Table Of ContentGROWTH, EMPLOYMENT AND INFLATION
John Cornwall, 1997.
Source: Findlay Muir, Dalhousie University
Growth, Employment
and Inflation
Essays in Honour of John Cornwall
Edited by
Mark Setterfield
Associate Professor of Economics
Trinity College
Hartford
Connecticut
Firstpublished in Great Britain1999 by
MACMILLAN PRESS LTD
Houndmills. Basingstoke. Hampshire RG21 6XS and London
Companies and representatives throughout the world
A catalogue record for this book is available from the British Library.
ISBN 978-1-349-27395-9 ISBN 978-1-349-27393-5 (eBook)
DOI 10.1007/978-1-349-27393-5
First published in the United States of America 1999 by
ST. MARTIN'S PRESS, INC.,
Scholarly and Reference Division,
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ISBN 978-0-312-22013-6
Libraryof Congress Cataloging-in-Publication Data
Growth, employment and inflation : essays in honour of John Cornwall
/edited by Mark Setterfield.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-312-22013-6 (cloth)
1. Economic development. 2. Capitalism. 3. Inflation (Finance)-
-Econometric models. 4.U nemployment-Effect of inflation on-
-Econometric models. 5. Economic histoty-1990- I. Cornwall,
John. II. Setterfield, Mark, 1967-
HD82.G755 1999
338.9-dc21 98-43273
CIP
Selection, editorial matter and Chapters 1and 5 © Mark Setterfield 1999
Chapters 2-4, 6-18 © Macmillan Press Ltd 1999
Softcover reprintof the hardcover 1st edition 1999
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10 9 8 7 6 5 4 3 2
08 07 06 05 04 03 02 01 00
Contents
John Cornwall frontispiece
List of Tables vii
List of Figures viii
List of Contributors ix
1 Introduction 1
Mark Setterfield
2 The Vital Contributions of John Cornwall to Economic
Theory and Policy: A Tribute from Two Admiring Friends
on the Occasion of His 70th Birthday 10
Geoff Harcourt and Mehdi Monadjemi
PART I REFLECTIONS ON THE METHODOLOGY AND
PRACTICE OF ECONOMICS
3 Soros on 'Free Market' Equilibria 27
Rod Cross and Douglas Strachan
4 Economics and Complexity 41
Basil Moore
5 Modelling a Path-Dependent Economy: Lessons from
John Cornwall's Macrodynamics 57
Mark Setterfield
6 Post-Keynesianism and Institutionalism: Another Look
at the Link 72
Geoff Hodgson
7 Are Economists Social Scientists? 88
Villy Bergstrom
8 Deregulation: The Anatomy of a Catchword 100
Kurt Rothschild
v
vi Contents
PART II ECONOMIC GROWTH IN THEORY AND PRACTICE
9 'Modern Capitalism' in the 1970s and 1980s 113
Jan Fagerberg and Bart Verspagen
10 A Problem with the Empirical Neoclassical Analysis
of Multisector Growth 127
John McCombie
11 Integration and Convergence in the European Union 149
Pascal Petit
12 Kaldor's Growth Laws and the Principle of Cumulative
Causation 166
Peter Skott
13 Social Capital and the Economy 180
Shaun Hargreaves Heap
PART III THE POLITICAL ECONOMY OF UNEMPLOYMENT
AND INFLATION
14 The Rise of Unemployment and Working Poverty:
An Evolutionary Macroeconomic Perspective 195
John Foster
15 A Post-Walrasian Explanation of Wage and Price Inflexibility
and a Keynesian Unemployment Equilibrium System 211
David Colander
16 Unemployment and Post-Keynesian Monetary Theory 226
Steven Pressman
17 Wage Determination, Capital Shortage and Unemployment:
A Comparison between Germany and the UK 241
Philip Arestis and Iris Biefang-Frisancho Mariscal
18 The Institutional Determinants of Unemployment 254
Wendy Cornwall
Works by John Cornwall 271
Index 275
List of Tables
9.1 Estimation results for Cornwall's 'manufacturing as an engine
of growth' equation, OLS and 2SLS, various countries,
1973-90 117
9.2 Structural change and productivity growth 121
10.1 Selected regression results from Feder (1983), Ram (1986)
and Rao (1989) 133
10.2 Shares of government expenditure, exports and the rest of
the economy, advanced countries 139
10.3 Regression results for advanced countries, pooled data,
1950-70 141
10.4 Regressions with two sectors, advanced countries, 1950-70 144
14.1 Possible long-term impacts of different categories of
investment 205
15.1 Macroeconomic operating systems and their effects on
