The Theory of Accumulation

This book treats the mechanisms of growth and cycles in capitalist economies in a unified manner, incorporating a highly original macro-dynamic theory based on Marxian micro-foundations and historical perspectives. That theory was developed about 50 years ago by Nobuo Okishio (1927–2003) and included the ideas of Keynes and Harrod. In mainstream economics, it used to be standard to analyse long-term economic growth and business cycles in different frameworks. That approach has been changing recently, but it still tends to be common to discuss them separately.

At the outbreak of the global financial crisis of 2007–2008 and the prolonged stagnation that followed, there was strong criticism among policymakers and businesspeople that mainstream macroeconomics failed to provide convincing explanations and effective policy recommendations. This book offers an alternative perspective that responds to those criticisms. All these macroeconomic difficulties call for new wisdom beyondthe limited neoclassical framework. The sharp, wise thoughts of Okishio will add new tools for young researchers worldwide to meet the challenges of the current resource misallocation, the Great Recession and the Lost Decades problems.

Okishio proposes a historical perspective for the capitalist system, first. He argues that production relations are conditioned by productive force. The former should evolve as the latter improves, and the latter should evolve in order for human society to survive. While reproduction is indispensable for the economy to continue in any production relations, it takes a specific form in capitalist economy.

He next shows that the existence of profit requires the exploitation of the labourer. This is called the Fundamental Marxian Theorem. He also shows a trade-off relationship between the real wage rate and the profit rate. In his theory, the real wage rate is determined to clear commodity markets in the short run as in the Keynesian theory, while Marx believed that the real wage rate is given at subsistence level or is influenced by the labour market.

Okishio attributes the origin of the business cycle to labourers’ under-consumption and private capitalists’ dispersive decision of accumulation. The former is caused by exploitation, and the latter is based on the capitalist class’s private ownership of the means of production. Both are derived from the nature of the capitalist economy.

He argues lastly that, in the long term, the development of productive force through the business cycle will transform the production relation into a new economic system.

Born in 1927 and died in 2003; the late Professor Nobuo Okishio was an emeritus professor of economics of Kobe University, former president of the Japan Association of Economics and Econometrics (currently, the Japanese Economic Association), and a member of the Science Council of Japan. Professor Okishio was awarded the Nikkei Prize for Economics Books in 1977.

Major journal articles included “Monopoly and the Rates of Profit” (Kobe University Economic Review, No.1, 1955, 71–88); “Technical Change and the Rate of Profit” (Kobe University Economic Review, No.7, 1961, 85–99); “A Mathematical Note on Marxian Theorems” (Weltwirtschaftliches Archiv, Vol.91, No.2, 1963, 287–297); “A Formal Proof of Marx’s Two Theorems” (Kobe University Economic Review, No.18, 1972, pp.1–6); and “Notes on Technical Progress and Capitalist Society” (Cambridge Journal of Economics, Vol.1, 1977, pp. 93–100). He is the author of Essays on political economy: collected papers (1993, P. Lang: Frankfurt am Main) and 13 books in Japanese, and edited Business cycles: theories and numerical simulation (1992 P. Lang: Frankfurt am Main) and 11 books in Japanese.

Professor Okishio taught and conducted research at Kobe University (1950–1990) and Osaka University of Economics (1990–2000).

His major contributions range from Marxian economics, which include Marxian Fundamental Theorem and the Okishio Theorem, Keynesian economics including Keynes’ aggregate supply function, and Harrod’s instability principle.