Effective Demand and Prices of Production: An Evolutionary Approach

Rotta, Tomas N.. 2021. Effective Demand and Prices of Production: An Evolutionary Approach. Structural Change and Economic Dynamics, 58, pp. 90-105. ISSN 0954-349X [Article]

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Abstract or Description

The paper develops a critique of and a (partial) solution to Say’s Law Marxism, defined as the employment of Say’s Law within the Marxist framework. The critique is based on the notion that expectations and effective demand are constitutive of labor values and prices of production. Socially necessary labor cannot be determined solely from the supply side. The (partial) solution to Say’s Law Marxism rests on the development of an evolutionary model that integrates the principle of effective demand in the short run and the formation of prices of production in the long run. The equalization of profit rates in the long run and the formation of prices of production as attractors of market prices depend upon the realization of profits in the short run and, therefore, are subject to the principle of effective demand. The model employs replicator dynamics from evolutionary game theory to formalize competition at the firm level. The replicator equations also formalize the adoption of new production techniques and the nonlinear feedback effects between individual decisions and unintended macroeconomic outcomes.

Item Type:

Article

Identification Number (DOI):

https://doi.org/10.1016/j.strueco.2021.04.010

Keywords:

Effective Demand, Prices of Production, Marx, Keynes, Kalecki

Related URLs:

Departments, Centres and Research Units:

Institute of Management Studies

Dates:

DateEvent
29 April 2021Accepted
9 May 2021Published Online
September 2021Published

Item ID:

30070

Date Deposited:

13 May 2021 09:42

Last Modified:

26 May 2021 15:23

Peer Reviewed:

Yes, this version has been peer-reviewed.

URI:

https://research.gold.ac.uk/id/eprint/30070

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