Household demand, income distribution and the sustainability of debt-based profit-led regimes: Introducing conspicuous consumption in a Post Keynesian model
Sprache des Vortragstitels:
Political Economy and the Outlook for Capitalism
Sprache des Tagungstitel:
This paper illustrates the compatibility of Institutionalist and Post Keynesian arguments by discussing an important but mostly overlooked complementarity between these two traditions. More specifically, we integrate the Veblenian idea of ?conspicuous consumption? in a standard Post Keynesian model in the tradition of Bhaduri and Marglin (1990). Thereby we show that the arguments associated with these concepts are not merely compatible, but complementary, hence leading to an extension of the traditional Post Keynesian results by adding a debt-financed consumption-driven (DFCD) profit led demand regime to the already known investment- or export-driven scenarios. Such a regime depends on excess indebtedness of households induced by an increase in income inequality between workers and capitalists as well as among workers. By linking debt, income distribution and demand in a rather straightforward manner the model improves our understanding of the pre-crisis period in the United States. According to our model the sustainability of such a regime depends on the intensity of income redistribution from workers to capitalists and on the willingness of creditors to grant loans.