Keynesian and neo-classical growth models: A sequential analytical approach

Summary

By means of Marshall's method of analysing complex dynamic processes an attempt has been made to position Keynesian and neo-classical growth theories. Three periods have been distinguished: the short period, the medium period and the long period. By extending disequilibrium theory to the medium and the long run, models have been developed for each of the three periods. Keynesian growth theory appears essentially a theory of the medium period, neo-classical a theory of the long period. The main differences between the two theories concern the formation of expectations with respect to factor prices and the behaviour of capacity utilisation. In contrast with neo-classical theory the growth process in Keynesian growth theory does not show a tendency to Walrasian growth equilibrium.