The Instability Principle Revisited: an essay in Harrodian Dynamics
, Muriel Dal-Pont Legrand
2014, European Journal of The History of Economic Thought, 21(3), pp.467-484
Résumé
Harrod's contribution to economic dynamics is very often reduced to the dynamic equation whose character is unstable. Growth theory and cycle theory based on Harrod's contributions aimed at reducing this instability. Following Harrod, who was strongly opposed to the ‘knife-edge’ interpretation, we define the warranted rate of growth as a ‘moving equilibrium’ and focus on its interaction with the effective rate of growth. Our simple Harrodian model generates various dynamics from stable path, to growth cycle and corridor of stability.