Muriel Dal-Pont Legrand

The instability principle revisited: an essay in Harrodian dynamics

Abstract Harrods contribution to economic dynamics is very often reduced to the dynamic equation whose character is unstable. Growth theory and cycle theory based on Harrods contributions aimed at reducing this instability. Following Harrod, who was strongly opposed to the ‘knife-edge’ interpretation, we define the warranted rate of growth as a ‘moving equilibrium’ and focus on its interaction with the effective rate of growth. Our simple Harrodian model generates various dynamics from stable path, to growth cycle and corridor of stability.

Combining Short-Run And Long-Run Analysis: Some Historical Perspectives

The interaction between short-run and long-run adjustments has always been a question of fundamental importance for economics. This question has been raised by different authors who were considered as pioneers of political economy. In recent history of macroeconomics (i.e., after the Second World War), Roy Harrod’s 1939 contribution has played an important role, setting the agenda for both growth and cycles theory for at least two decades (see, for instance, Assous 2016, or Bruno and Dal Pont Legrand 2014, or Hagemann 2009). If economists never totally ceased to be interested in this question, the combination between short-run and long-run economic analyses still represents a theoretical challenge. Understanding how both dynamics intertwine is not only fundamental for growth theory (cf. Solow 1988) but also for a better understanding of large fluctuations (i.e., deep and durable downturns, as emphasized by Stiglitz 2016). Indeed, economists know all too well that one of the major routes to understanding economic instability (and, indeed, large depressions) is rooted in the short-run/long-run interaction, and more precisely in growth cycles dynamics. Considering the renewed interest macroeconomists have shown for growth cycles analysis—and more generally for theories that account for short-run/long-run interactions—a small group of European historians of economic thought put together a workshop on this topic. The purpose of this scientific meeting (which took place in June 2014, generously financed by the Treilles Foundation) was to associate historians of economic thought with macroeconomists at the frontier of their discipline. Our small group of historians of macroeconomics could thus confront more systematically historical insights on the emergence, development, successes, and failures of earlier attempts with current macroeconomic objectives and challenges. In particular, this workshop helped towards a better understanding of the progressive evolution of the

Business cycles, growth and economic policy: Schumpeter and the Great Depression

Joseph A. Schumpeter’s theory of economic development analyzes how growth and cycle dynamics intertwine. The process of Creative Destruction plays an essential role in that dynamics: embodying a cleaning effect, it has a clear beneficial impact on long-run development. For that reason, and also for some of his famous (and provocative) non-interventionists statements, Schumpeter is generally interpreted as a pure liquidationist. This paper contests this rather simplistic view and shows that Schumpeter not only expressed much more nuanced positions as far as practical economic issues were concerned but also that his views on economic policy were rooted in his earlier contributions before the Great Depression, attesting to a stronger time-consistency of his contributions.