, the induction of centrifugal forces around the Silvery Equilibrium by the Harrodian investment function, and the necessity of unemployment in a ‘fixprice’ economy. The last section looks at the possibility of avoiding this last Iron Rule: that in fixprice economies where the Rule of Competitive Pricing does not work, a state of full employment cannot be kept unless the warranted rate of growth is equated with the natural rate of growth.Less

Among the assumptions underlying the analysis of stability of growth equilibrium already made in the book, the following two have played the most important roles in deriving the conclusions: first, prices and the wage rate are perfectly flexible so that the price of any good or any factor of production will go down to zero if excess supply of it cannot be eliminated (the Rule of Free Goods); second, unless the price of the capital service is zero, the existing stock of capital is fully utilized and investment is made according to the Acceleration Principle. However, as soon as a progression is made from the Walras‐type ‘flexprice’ model (where quantities are fixed in the short run, and prices adjust faster than quantities) to a ‘fixprice’ model (where prices are fixed in the short run, and quantities adjust faster than prices), either full employment of labour or full utilization of capital is no longer automatically established. Also, in the absence of full utilization of capital, it is evident that investment decisions do not obey the Acceleration Principle. The first four sections of this chapter look at price flexibility and full employment, the possibility of a Keynesian short‐run equilibrium with unemployment, the induction of centrifugal forces around the Silvery Equilibrium by the Harrodian investment function, and the necessity of unemployment in a ‘fixprice’ economy. The last section looks at the possibility of avoiding this last Iron Rule: that in fixprice economies where the Rule of Competitive Pricing does not work, a state of full employment cannot be kept unless the warranted rate of growth is equated with the natural rate of growth.