Research Scholar, Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi, India. malikaltf@gmail.com
Online published on 12 January, 2018.
One of the fundamental problems with the neo-classical growth theory is that it assumes away Harrodian knife edge-I which was is fundamental to Harrod's theory that he devoted almost his entire paper (1939) to it except the last few paragraphs. The way neo-classical economists have dealt with this knife edge is that they assume actual growth always to be equal to warranted arte of growth and foucn entirely upon knife edge-II which is the equality between natural rate and warranted rate of growth. In this paper, I analyze the neo-classical theory to show the inconsistencies which arise as a result of assuming away knife edge-I. Towards the end, I present a heterodox solution to resolve the knife edge proble of Harrod.
Neo-classical growth theory, Harrodian Knife edge, Macroeconomic instability, Warranted growth rate, actual growth rate, natural growth rate
