Matias Vernengo — Thirlwall à la Godley

Arguably Godley had a version of Thirlwall's Law in his model too. As noted by Zezza: "the ideas underlying the ‘New Cambridge Hypothesis,’ which assumed... that the private sector would adjust rather quickly to a shock, to restore its desired income/assets ratio." In this sense, in the long run in a steady state Godley assumed that the net acquisition of financial assets would be zero. This would be a stock version of the flow equilibrium between investment and savings, the private balance.

Naked Keynesianism
Thirlwall à la Godley
Matias Vernengo | Associate Professor of Economics, Bucknell University

Philip Pilkington — Thirlwall’s Law in Historical Context

What lessons can we draw from this? Well, for one we can say once again that: there are no true Laws in economics. Economics, to repeat a point I never tire of making, is an historical discipline. And if we don’t understand political and institutional arrangements we will understand nothing of relevance or importance. Insights such as Thirwall’s Law (which is not a law at all…) are of secondary importance when faced with the realities of actually existing economic institutions....

Those who wield such supposed Laws and insist on their timelessness and Absolute Truth are likely to make rather poor economic analysts. (I’m not referring to Thirlwall in this regard who, so far as I can see, recognises the contingencies involved in what he is saying). Such relationships need to be approached with an understanding that historical/institutional constellations come first and equations such as Thirlwall’s can only be made to generate insights within the framework of analysis provided by a given historical/institutional constellation.

Fixing the Economists
Thirlwall’s Law in Historical Context

Philip Pilkington