Post-Keynesian economics

Post-Keynesian economics

Overview
Post Keynesian economics is a school of economic thought with its origins in The General Theory of John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

, although its subsequent development was influenced to a large degree by Michał Kalecki, Joan Robinson
Joan Robinson
Joan Violet Robinson FBA was a post-Keynesian economist who was well known for her knowledge of monetary economics and wide-ranging contributions to economic theory...

, Nicholas Kaldor
Nicholas Kaldor
Nicholas Kaldor, Baron Kaldor was one of the foremost Cambridge economists in the post-war period...

 and Paul Davidson
Paul Davidson (economist)
Paul Davidson is an American macroeconomist who has been one of the leading spokesmen of the American branch of the Post Keynesian school in economics...

. Keynes's biographer Lord Skidelsky writes that the Post Keynesian school has remained closest to the spirit of Keynes's own work.

The term Post Keynesian was first used to refer to a distinct school of economic thought by Eichner and Kregel (1975) and by the establishment of the Journal of Post Keynesian Economics in 1978.
Discussion
Ask a question about 'Post-Keynesian economics'
Start a new discussion about 'Post-Keynesian economics'
Answer questions from other users
Full Discussion Forum
 
Unanswered Questions
Recent Discussions
Encyclopedia
Post Keynesian economics is a school of economic thought with its origins in The General Theory of John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

, although its subsequent development was influenced to a large degree by Michał Kalecki, Joan Robinson
Joan Robinson
Joan Violet Robinson FBA was a post-Keynesian economist who was well known for her knowledge of monetary economics and wide-ranging contributions to economic theory...

, Nicholas Kaldor
Nicholas Kaldor
Nicholas Kaldor, Baron Kaldor was one of the foremost Cambridge economists in the post-war period...

 and Paul Davidson
Paul Davidson (economist)
Paul Davidson is an American macroeconomist who has been one of the leading spokesmen of the American branch of the Post Keynesian school in economics...

. Keynes's biographer Lord Skidelsky writes that the Post Keynesian school has remained closest to the spirit of Keynes's own work.

Introduction


The term Post Keynesian was first used to refer to a distinct school of economic thought by Eichner and Kregel (1975) 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 The General Theory.
Post Keynesian economists are united in maintaining that Keynes's theory is seriously misrepresented by the two other principal Keynesian schools: neo-Keynesian economics
Neo-Keynesian Economics
Neo-Keynesian economics is a school of macroeconomic thought that was developed in the post-war period from the writings of John Maynard Keynes. A group of economists , attempted to interpret and formalize Keynes' writings, and to synthesize it with the neo-classical models of economics...

 which was orthodox in the 1950s and 60s - and by New Keynesian economics
New Keynesian economics
New Keynesian economics is a school of contemporary macroeconomics that strives to provide microeconomic foundations for Keynesian economics. It developed partly as a response to criticisms of Keynesian macroeconomics by adherents of New Classical macroeconomics.Two main assumptions define the New...

, which together with various strands of neoclassical economics
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...

 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 Post Keynesians such as Joan Robinson
Joan Robinson
Joan Violet Robinson FBA was a post-Keynesian economist who was well known for her knowledge of monetary economics and wide-ranging contributions to economic theory...

 sought to distance themselves from Keynes himself and much current Post Keynesian thought cannot be found in Keynes. Some Post Keynesians took an even more progressive view than Keynes with greater emphases on worker friendly policies and re-distribution. Robinson, Paul Davidson
Paul Davidson (economist)
Paul Davidson is an American macroeconomist who has been one of the leading spokesmen of the American branch of the Post Keynesian school in economics...

 and Hyman Minsky
Hyman Minsky
Hyman Philip Minsky was an American economist and professor of economics at Washington University in St. Louis. His research attempted to provide an understanding and explanation of the characteristics of financial crises...

 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.

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
Full employment
In macroeconomics, full employment is a condition of the national economy, where all or nearly all persons willing and able to work at the prevailing wages and working conditions are able to do so....

. Contrary to the views of New Keynesian economists working in the neo-classical tradition, Post Keynesians do not accept that the theoretical basis of the market failure to provide full employment is rigid or sticky prices or wages. Post Keynesians typically reject the IS/LM model
IS/LM model
The IS/LM model is a macroeconomic tool that demonstrates the relationship between interest rates and real output in the goods and services market and the money market...

 of John Hicks
John Hicks
Sir John Richard Hicks was a British economist and one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory in microeconomics, and the IS/LM model , which...

, which was very influential in neo-Keynesian economics.

The positive contribution of Post Keynesian economics 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 'real' forces of technology, preferences and endowment. 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, 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
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...

, 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.

Strands


There are a number of strands to Post Keynesian theory with different emphases. Joan Robinson regarded Michal Kalecki’s theory of effective demand to be superior to Keynes’s theories. Kalecki's theory is based on a class division between workers and capitalists and imperfect competition. She also led the critique of the use of aggregate production functions based on homogeneous capital – the Cambridge capital controversy
Cambridge capital controversy
The Cambridge capital controversy – sometimes simply called "the capital controversy" – refers to a theoretical and mathematical debate during the 1960s among economists concerning the nature and role of capital goods and the critique of the dominant neoclassical vision of aggregate...

 – winning the argument but not the battle. Much of Nicholas Kaldor
Nicholas Kaldor
Nicholas Kaldor, Baron Kaldor was one of the foremost Cambridge economists in the post-war period...

