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Cambridge Journal of Economics 28:527-547 (2004)
Cambridge Journal of Economics, Vol. 28, No. 4, © Cambridge Political Economy Society 2004; all rights reserved

Capital, distribution and macroeconomics: ‘core’ beliefs and theoretical foundations

Graham White*

Address for correspondence: School of Economics and Political Science, University of Sydney Sydney, Australia; email: graham{at}econ.usyd.edu.au

The paper suggests an alternative ‘benchmark’ model or ‘microfoundations’ for theorising about macroeconomic phenomena in the case of competitive equilibria. This alternative reflects a classical-Sraffian explanation of relative prices. This approach also provides a coherent framework for the analysis of the choice of technique in a multi-commodity setting. In turn, it leads to results which throw into question a number of key propositions of conventional macro theory, including the notion of a long-run self-correcting mechanism for involuntary unemployment in the presence of wage and price flexibility. The paper argues that a classical-Sraffian approach provides a means of reconciling Keynesian results with competitive outcomes.

Key Words: Sraffian • Keynesian • Competitive • Benchmark • Capital

JEL classifications: B51, D3, D5, E120, E130

Manuscript received October 29, 2002; final version received January 6, 2003.


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