[Springer Studies in the History of Economic Thought] Secular Stagnation Theories (A Historical and Contemporary Analysis with a Focus on the Distribution of Income) ||

In light of weak economic performances and rising income disparities across the developed world during the past decades, this book provides a comprehensive overview of secular stagnation theories in the history of economic thought and examines the role of income distribution in various stagnation hypotheses. By offering a historical perspective, from the classical economists to the most recent stagnation debate of the early twenty-first century, the author shows that most stagnation theories were developed in periods of high and/or rising income disparities. Eventually, it was Josef Steindl, one of the least recognized stagnationists in the history of economic thought, who put the distribution of income at the heart of his stagnation theory. While Josef Steindl focused on the nexus between the functional distribution of income and economic growth, this book includes the personal distribution of income in a Kaleckian-Steindlian model of economic growth and stagnation. In the model presented, the nexus between economic growth and the distribution of income is a priori uncertain, depending on the type of economic shock and the specific economic circumstances. The author also discusses various empirically oriented policy implications aimed at fostering both economic growth and a more equal distribution of income. This book appeals to scholars in economics and the history of economic thought interested in economic growth, secular stagnation, and income distribution. Acknowledgements 6 Contents 7 Abbreviations 11 Symbols 13 List of Figures 16 List of Tables 19 1 Introduction 20 1.1 Setting the Framework 20 1.1.1 From Economic Growth to Secular Stagnation? 21 1.1.2 Income Distribution: Empirical Trends 24 1.2 Outline 34 References 37 Part I Secular Stagnation Theories: Past and Present 41 2 Theoretical Foundations 42 2.1 Defining Stagnation on Its Common Symptoms 42 2.2 Demand- and Supply-Side Stagnation 44 2.3 Stagnation Theorists: An Overview 48 References 51 3 Demand-Side Stagnation Theories 53 3.1 Pre-Keynesian Underconsumption Theories 53 3.1.1 Simonde de Sismondi: Income Distribution and Mass Poverty 54 3.1.2 Malthus: Over-Saving by the Rich 56 3.1.3 Hobson: Over-Saving and Income Distribution 58 3.2 Modern Demand-Side Stagnation Theories 60 3.2.1 Keynes: The Father of Modern Demand-Side Stagnationism? 60 3.2.2 Hansen: Lack of Investment Due to Changing Exogenous Factors 63 3.2.3 Kalecki and Steindl: The Rise in Industrial Concentration 73 3.3 A Contemporary Demand-Side Stagnation Theory 87 3.3.1 The Economic Environment in the Early Twenty-First Century 88 3.3.2 Summers: A Revival of Hansen's Stagnation Theory? 93 References 104 4 Supply-Side Stagnation Theories 119 4.1 Stagnation in Classical Economics 119 4.1.1 Smith: Saturation in the Midst of Riches 119 4.1.2 Malthus and Ricardo: Stagnation Due to Land Scarcity 123 4.1.3 Mill: The Stationary State as a Pleasant Condition 125 4.1.4 Marx: Predicting the Breakdown of Capitalism 127 4.2 Modern Supply-Side Stagnation Theories 129 4.2.1 Schumpeter: The Self-Destruction of Capitalism 130 4.2.2 Solow and Swan: The Vanishing of Stagnation Fears 133 4.2.3 Fourastié and Baumol: Structural Shift Toward Sectors with Low Productivity Growth 135 4.2.4 Meadows et al.: Environmental Limits to Growth 140 4.3 Contemporary Supply-Side Stagnation Theories 142 4.3.1 Piketty: High Growth as a Historical Exception 142 4.3.2 Gordon: Sluggish Technological Progress and Four Headwinds 144 