In this paper, a discrete-time version of the Marxian circuit of capital model in Foley (1982, 1986a) is used to address two important theoretical issues of general interest to the heterodox economics tradition: profit-led versus wage-led growth, and the growth-reducing impact of non-production credit. First, it is demonstrated that both profit-led and wage-led growth regimes can be accommodated within the Marxian circuit of capital model. Second, it is demonstrated that, if the total flow of credit is large, the steady-state growth rate of a capitalist economy is negatively related to the share of consumption credit in total net credit.
AlemiP.FoleyD. K.1997. The circuit of capital, U.S. manufacturing, and nonfinancial corporate business sectors, 1947-1993. Available for download at: http://homepage.newschool.edu/_foleyd/circap.pdf
2.
AlemiP.FoleyD. K.2010. The circuit of capital, U.S. manufacturing, and nonfinancial corporate business sectors, 1966-2009. Working Paper, New School of Social Research, and John Jay College of Criminal Justice, City University of New York.
3.
Barbosa-FilhoN. H.TaylorL.2006. Distributive and demand cycles in the US economy – A structuralist Goodwin model. Metroeconomica57(3): 389-411.
4.
BhaduriA.2008. On the dynamics of profit-led and wage-led growth. Cambridge Journal of Economics32(1): 147-60.
5.
BhaduriA.MarglinS.1990. Unemployment and the real wage: The economic basis for contesting ideologies. Cambridge Journal of Economics14: 375-393.
6.
BowlesS.BoyerR.1995. Wages, aggregate demand and employment in an open economy: An empirical investigation. In Macroeconomic policy after the conservative era: Studies in investment, saving and finance, ed. EpsteinG. A.GintisH. M., 143-174. Cambridge University Press.
7.
dos SantosP. L.2011. Production and consumption in a continuous-time model of the circuit of capital. Metroeconomica62(4): 729-58.
8.
DuménilG.LévyD.2004. Capital resurgent: Roots of the neoliberal revolution. Harvard University Press.
9.
DuménilG.LévyD.2011. The crisis of neoliberalism. Harvard University Press.
10.
DuttA. K.2011. The role of aggregate demand in classical-Marxian models of economic growth. Cambridge Journal of Economics35(2): 357-82.
11.
FoleyD. K.1982. Realization and accumulation in a Marxian model of the circuit of capital. Journal of Economic Theory28: 300-319.
12.
FoleyD. K.1986a. Money, accumulation and crisis: Fundamentals of pure and applied economics. Harwood Academic Publishers.
13.
FoleyD. K.1986b. Understanding Capital: Marx’s economic theory. Harvard University Press.
14.
FoleyD. K.MichlT. R.1999. Growth and distribution. Harvard University Press.
15.
FoleyD. K.TaylorL.2006. A heterodox growth and distribution model. In Economic growth and distribution: On the nature and causes of the wealth of nations, ed. SalvadoriN.75-99. Edgar Elgar Publishing.
16.
HarveyD.2005. A brief history of neoliberalism. Oxford University Press.
17.
KeynesJ. M.1936. The general theory of employment, interest and money. Macmillan Cambridge University Press.
18.
KotzD. M.1988. A circuit of capital approach to Marxian crisis theory. Department of Economics, University of Massachusetts, Amherst Working Paper 1988-17.
19.
KotzD. M.1991. Accumulation, money and credit in the circuit of capital. Rethinking Marxism4(2).
20.
KotzD. M.2009. The financial and economic crisis of 2008: A systemic crisis of neoliberal capitalism. Review of Radical Political Economics41(3): 305-17.
21.
LorangerJ.-G.1989. A re-examination of the Marxian circuit of capital: A new look at inflation. Review of Radical Political Economics21(1-2): 97–112.
22.
MarxK.[1867]1992. Capital: A critique of political economy, volume I. Penguin.
23.
MarxK.[1885]1993. Capital: A critique of political economy, volume II. Penguin.
24.
MatthewsP. H.2000. An econometric model of the circuit of capital. Metroeconomica51(1): 1-39.
25.
OnaranO.StockhammerE.GraflL.2011. Financialization, income-distribution and aggregate demand in the USA. Cambridge Journal of Economics. Published online: January7.
26.
PalleyT. I.2008. Financialization: What it is and why it matters. Levy Economics Institute Working Paper No. 525. Available at SSRN: http://ssrn.com/abstract=1077923
27.
SimonC. P.BlumeL.1994. Mathematics for economists. W. W. Norton & Company.
28.
TaylorL.2006. Reconstructing macroeconomics: Structuralist proposals and critiques of the mainstream. Harvard University Press.
29.
von NeumannJ.1945. A model of general equilibrium. Review of Economic Studies1-9.
