Post-Keynesian economics

Post-Keynesian economics is a school of economic thought with its origins in The General Theory of John Maynard Keynes, with subsequent development influenced to a large degree by Michał Kalecki, Joan Robinson, Nicholas Kaldor, Sidney Weintraub, Paul Davidson, Piero Sraffa and Jan Kregel. Historian Robert Skidelsky argues that the post-Keynesian school has remained closest to the spirit of Keynes' original work.[1][2] It is a heterodox approach to economics.[3][4]

Introduction

The term "post-Keynesian" was first used to refer to a distinct school of economic thought by Eichner and Kregel (1975)[5] and by the establishment of the Journal of Post Keynesian Economics in 1978. Prior to 1975, and occasionally in more recent work, post-Keynesian could simply mean economics carried out after 1936, the date of Keynes's General Theory.[6]

Post-Keynesian economists are united in maintaining that Keynes' theory is seriously misrepresented by the two other principal Keynesian schools: neo-Keynesian economics, which was orthodox in the 1950s and 60s, and new Keynesian economics, which together with various strands of neoclassical economics has been dominant in mainstream macroeconomics since the 1980s. Post-Keynesian economics can be seen as an attempt to rebuild economic theory in the light of Keynes' ideas and insights. However, even in the early years, post-Keynesians such as Joan Robinson sought to distance themselves from Keynes and much current post-Keynesian thought cannot be found in Keynes. Some post-Keynesians took a more progressive view than Keynes himself, with greater emphases on worker-friendly policies and redistribution. Robinson, Paul Davidson and Hyman Minsky emphasized the effects on the economy of practical differences between different types of investments, in contrast to Keynes' more abstract treatment.[7]

The theoretical foundation of post-Keynesian economics is the principle of effective demand, that demand matters in the long as well as the short run, so that a competitive market economy has no natural or automatic tendency towards full employment.[8] Contrary to the views of new Keynesian economists working in the neoclassical tradition, post-Keynesians do not accept that the theoretical basis of the market's failure to provide full employment is rigid or sticky prices or wages. Post-Keynesians typically reject the IS–LM model of John Hicks, which is very influential in neo-Keynesian economics.

The contribution of post-Keynesian economics[9] has extended beyond the theory of aggregate employment to theories of income distribution, growth, trade and development in which money demand plays a key role, whereas in neoclassical economics these are determined by the forces of technology, preferences and endowment. In the field of monetary theory, post-Keynesian economists were among the first to emphasise that money supply responds to the demand for bank credit,[10] so that a central bank cannot control the quantity of money, but only manage the interest rate by managing the quantity of monetary reserves.

This view has largely been incorporated into monetary policy, which now targets the interest rate as an instrument, rather than the quantity of money. In the field of finance, Hyman Minsky put forward a theory of financial crisis based on financial fragility, which has received renewed attention. [11]

Strands

There are a number of strands to post-Keynesian theory with different emphases. Joan Robinson regarded Michał Kalecki’s theory of effective demand to be superior to Keynes’ theories. Kalecki's theory is based on a class division between workers and capitalists and imperfect competition.[12] Robinson also led the critique of the use of aggregate production functions based on homogeneous capital – the Cambridge capital controversy – winning the argument but not the battle.[13] The writings of Piero Sraffa were a significant influence on the post-Keynesian position in this debate, though Sraffa and his neo-Ricardian followers drew more inspiration from David Ricardo than Keynes. Much of Nicholas Kaldor’s work was based on the ideas of increasing returns to scale, path dependency, and the key differences between the primary and industrial sectors.[14]

Paul Davidson[15] follows Keynes closely in placing time and uncertainty at the centre of theory, from which flow the nature of money and of a monetary economy. Monetary circuit theory, originally developed in continental Europe, places particular emphasis on the distinctive role of money as means of payment. Each of these strands continues to see further development by later generations of economists.

Modern Monetary Theory is a relatively recent offshoot influenced by the macroeconomic modelling of Wynne Godley and Hyman Minsky's ideas on the labour market, as well as chartalism and functional finance.

Current work

Journals

Much post-Keynesian research is published in the Review of Keynesian Economics (ROKE), the Journal of Post Keynesian Economics (founded by Sidney Weintraub and Paul Davidson), the Cambridge Journal of Economics, the Review of Political Economy, and the Journal of Economic Issues (JEI).