References 154 5 Stagnation Theories: Concluding Remarks 160 References 164 Part II Income Distribution and Secular Stagnation 165 6 The Impact of an Unequal Distribution of Income on Economic Growth: Theoretical Considerations 166 6.1 Introduction 166 6.2 Demand-Side Mechanisms 168 6.2.1 The Size of Consumption Demand 168 6.2.2 The Composition of Consumption Demand 169 6.3 Supply-Side Mechanisms 170 6.3.1 Investment Indivisibility and Credit Market Imperfections 170 6.3.2 Human Capital Investment and Credit Market Imperfections 171 6.3.3 Incentive System and Risk-Taking 172 6.4 Political and Social Mechanisms 173 6.4.1 Redistribution Policy 173 6.4.2 Social Instability and Political Uncertainty 173 References 174 7 Income Distribution in Stagnation Theories 176 7.1 Introduction 176 7.2 Distribution in Modern Stagnation Theories 180 7.2.1 Keynes: Income Distribution as a Side Issue 180 7.2.2 Hansen: Redistribution as a Remedy for Secular Stagnation 183 7.2.3 Schumpeter on the Limits of Progressive Taxation 187 7.2.4 Kalecki and Steindl: Distribution Moves to the Forefront 189 7.3 Distribution in Contemporary Stagnation Theories 194 7.3.1 The Contrasting Views of Summers and Krugman 194 7.3.2 Gordon's Headwind of Inequality 198 7.4 Concluding Remarks 200 References 201 8 A Steindlian Model of Income Distribution, Economic Growth, and Stagnation 208 8.1 Introduction 208 8.2 Outline and Structure of the Model 211 8.2.1 The Corporate Sector 211 8.2.2 The Private Household Sector 214 8.2.3 Measures of Functional and Personal Income Distribution 215 8.3 Short- and Long-Run Effects of Economic Changes 216 8.3.1 The Economy in the Short Run 217 8.3.2 The Economy in the Long Run 220 8.4 Graphical Analysis 231 8.4.1 Functional Relationships 231 8.4.2 Graphical Illustrations of a Decline in Economic Growth 236 8.5 Discussion and Final Remarks 244 8.5.1 Extending Steindl's Original Stagnation Theory 244 8.5.2 Applying the Model to Other Stagnation Theories 245 8.5.3 The Impact of Changes in Economic Growth 246 8.5.4 Policy Implications 247 8.5.5 Concluding Remarks 249 References 250 9 Existing Empirical Evidence on the Nexus Between Income Distribution and Economic Growth 253 9.1 Introduction 253 9.2 Wage- Versus Profit-Led Economic Regimes 254 9.3 Equality- Versus Inequality-Led Economic Growth 255 9.4 The Distributional Impact of Economic Growth 258 9.5 Concluding Remarks 259 References 261 10 Summary, Economic Policy Outlook, and Conclusion 264 10.1 Résumé 264 10.2 Policy Implications and the Issue of Public Debt 267 10.2.1 Empirically Oriented Policy Recommendations 267 10.2.2 Public Debt as an Impediment to Fiscal Intervention? Lessons from the Stagnation Debates and Beyond 279 References 284 Appendix A Figure Sources and Notes in Detail 289 Appendix B Table Sources and Notes in Detail 305 Appendix C Wealth Distribution: Empirical Trends 308 Appendix D A Steindlian Model of Income Distribution, Economic Growth, and Stagnation: Mathematical and Graphical Appendix 310 D.1 Short- and Long-Run Effects of Economic Changes 310 D.1.1 The Economy in the Short Run 310 D.1.1.1 Partial Derivatives 310 D.1.1.2 Comparative Statics in the Short Run 314 D.1.2 The Economy in the Long Run 316 D.1.2.1 The Keynesian Stability Condition 316 D.1.2.2 Partial Derivatives 318 D.1.2.3 Comparative Statics in the Long Run: Effects on the Long-Run Equilibrium 321 D.2 Graphical Analysis 330 D.2.1 A Rise in the Dividend Payout Parameter (a2) 330 D.2.2 A Rise in the Saving Rate of the Rich Private Households (srh) 332 D.2.3 A Decline in the Parameter Reflecting the Impact of the Degree of Capacity Utilization (α2) 335