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Path Dependency and Demand—Supply Interactions in Macroeconomic Analysis

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Path Dependency and Macroeconomics

Part of the book series: International Papers in Political Economy Series ((IPPE))

Abstract

The chapter commences with an elaboration on the meaning of the notion of path dependency, how path dependency is linked with notions of fundamental uncertainty, non-ergodicity, hysteresis and some of the factors that have been highlighted in the generation of path dependency. The implications of the notion of path dependency for macroeconomic analysis are discussed in terms of the interrelationship between aggregate demand and supply potential and the availability of future resources. The contrast is drawn between these notions of path dependency, which have featured in the heterodox macroeconomics literature with the path independency of mainstream macroeconomics to suggest that they differ substantially with significant analytical implications. Path dependency in macroeconomic analysis is then discussed in relation to the relationship between aggregate demand and supply, labour market, inflation barrier, investment and the capital stock, technological change and demand and supply in economic growth. In all this we draw on ideas, which have long circulated in Keynesian economics, to indicate some of the ways in which the path of demand impacts on the development of supply potential.

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Author information

Authors and Affiliations

  1. University of Cambridge, UK

    Philip Arestis

  2. University of Leeds, UK

    Malcolm Sawyer

Authors
  1. Philip Arestis
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  2. Malcolm Sawyer
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Editor information

Editors and Affiliations

  1. Department of Land Economy, University of Cambridge, UK

    Philip Arestis (University Director of Research, Cambridge Centre for Economics and Public Policy) (University Director of Research, Cambridge Centre for Economics and Public Policy)

  2. Leeds University Business School, University of Leeds, UK

    Malcolm Sawyer (Professor of Economics) (Professor of Economics)

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© 2009 Philip Arestis and Malcolm Sawyer

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Arestis, P., Sawyer, M. (2009). Path Dependency and Demand—Supply Interactions in Macroeconomic Analysis. In: Arestis, P., Sawyer, M. (eds) Path Dependency and Macroeconomics. International Papers in Political Economy Series. Palgrave Macmillan, London. https://doi.org/10.1057/9780230251090_1

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