The Missing Dynamics: On the Early Contributions of Clower and Leijonhufvud
(1989) , 20 pages
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- Abstract
- The paper presents a unified and critical discussion of the early contributions of Clower and Leijonhufvud (1960s and early 1970s). Its central argument is that the main message of Clower's initial project, which has to do with what will be called the "wandering system" dynamics, has been neglected in favor of the static message underlying the income-constrained (or multiplier) process. The following contentions are made: (i) In his static model, Clower derives coordination failures which are not intrinsically specific to a pure money economy. (ii) Clower's discussion of dynamics leads to a crucial conjecture about the possibility of permanent Keynesian unemployment (due essentially to the viability of this system to alleviate the coordination failure over time), but this conjecture has been neglected by those who have concentrated on (static) fix-price equilibria. (iii) Leijonhufvud's analysis of "dynamics" in fact replicates static fix-price results, and is inappropriate for dealing with Clower's conjecture.
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Citations
Arnsperger, C. (1989). The Missing Dynamics: On the Early Contributions of Clower and Leijonhufvud (Working Papers Institut des sciences économiques 8918). https://hdl.handle.net/2078.5/281064