Goodwin’s growth cycle
Eschewing any reference to shocks as a way of modelling fluctuating growth, Goodwin carved out his own path towards an integration of Harrod and Marx’s insights. In Goodwin’s (1967) growth cycle, economic fluctuations in output, unemployment and wages are generated endogenously in a model that combines elements of Harrod’s growth model and the Phillips curve.
The key equations in the Goodwin model are the Lotka-Volterra equations for the rate of growth of the share of wages in output, and of capital. Goodwin adopts the Lotka-Volterra equations which are used in biology in order to model predator-prey interaction, to explain the dynamical contradictions of capitalism in a Marx-Kaleckian spirit. Due to innovations and productivity growth any upswing can carry the economy beyond the previous peak. Goodwin (1987) agrees with Schumpeter that economic growth is therefore likely to occur in waves. Goodwin’s model has been discussed intensively and elaborated over the last decades (see, for example, Flaschel 2009: ch. 4). An important characteristic of the Goodwin model is that it can create economic fluctuations endogenously without relying on exogenous shocks - whether monetary or technological.