aggregate output 218
17.1 Unemployment, investment and capacity utilization rates
in Germany and the UK, 1966-94 246
18.1 Regression results for the reduced form unemployment
equation 263
vii
List of Figures
2.1 The market for residential mortgage and non-housing funds 19
10.1 Labour productivities given constant factor shares with
surplus labour 137
10.2 Labour productivities given constant factor shares with a
Cobb-Douglas production function 138
11.1 Convergence/divergence in Europe, 1960-73 150
11.2 Convergence/divergence in Europe, 1984-96 150
11.3 Technological trends and productivity levels, 1961-73 156
11.4 Technological trends and productivity levels, 1984-96 156
11.5 Mark-up rates and productivity levels, 1961-73 157
11.6 Mark-up rates and productivity levels, 1984-94 157
13.1 The prisoners' dilemma 182
13.2 The battle of the sexes 183
13.3 Interaction at a crossroads 185
15.1 The coordination-augmented production function and
labour market 220
17.1 Pricing, real wages and the determination of equilibrium
employment 244
17.2 The expansion of the German capital stock, 1966-93 247
17.3 Unemployment in Germany and the UK, 1966-93 248
17.4 UK real budget deficit as a proportion of real GDP,
1966-94 250
17.5 German real budget deficit as a proportion of real GDP,
1966-94 251
18.1 The determination of optimal unemployment and inflation 258
18.2 The effect of different preferences on optimal unemployment
and inflation 258
viii
Notes on the Contributors
Philip Arestis is Professor of Economics at the University of East London,
England, having previously taught at the Universities of Surrey, Cambridge
and Greenwich. He is joint editor of the International Papers in Political
Economy, has served on the editorial boards of a number of journals and has
been an elected member of the Council of the Royal Economic Society.
Arestis has authored, co-authored, edited or co-edited numerous books,
including Post-Keynesian Monetary Economics: New Approaches to Financial
Modelling (as editor; 1988), The Post-Keynesian Approach to Economics: An
Alternative Analysis of Economic Theory and Policy (1992) and Money, Pricing,
Distribution and Economic Integration (1997). He has also published widely in
journals and books in the fields of post-Keynesian economics, macro
economics, monetary economics and applied econometrics.
Villy Bergstrom is editor-in-chief of the Swedish daily newspaper Dala
Demokraten, having formerly been a Ford Foundation visiting scholar at
Stanford University, and Lecturer and Associate Professor at Uppsala
University. He is responsible for establishing the Trade Union Institute for
Economic Research (FIEF), an academic research institute owned by the LO,
the Swedish blue collar trade union confederation. His most recent book is
Government and Growth (as editor; 1997), part of the FIEF Studies in Labour
Markets and Economic Policy series.
Iris Biefang-Frisancho Mariscal is Senior Lecturer in Economics at the
University of East London, England, having previously been affiliated with the
University of Munster. She has published in a variety of scholarly journals and
books, including the Journal of Post Keynesian Economics, Weltwirtschaftliches
Archiv, Empirica, Applied Economics and the British Review of Economic
Issues, contributing to the fields of applied econometrics, macroeconomics,
monetary economics and wage and unemployment determination.
David Colander is the Christian A Johnson Distinguished Professor of
Economics at Middlebury College, Middlebury, Vermont, USA, having
previously taught at Columbia University, Vassar College and the University
of Miami. He has authored, co-authored, or edited over 30 books and over 80
articles on a wide range of topics. These include Principles of Economics
(1998), History of Economic Thought (with Harry Landreth; 1994), Why Aren't
Economists as Important as Garbagemen? (1991), and MAP: A Market Anti
Inflation Plan (with Abba Lerner; 1980). His books have been, or are being,
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