Capacity utilisation, effective demand and unsteady growth

Regimes of economic growth with abnormally high or abnormally low degrees of capacity utilisation constitute the main analytical subject of this thesis. The theoretical explanation provided for this subject centres upon the interplay between demand and investment. Three strands of theoretical investigation are called into question in connection with this subject; a) Keynes and Harrod; b) the Steindl-Kalecki inspired literature on the capacity utilisation model; c) the Sen inspired approach to economic growth based on a multiplicity of growth regimes. Both Keynes and Harrod studied aspects of the interplay between demand and investment. The Steindl-Kalecki models of growth allow for different from normal degrees of capacity utilisation. Finally the Sen inspired literature is relevant because a regime of growth with abnormal capacity utilisation cannot be credited with long-term status, but more naturally belongs to an approach to growth which admits of a number of growth regimes. The theoretical innovation which this thesis suggests is the introduction of the concept of the medium term in the theory of economic growth as an independent construct. It is precisely by doing so that the interplay between demand and investment can be given a new role and that specific questions which remain open in those areas of investigation can be solved. All this is achieved by connecting non-normal degrees of utilisation with that part of investment demand which is designed to alter the average scale of capacity, while the capability of the system to grow over time is taken for granted. When such a separation is obtained it becomes clear that the capacity adjustment process gives rise to a process of growth worth studying for its own sake. The equilibrium rate of growth which can then be identified is a medium-term equilibrium with realised expectations