Modelling a Path-Dependent Economy: Lessons from John Cornwall’s Macrodynamics

Abstract

Dynamics are an innate feature of Keynes’s and Post-Keynesian economics. So much is obvious from the pages of The General Theory itself, and was only made more apparent by the rush of early Keynesians to extend Keynes’s theory into the long run.² Keynes and the Post-Keynesians conceive capitalism as a monetary production economy, wherein nominal contracts and monetary exchange link the activities of buying inputs, producing output and realizing profits from the sale of output — activities that are separated temporally. A capitalist economy functions, then, in historical time. Decisions and actions in the present take place in the context of an immutable past and an as yet unmade (and hence fundamentally uncertain) future. Great importance attaches to the sequential nature of economic activity and the concomitant tendency of economic systems to evolve over time as a result of their concrete historical functioning.

I would like to thank John Cornwall and Geoff Harcourt for their comments on an earlier version of this chapter. The usual disclaimer applies.