The Sraffian Supermultiplier

This is a study in the notion of long-period effective demand, viewed from a Sraffian standpoint. First, we examine the conditions under which both the level and the rate of growth of the productive capacity of the economy can be said to be demand-led rather than resource constrained.

We then show how, for a given aggregate marginal propensity to save, the economy’s average propensity to save adjusts itself automatically to the required share of induced investment via the operation of the supermultiplier. Finally, we demonstrate how the operation of the supermultiplier guarantees that under conditions of exogenous distribution and a ‘planned’ degree of capacity utilization, conditions which imply that there is an inverse relation between the normal rate of profits and the wage share, there is no direct connection between the rate of accumulation and the distribution of income. Thus there is also no long period trade-off between the levels of investment and consumption.

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