Post-Keynesian economics
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Post-Keynesian economics is a school of thought which is based on the ideas of John Maynard Keynes. It differs from the interpretation of Keynes' ideas offered by mainstream Keynesian economics, such as the new Keynesian economics, emphasising in particular:
- The importance of uncertainty, historical time, or non-ergodicity (as opposed to risk, logical time, and ergodic processes).
- The idea that money matters for the "real" economy (output, employment, etc.) in both the short and long runs.
- A rejection of neoclassical general equilibrium models.
Post-Keynesian economists believe that a capitalist economy has no natural or automatic tendency towards full employment. Fixed investment is a major determinant of the level of aggregate demand in closed or large economy. Decisions on the level and direction of investment are made in anticipation of future events, which agents cannot know even probabilistically. Post-Keynesians emphasize the need for government fiscal policy to support institutions to support employment and incomes. "Logical time" is the type of "time" seen in most economic models, i.e., comparative statics exercises in which an equilibrium is disturbed and the model automatically moves to a new, predetermined, equilibrium with no attention given by the economist to the process of getting there. On the other hand, "historical time," the present is nothing but a moment in the passage from the immutable past to the unknowable future (to paraphrase Joan Robinson). The economy is always a dynamic process and (almost) never in an equilibrium state. The actual process of going from situation A to situation B is path dependent, helping to determine the character of situation B rather than it being predetermined. Thus, the post-Keynesian conception of the "long run" differs from that of neoclassicals and various neoclassical schools of Keynesian economics.
Post-Keynesians believe, along with others, that what many call Keynesianism is, in fact, a counterrevolution against the economics of Keynes. Keynesianism, as developed by many American economists, teaches that involuntary unemployment is a temporary or medium-run phenomenon. Government pump-priming may be desirable, but if wages and prices were perfectly flexible, mainstream Keynesian economists believe, the labor market would eventually clear, as in the classical theory of unemployment.
An often underestimated contribution by post-Keynesian economics is in monetary theory. Basil J Moore's book "Horizontalists and Verticalists" (Cambridge University Press, 1988; ISBN 0-521-35079-4) pointed to an important difference between traditional monetary theory, where money is perceived exogenous to the real sector, and a post-Keynesian theory where money is endogenous. The terms "vertical" and "horizontal" refer to how traditional and post-Keynesian monetary theory view money supply: the former regard it as vertical, i.e., fixed at any point in time and thereby under complete control by the central bank; the latter consider money supply to be entirely regulated by the market for money, leaving only the funds rate in the hands of the central bank.
There are divisions within post-Keynesian economics, for example between American post-Keynesians such as Paul Davidson and the Cambridge (England) - Italian branch. The latter often focuses on issues of microeconomics, especially the capital controversy, and is closely related to the neo-Ricardian school.
Post-Keynesian economics emphasizes macroeconomics. Many post-Keynesians look to American Institutionalists for microeconomics. Institutionalists include such economists as Thorstein Veblen, John R. Commons, Wesley Clair Mitchell, John Maurice Clark, Clarence Ayres, Gunnar Myrdal (not an American), and John Kenneth Galbraith.
Much post-Keynesian research is published Journal of Post-Keynesian Economics, which also publishes mainstream Keynesian economic research.
The influence of post-Keynesian economics was greatest during the 1960s and 1970s, when the capital controversy was a focus of professional attention and the resurgence of unemployment showed up deficiencies in mainstream Keynesianism.
Post-Keynesianism has not built any strong presence in the economics discipline. It prevails as an archipelago of economics departments across the academic landscape. Its strongest presence today in North America is at the University of Missouri, Kansas City[1]. It has failed to open a lasting dialogue with mainstream economics in part because of deep methodological differences. Mainstream economics relies heavily on quantitative methods, which post-Keynesians are more reluctant to accept. According to them, key elements in the economic system, such as uncertainty and the role and stability of institutions, are difficult to quantify to a degree that would be acceptable to mainstream economics.
[edit] Major post-Keynesian economists
- Paul Davidson [2]
- Alfred Eichner
- Richard Goodwin
- Nicholas Kaldor
- Michal Kalecki [3]
- Jan Kregel
- Hyman P. Minsky
- Luigi Pasinetti
- Piero Sraffa
- Joan Robinson
- G. L. S. Shackle
- Sidney Weintraub
- James Crottty [4]
- Jan Schmitz
- Victoria Chick
[edit] External links
| Macroeconomic schools of thought |
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| Keynesian economics • Monetarism • New classical economics • New Keynesian economics • Neo-Keynesian Economics • Austrian School • Supply-side economics • Post-Keynesian economics |
