There are two optimality conditions in the M & P model of 1985. If the constant relative risk aversion is unity (log utility consumption), then correcting for risk-free rates that are “too low” will not prevent the equity optimality condition from seeming “too high” for observable...

We consider a Keynes-Goodwin model of effective demand and the distributive cycle where workers purchase goods and houses with marginal propensity significantly larger than one. They therefore need credit, supplied from asset holders, and have to pay interest on their outstanding debt. In this...