| Abstract: | Research over the last 10 to 15 years on the possibility of a Sraffa—Keynes synthesis has, in part, been concerned with clarifying the concept of a normal rate of capacity utilization, as well as its role in price determination and its interdependence with relative prices. This paper examines some of the key implications of the interdependence between the normal rate of capacity utilization and relative prices for disequilibrium pricing, specifically, target return pricing. In particular, the question arises as to consistency between the idea of a normal rate of utilization interpreted as a profit-maximizing choice by producers and the notion of a predetermined target rate of return. Interestingly, this issue of consistency raises the possibility that far from conceiving of the Post-Keynesian and Sraffian approaches to price theory as incompatible, they may instead be seen more appropriately as representing an alternatively short-run and long-run focus on the pricing decision. This view also carries with it implications about the role for demand and supply conditions in disequilibrium pricing, where this role takes the form of movements in demand relative to capacity within and between sectors affecting relative prices. |
