Solow's Harrod: Transforming Cyclical Dynamics into a Model of Long-Run Growth

51 Pages Posted: 27 Apr 2013 Last revised: 7 May 2013

See all articles by Verena Halsmayer

Verena Halsmayer

University of Lucerne

Kevin D. Hoover

Duke University - Departments of Economics and Philosophy

Date Written: March 27, 2013

Abstract

Modern growth theory derives mostly from Robert Solow’s “A Contribution to the Theory of Economic Growth” (1956). Solow’s own interpretation locates the origins of his “Contribution” in his view that the growth model of Roy Harrod implied a tendency toward progressive collapse of the economy. He formulates his view in terms of Harrod’s invoking a fixed-coefficients production function. We challenge Solow’s reading of Harrod’s “Essay in Dynamic Theory,” arguing that Harrod’s object in providing a “dynamic” theory had little to do with the problem of long-run growth as Solow understood it, but instead addressed medium-run fluctuations, the “inherent instability” of economies. It was an attempt to isolate conditions under which the economy might tend to run below potential. In making this argument, Harrod does not appeal to a fixed-coefficients production function – or to any production function at all, as that term is understood by Solow. Solow interpreted Harrod’s “Essay” in the light of a particular culture of understanding grounded in the practice of formal modeling that emerged in economics in the post-World War II period. The fate of Harrod’s analysis is a case study in the difficulties in communicating across distinct interpretive communities and of the potential for losing content and insights in the process. From Harrod’s English Keynesian point of view, Solow’s interpretation arose out of a culture of misunderstanding, and his objects – particularly, of trying to account for a tendency.

Keywords: economic growth, Roy Harrod, Robert Solow, dynamics, dynamic instability, knife-edge, warranted rate of growth, natural rate of growth

JEL Classification: B22, O4, E12, E13, N1, B31

Suggested Citation

Halsmayer, Verena and Hoover, Kevin D., Solow's Harrod: Transforming Cyclical Dynamics into a Model of Long-Run Growth (March 27, 2013). Economic Research Initiatives at Duke (ERID) Working Paper, CHOPE Working Paper No. 2013-02, Available at SSRN: https://ssrn.com/abstract=2241066 or http://dx.doi.org/10.2139/ssrn.2241066

Verena Halsmayer

University of Lucerne ( email )

Hofstrasse 9
P.O. Box 7464
Luzern 7, CH - 6000
Switzerland

Kevin D. Hoover (Contact Author)

Duke University - Departments of Economics and Philosophy ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

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