Post-Keynesian economics
Post-Keynesian economics[1] is a school of economic thought with its origins in The General Theory of John Maynard Keynes, although its subsequent development was influenced to a large degree by Michał Kalecki, Joan Robinson, Nicholas Kaldor and Paul Davidson. Keynes' biographer Lord Skidelsky writes that the post-Keynesian school has remained closest to the spirit of Keynes' work, particularly in his monetary theory and in rejecting the neutrality of money.[2][3]
Introduction
Post-Keynesian economists maintain that Keynes' theory was seriously misrepresented by the two other principle Keynesian schools: neo-Keynesian economics which was orthodox in the 1950s and 60s - and by 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's ideas and insights. However even in the early years in the late 1940s post-Keynesians such as Joan Robinson sought to distance themselves from Keynes himself, as well as from the then emergent neo-Keynesianism. Some post-Keynesians took an even more progressive view than Keynes with greater emphases on worker friendly policies and re-distribution. Robinson, Paul Davidson and Hyman Minsky were notable for emphasising the effects on the economy of the practical differences between different types of investments in contrast to Keynes more abstract treatment.[4]
A feature 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.[5] Contrary to a view often expressed, the theoretical basis of this market failure is not rigid or sticky prices or wages (as in New Keynesian economics, which is best regarded as a modified form of neoclassical economics[citation needed]). Many post-Keynesians reject the IS/LM model of John Hicks, which was very influential in neo-Keynesian economics.
The positive contribution of post-Keynesian economics[6] has extended beyond the theory of aggregate employment to theories of income distribution, growth, trade and development in which demand plays a key role, whereas in neoclassical economics these are determined by the supply side alone. In the field of monetary theory, post-Keynesian economists were among the first to emphasise that the money supply responds to the demand for bank credit,[7] so that the central bank can choose either the quantity of money or the interest rate but not both at the same time. 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 recently received renewed attention.[8]
Strands
There are a number of strands to post-Keynesian theory with different emphases. Joan Robinson regarded as superior to Keynes’s Michal Kalecki’s theory of effective demand, based on a class division between workers and capitalists and imperfect competition.[9] She 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.[10] 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.[11] Paul Davidson [12] 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, although the school of thought has been marginalized within the academic profession.
Current work
Journals
Much post-Keynesian research is published in 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).
UK
There is also a UK academic association, the Post Keynesian Economics Study Group (PKSG).
US
Kansas City School
In America, there is a center of post-Keynesian work at the University of Missouri – Kansas City, dubbed "The Kansas City School", together with the Center for Full Employment and Price Stability, which run a Post Keynesian Conference and Post Keynesian Summer School, together with a group blog, Economic Perspectives from Kansas City. Their research emphasis includes Neo-Chartalism, job guarantee programs, and economic policy.
Major post-Keynesian economists
Major post-Keynesian economists of the first and second generation after Keynes include:
Post-Keynesian theories
- Job guarantee, from the Kansas City School
- Monetary circuit theory, often associated with post-Keynesian economics
- Neo-Chartalism, another post-Keynesian theory of money
See also
Notes
- ^ There is semantic dispute as to whether there should be a hyphen between Post and Keynesian. The American journal of the same name does not use the hyphen despite its grammatical correctness, and the objection to its use dates back to Paul Samuelson's claim to be a Post-Keynesian. However Harcourt 2006 uses the hyphen, following Joan Robinson's original use of the phrase.
- ^ Skidelsky 2009, p. 42
- ^ Financial markets, money and the real world, by Paul Davidson, pp. 88–89
- ^ Hayes 2008
- ^ Arestis 1996
- ^ For a general introduction see Holt 2001
- ^ Kaldor 1980
- ^ Minsky 1975
- ^ Robinson 1974
- ^ Pasinetti 2007
- ^ Harcourt 2006, Pasinetti 2007
- ^ Davidson 2007
References
- Arestis, Philip (1996). "Post-Keynesian economics: towards coherence". Cambridge Journal of Economics. 20: 111–135.
- Davidson, Paul (2007). John Maynard Keynes. Palgrave Macmillan.
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- Harcourt, Geoff (2006). The Structure of Post-Keynesian Economics. Columbia University Press.
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- Kaldor, Nicholas (1980). "Monetarism and UK economic policy". Cambridge Journal of Economics. 4: 271–218.
- Minsky, Hyman (1975). John Maynard Keynes. Columbia University Press.
- Pasinetti, Luigi (2007). Keynes and the Cambridge Keynesians. Columbia University Press.
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- Robinson, Joan (1974). An Introduction to Modern Economics (2 ed.). McGraw Hill.
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- Hayes, M.G. (2008). The Economics of Keynes: A new guide to the General Theory. Edward Elgar Publishing. p. 31. ISBN 9781848440562.
- Skidelsky, Robert (2009). Keynes: The return of the Master. Allen Lane. p. 42. ISBN 9781846142581.
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Further reading
- Holt, Ric (2001). A New Guide to Post Keynesian Economics. Routledge.
{{cite book}}: Unknown parameter|coauthors=ignored (|author=suggested) (help)CS1 maint: ref duplicates default (link) - Holt, Ric; Pressman, Steven (2006). Empirical Post Keynesian Economics: Looking at the Real World. M.E. Sharpe.