United Kingdom

There is also a United Kingdom academic association, the Post Keynesian Economics Society (PKES). This was previously called the Post Keynesian Economics Study Group (PKSG) but changed its name in 2018.

United States

In the United States, there are several universities with a post-Keynesian bent:

Canada

In Canada, post-Keynesians can be found at the University of Ottawa and Laurentian University.

Germany

In Germany, post-Keynesianism is very strong at the Berlin School of Economics and Law [16] and its master's degree course: International Economics [M.A.]. Many German Post-Keynesians are organized in the Forum Macroeconomics and Macroeconomic Policies.[17]

Australia

University of Newcastle

The University of Newcastle in New South Wales, Australia, houses the Centre of Full Employment and Equity (CofFEE), an active educational, research and collaborative organisation whose focus is on policies "restoring full employment" and achieving an economy that delivers "equitable outcomes for all". CofFEE's work is on post-Keynesian macroeconomics, labour economics, regional development and monetary economics. Research conducted by CofFEE is aimed at developing a model for new global economy that achieves full employment without the consequences imposed by the dominant neoliberal economic policies.

Major post-Keynesian economists

Major post-Keynesian economists of the first and second generations after Keynes include:

See also

Notes

  1. ^ Skidelsky 2009, p. 42
  2. ^ Financial markets, money and the real world, by Paul Davidson, pp. 88–89
  3. ^ Lavoie, Marc (2006), "Post-Keynesian Heterodoxy", Introduction to Post-Keynesian Economics, Palgrave Macmillan UK, pp. 1–24, doi:10.1057/9780230626300_1, ISBN 9781349283378
  4. ^ Dequech, David (2012). "Post Keynesianism, Heterodoxy and Mainstream Economics". Review of Political Economy. 24 (2): 353–368. doi:10.1080/09538259.2012.664364. ISSN 0953-8259.
  5. ^ Eichner and Kregel 1975
  6. ^ King 2002, p. 10
  7. ^ Hayes 2008
  8. ^ Arestis 1996
  9. ^ For a general introduction see Holt 2001
  10. ^ Kaldor 1980
  11. ^ Minsky 1975
  12. ^ Robinson 1974
  13. ^ Pasinetti 2007
  14. ^ Harcourt 2006, Pasinetti 2007
  15. ^ Davidson 2007
  16. ^ "HWR Berlin - Campus4U". campus4u.hwr-berlin.de.
  17. ^ Hein, Eckhard; Priewe, Jan (2009). "Forum: The Research Network Macroeconomics and Macroeconomic Policies (FMM) – Past, present and future". European Journal of Economics and Economic Policies: Intervention. 6 (2): 166–173. doi:10.4337/ejeep.2009.02.04.

References

Further reading

External links

Alfred Eichner

Alfred S. Eichner (March 23, 1937 – February 10, 1988) was an American post-Keynesian economist who challenged the neoclassical price mechanism and asserted that prices are not set through supply and demand but rather through mark-up pricing.

Eichner is one of the founders of the post-Keynesian school of economics and was a professor at Rutgers University at the time of his death. Eichner's writings and advocacy of thought, differed with the theories of John Maynard Keynes, who was an advocate of government intervention in the free market and proponent of public spending to increase employment. Eichner argued that investment was the key to economic expansion. He was considered an advocate of the concept that government incomes policy should prevent inflationary wage and price settlements in connection to the customary fiscal and monetary means of regulating the economy.

He is noted for his book The Megacorp and Oligopoly (1976), Toward a new economics: essays in post-Keynesian and institutionalist theory (1985). His Macrodynamics of Advanced Market Economies (1987) contains chapters on dynamics and growth, investment, finance and income distribution.

Athanasios Asimakopulos

Athanasios "Tom" Asimakopulos (Greek: Αθανάσιος Ασημακόπουλος) (May 28, 1930 – May 25, 1990) was a Canadian economist, who was the "William Dow Professor of Political Economy" in the Department of Economics, McGill University, Montreal, Quebec, Canada. His monograph, Keynes's General Theory and Accumulation, reviews important areas of Keynes's General Theory and the theories of accumulation of two of his most distinguished followers, Roy Harrod and Joan Robinson.