’s work was based on the ideas of increasing returns to scale, path dependency, and the key differences between the primary and industrial sectors. Paul Davidson
Paul Davidson (economist)
Paul Davidson is an American macroeconomist who has been one of the leading spokesmen of the American branch of the Post Keynesian school in economics...

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

, 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.

Journals


Much Post Keynesian research is published in the Journal of Post Keynesian Economics (founded by Sidney Weintraub
Sidney Weintraub
Sidney Weintraub was one of the most prominent American members of the Post Keynesian school in economics.-External links:*...

 and Paul Davidson
Paul Davidson (economist)
Paul Davidson is an American macroeconomist who has been one of the leading spokesmen of the American branch of the Post Keynesian school in economics...

), 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).

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 has 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
Job guarantee
A job guarantee 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...

 programs, and economic policy.

University of Newcastle


The University of Newcastle
University of Newcastle, Australia
The University of Newcastle is an Australian public university that was established in 1965. The University's main and largest campus is located in Callaghan, a suburb of Newcastle in New South Wales...

, in New South Wales
New South Wales
New South Wales is a state of :Australia, located in the east of the country. It is bordered by Queensland, Victoria and South Australia to the north, south and west respectively. To the east, the state is bordered by the Tasman Sea, which forms part of the Pacific Ocean. New South Wales...

, Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...

, houses CofFEE, the Centre of Full Employment and Equity
Centre of Full Employment and Equity
The Centre of Full Employment and Equity or CofFEE is an official research centre of the University of Newcastle, New South Wales, Australia, and has operated since 1998...

, an active educational, research and collaborative organisation whose focus is on policies "restoring full employment
Full employment
In macroeconomics, full employment is a condition of the national economy, where all or nearly all persons willing and able to work at the prevailing wages and working conditions are able to do so....

" and achieving an economy that delivers "equitable outcomes for all". CofFFEE's work is on Post-Keynesian macroeconomics, labour economics, regional development and monetary economics.

Major Post Keynesian economists


Major Post Keynesian economists of the first and second generation after Keynes include:
  • Victoria Chick
    Victoria Chick
    Victoria Chick 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.-Biography:...

  • Paul Davidson
    Paul Davidson (economist)
    Paul Davidson is an American macroeconomist who has been one of the leading spokesmen of the American branch of the Post Keynesian school in economics...

  • Alfred Eichner
    Alfred Eichner
    Alfred Eichner was an American post-Keynesian economist who challenged the neo-classical price mechanism and asserted that prices are not set through supply and demand but rather through mark-up pricing....

  • Geoff Harcourt
    Geoff Harcourt
    Geoffrey Colin Harcourt is an Australian academic economist who studied at the University of Melbourne and then at the King's College, Cambridge.-Biography:...

  • Nicholas Kaldor
    Nicholas Kaldor
    Nicholas Kaldor, Baron Kaldor was one of the foremost Cambridge economists in the post-war period...

  • Michał Kalecki
  • Jan Kregel
    Jan Kregel
    Jan A. Kregel is an eminent Post-Keynesian economist.Kregel has served since 2006 as Professor of Finance and Development at Tallinn University of Technology, Tallinn, Estonia. He is a permanent advisor for the Trade and Development Report of the United Nations Conference on Trade and Development...

  • Abba P. Lerner
    Abba P. Lerner
    Abba Ptachya Lerner was an American economist.Lerner was born on October 28, 1903 in Bessarabia . He grew up in a Jewish family, which emigrated to Great Britain when Lerner was three years old. Lerner grew up in the London East End. From the age of sixteen he worked as a machinist, a teacher in...

  • Hyman Minsky
    Hyman Minsky
    Hyman Philip Minsky was an American economist and professor of economics at Washington University in St. Louis. His research attempted to provide an understanding and explanation of the characteristics of financial crises...

  • Basil Moore
    Basil Moore (economist)
    Basil Moore is a Canadian Post-Keynesian economist, most 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...

  • Luigi Pasinetti
    Luigi Pasinetti
    Luigi L. Pasinetti is an Italian economist of the Post-Keynesians school. Pasinetti is considered the heir of the "Cambridge Keynesians" and a student of Piero Sraffa and Richard Kahn. Along with them, as well as Joan Robinson, he was one of the prominent members on the "Cambridge, UK" side of the...

  • Joan Robinson
    Joan Robinson
    Joan Violet Robinson FBA was a post-Keynesian economist who was well known for her knowledge of monetary economics and wide-ranging contributions to economic theory...

  • George Shackle
  • Anthony Thirlwall
    Anthony Thirlwall
    Tony Thirlwall is Professor of Applied Economics at the University of Kent. He has made major contributions to regional economics; the analysis of unemployment and inflation; balance of payments theory, and to growth and development economics with particular reference to developing countries...

  • Sidney Weintraub
    Sidney Weintraub
    Sidney Weintraub was one of the most prominent American members of the Post Keynesian school in economics.-External links:*...

  • William Vickrey
    William Vickrey
    William Spencer Vickrey was a Canadian professor of economics and Nobel Laureate. Vickrey was awarded the Nobel Memorial Prize in Economics with James Mirrlees for their research into the economic theory of incentives under asymmetric information...



Further reading

  • Holt, Ric; Pressman, Steven
    Steven Pressman (economist)
    Steven Pressman is an American economist. He is currently a Professor of Economics and Finance at Monmouth University in West Long Branch, NJ...

    (2006). Empirical Post Keynesian Economics: Looking at the Real World. M.E. Sharpe.

External links