Inequality and the Double Bluff

Abstract

This paper demonstrates the role of the distribu tion of income in promoting or retarding economic growth, in either free market or planned economies. Keynes's view of the importance of the double bluff of income inequality for nineteenth century capitalism is explained in a Harrod growth model. The difference between Harrod's model and the neo- Keynesian emphasis on distribution is explained. Finally, it is shown that, to encourage growth, a rational monetary policy must take into account the fact that the distribution of income can create financial, as well as real, restraints on growth.