Basil Moore

Basil John Moore was a Canadian Post-Keynesian economist, best known for developing and promoting endogenous money theory, particularly the proposition that the money supply curve is horizontal, rather than upward sloping, a proposition known as horizontalism. He was the most vocal proponent of this theory, and is considered a central figure in post Keynesian economicsMoore studied economics at the University of Toronto and at Johns Hopkins University. In 1958 he started a distinguished academic career at Wesleyan University in Middletown, Connecticut and became professor emeritus at the University. He left in 2003 to move to South Africa where he joined the University of Stellenbosch with which he had long maintained an association and, "where he was Professor Extraordinary of Economics."

Endogenous money

Endogenous money is an economy’s supply of money that is determined endogenously—that is, as a result of the interactions of other economic variables, rather than exogenously (autonomously) by an external authority such as a central bank.

The theoretical basis of this position is that money comes into existence through the requirements of the real economy and that the banking system reserves expand or contract as needed to accommodate loan demand at prevailing interest rates.

Central banks implement policy primarily through controlling short-term interest rates. The money supply then adapts to the changes in demand for reserves and credit caused by the interest rate change. The supply curve shifts to the right when financial intermediaries issue new substitutes for money, reacting to profit opportunities during the cycle.

Geoffrey Harcourt

Geoffrey Colin Harcourt (born 27 June 1931) is an Australian academic economist who is a leading member of the Post Keynesian school. He studied at the University of Melbourne and then at King's College, Cambridge.

Joan Robinson

Joan Violet Robinson (née Maurice; 31 October 1903 – 5 August 1983) was a British economist well known for her wide-ranging contributions to economic theory. She was a central figure in what became known as post-Keynesian economics.

Job guarantee

A job guarantee (JG) is an economic policy proposal aimed at providing a sustainable solution to the dual problems of inflation and unemployment. Its aim is to create full employment and price stability, by having the state promise to hire unemployed workers as an employer of last resort (ELR).The economic policy stance currently dominant around the world uses unemployment as a policy tool to control inflation; when inflation rises, the central bank pursues contractionary monetary policy, creating a buffer stock of unemployed people, reducing wage demands, and ultimately inflation. When inflationary expectations subside, these people will get their jobs back. In Marxian terms, the unemployed serve as a reserve army of labor. By contrast, in a job guarantee program, a buffer stock of employed people (employed in the job guarantee program) provides the same protection against inflation without the social costs of unemployment, hence potentially fulfilling the dual mandate of full employment and price stability.

M. E. Sharpe

M.E. Sharpe, Inc., an academic publisher, was founded by Myron Sharpe in 1958 with the original purpose of publishing translations from Russian in the social sciences and humanities. These translations were published in a series of journals, the first of which was Problems of Economics, now called Problems of Economic Transition. In the 1960s the translation project was expanded to include other European languages, and then Chinese and later, Japanese. Other academic journals launched by M.E. Sharpe during these years featured articles originating in English. At present the firm publishes over 35 periodicals including Challenge: The Magazine of Economic Affairs, Journal of Management Information Systems, International Journal of Electronic Commerce, Journal of Post-Keynesian Economics, and Problems of Post-Communism. Shortly after it was established, M.E. Sharpe, Inc. also began to publish scholarly books in the social sciences and humanities, with a special emphasis on international studies. In the 1980s the book division was expanded and it currently publishes approximately 60 new titles a year, including works in economics, business, management, public administration, political science, history, and literature. Many of M.E. Sharpe’s textbooks are available in digital editions through the Sharpe E-Text Center.Several Nobel Prize winners, including Kenzaburō Ōe and Wassily Leontief, are among M.E. Sharpe authors, as is the acclaimed American novelist Howard Fast, author of Spartacus. The East Gate Books imprint is widely recognized as representing the best in Asian Studies.In 1995 Sharpe Reference was founded to provide essential reference material for the high school, undergraduate, and general reader—again, building on Sharpe’s areas of strength in American studies and global studies. The full, updated content of many of these reference sets is also available in electronic editions published by Sharpe Online Reference.M.E. Sharpe, Inc. started in New York City and was originally called International Arts and Sciences Press. After twelve years in the city, the firm moved to White Plains, New York. Its offices have been based in Armonk, New York, since 1980.M.E. Sharpe was sold to Routledge in 2014.

Marc Lavoie

Marc Lavoie (born 1954) is a Canadian professor in economics at the University of Ottawa and a former Olympic fencing athlete.

