Joan Robinson, in her book The Accumulation of Capital published in 1956, propagated a simple growth model, which reflects the working of a pure capitalist economy, also known as “Joan Robinson’s Growth Model”. However, the Accumulation of Capital was a terse book and in one of her other books entitled Essays in the theory of Economic Growth, she tried to lower the degree of abstraction. The growth model was propagated in verbal terms, where later on the mathematical formalization was put forward by Kenneth K. Kurihara.
- There is a laissez-faire closed economy.
- The factors of production are capital and labour only.
- There is neutral technical progress.
- There are only two classes: workers and capitalists, among whom the national income is distributed.
- Workers save nothing and spend their wage income on consumption.
- Capitalists consume nothing, but save and invest their entire income for capital formation.
- There is no change in the price level.
- Saving is a function of profit.
The entrepreneurs’ total profit and the workers’ total wage bill constitute the net national income. It can be mathematically expressed as
where Y is the net national income, w is the money wage rate, N is the number of workers employed, K is the amount of capital utilized, p is the average price of output as well as of capital and π is the gross profit rate.
- ^Joan Robinson, The Accumulation of Capital (London: Macmillan & Co. Ltd., 1956)
- ^Joan Robinson, Essays in the Theory of Economic Growth (London: Macmillan & Co. Ltd., 1963)
- ^Hamberg, D. (1963). “Essays in the Theory of Economic Growth by Joan Robinson”. American Economic Review. 53 (5): 1109–1114.
- ^Mishra, S. K.; Puri, V. K. Economics of Development and Planning. ISBN 978-81-8488-829-4.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.