Circuit Theory and the Employment Issue

The circuit is a time-honoured concept in economics. It can be traced back to the Physiocrats of eighteenth-century France, who viewed production as a circular process initiated by advances, that is, capital expenditures which are recouped when goods are produced and then sold. Ever since then, however, this conception, without being explicitly discarded, has been left on the sidelines. For instance, Schumpeter, Keynes, Kalecki and J. Robinson, to mention twentieth-century economists only, undoubtedly made allowance for the circuit but did not give it prominence.1 In fact, the idea of making use of this conception as a research tool remained largely dormant until the late 1960s in France and Italy, when J. Le Bourva (1962), B. Schmitt (1966, 1984), A. Parguez (1975), A. Barrère (1979) and A. Graziani (1990, 2003) undertook to revive it. This undertaking has been largely inspired by Keynes’s work and, just like the Anglo-Saxon Post Keynesians, circuitists have sought to set Keynes’s heterodoxy opposite the neoclassical synthesis.