Modern Monetary Theory

Modern Monetary Theory or Modern Money Theory (MMT) is a heterodox macroeconomic theory that describes currency as a public monopoly for a government and unemployment as the evidence that a currency monopolist is restricting the supply of the financial assets needed to pay taxes and satisfy savings desires. MMT is seen as an evolution of chartalism and is sometimes referred to as neo-chartalism.

MMT advocates argue that the government should use fiscal policy to achieve full employment, creating new money to fund government purchases. The primary risk once the economy reaches full employment is inflation, which can be addressed by raising taxes and issuing bonds, to remove excess money from the system. MMT is controversial, with active debate about its policy effectiveness and risks.

Monetary circuit theory

Monetary circuit theory is a heterodox theory of monetary economics, particularly money creation, often associated with the post-Keynesian school.

It holds that money is created endogenously by the banking sector, rather than exogenously by central bank lending; it is a theory of endogenous money. It is also called circuitism and the circulation approach.

NAIBER

NAIBER is an acronym for non-accelerating inflation buffer employment ratio and refers to a systemic proposal for an in-built inflation control mechanism devised by economists Bill Mitchell and Warren Mosler, and advocated by Modern Money Theory as replacement for NAIRU (non-accelerating inflation rate of unemployment). The concept of NAIBER is related to the idea of a Job Guarantee aimed to create full employment and price stability, by having the state promise to hire unemployed workers as an employer of last resort (ELR).

Non-equilibrium economics

Non-equilibrium economics understands economic processes as non-equilibrium phenomena, as opposed to standard neoclassical equilibrium economics. This approach is consistent with our understanding of life processes as non-equilibrium phenomena. It is represented by modern researchers in the fields of evolutionary-institutional economics, Post Keynesian economics, Ecological Economics, development and growth economics. The early contributions to this theory were made by Thorstein Veblen, Gunnar Myrdal, Karl William Kapp and Nicholas Kaldor. Many contributions have been made to this field in recent years, such as "The Foundations of Non-Equilibrium Economics: The Principle of Circular Cumulative Causation" (2009), Routledge.Related fields of economics include Complexity economics and Evolutionary economics.

Paul Davidson (economist)

Paul Davidson (born October 23, 1930) is an American macroeconomist who has been one of the leading spokesmen of the American branch of the Post Keynesian school in economics. He is a prolific writer and has actively intervened in important debates on economic policy (natural resources, international monetary system, developing countries' debt) from a position that is very critical of mainstream economics.

Review of Keynesian Economics

The Review of Keynesian Economics is a quarterly double-blind peer-reviewed academic journal covering Keynesian and Post-Keynesian economics, although it is also open to other heterodox traditions. It is published by Edward Elgar Publishing and was established in 2012. The editors-in-chief are Thomas Palley (New America Foundation), Louis-Philippe Rochon (Laurentian University), and Matías Vernengo (Bucknell University).

Sidney Weintraub (economist born 1914)

Sidney Weintraub (; April 28, 1914 – June 19, 1983) was an American economist, one of the most prominent American members of the Post Keynesian economics school. He was the co-founder and co-editor of The Journal of Post Keynesian Economics (1978). His views included criticism of monetarism and the neoclassical synthesis, and promotion of the tax-based incomes policy (TIP).

Steven Pressman (economist)

Steven Pressman (born February 23, 1952 in Brooklyn, New York) is an American economist. He is a former Professor of Economics and Finance at Monmouth University in West Long Branch, NJ. He has taught at the University of New Hampshire and Trinity College in Hartford, Connecticut.He has served as co-editor of the Review of Political Economy since 1995, as Associate Editor and Book Review Editor of the Eastern Economic Journal since 1989, and a member of the Editorial Advisory Board of the journal Basic Income Studies since 2005.He has been on the Board of Directors of the Eastern Economic Association from 1994 to the present, and since 1996 he has served as Treasurer of the group. In addition he has been a regular book reviewer for "Dollars and Sense" since 2010.

Thomas Palley

Thomas Palley (born March 17, 1956) is an American economist who has served as the chief economist for the US–China Economic and Security Review Commission. He is currently Schwartz Economic Growth Fellow at the New America Foundation.

Victoria Chick

Victoria Chick (born 1936) is a Post Keynesian economist who is best known for her contributions to the understanding of Keynes's General Theory and to the establishment of Post Keynesian economics in the UK and elsewhere.

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