Post-Keynesian economics

"After Keynes, it was no longer possible to develop economic theory within the old equilibrium framework. The temporal dimension he introduced was there to stay. The next step was logical: the emergence of growth theory as such. Here, however, the inherent limits of orthodox economic theory checked its own spontaneous trajectory. The preoccupation with growth which is the distinguishing feature of post-Keynesian economics should logicallyhave returned it to political economy (and its apex, Marx). For the reproduction of capital was central to Marx’s concerns. But political economy was forbidden, for obvious reasons: it by definition put the socio-economic system as a whole in question."

"Academics who continue to be amused and intrigued with the still-growing literature on the economics of John Maynard Keynes have had to learn to distinguish among the several different schools that draw inspiration from the master. Hyphenated or adjectival Keynesianism includes, for instance, both Neo-Keynesianism, which is based on an assumed wage and price stickiness, and New Keynesianism which attempts to explain the stickiness. Neo- and New Keynesianism share certain methodological presuppositions with Neo- and New Classicism but do not share in the judgment that markets are generally self-equilibrating. Interpreters who prefer to blend Keynes's ideas with those of the old classical school, which featured a cost-based production theory, have adopted "post" as their adjective of choice. … Post Keynesians emphasize Keynes's vision of utopia and the associated reform proposals almost to the exclusion of his diagnosis of depression and prescription of short-run demand-management policies. In fact, standard textbook Keynesianism, whose graphics and equations make the case for monetary and fiscal activism, are repeatedly described in the Davis volume as "bastardized Keynesianism" (Joan Robinson's term) so as to provide an appropriate contrast with the more radical Keynesianism adopted by the volume's contributors. If "post Keynesians" did nothing but embrace these utopian aspects of Keynes, they would more accurately be described as Keynesian fundamentalists."

"Such an emphasis is justified, from an Austrian perspective, because of numerous suggestions made that the two schools would benefit from some sort of “increased intellectual trade.” For instance, no less an authority than John Hicks has “made a case for increased integration” of the viewpoints of John Maynard Keynes and F.A. Hayek (Snowdon, Vane, and Wynarczyk 1994). The Austrians and Post Keynesians, in addition to their criticisms of orthodoxy on the issue of uncertainty, also share non-mainstream perspectives on the importance of monetary institutions (as opposed to strict money neutrality) and transitional states (as opposed to static equilibrium). However, despite their shared recognition of important factors such as ignorance, money, and time, the two schools remain far apart on the nature and significance of these factors within the economic system."

"Post Keynesian policy recommendations involve limiting the legal ability of individuals to bargain in the marketplace. Such recommendations include traditional demand management and "incomes" policies designed to stimulate expenditures while stifling free wage bargaining (Snowdon, Vane, and Wynarczyk 1994, pp. 367–82). However, a glaring omission in Davidson's chapter is that the link from the Post Keynesian position on uncertainty to the possibility of government action] to "improve the performance of the economy" is never made. Even if one accepts the view of an economy plagued by an all-encompassing uncertainty and entrepreneurs that act without any good reason for doing so, it still does not follow that government is capable of improving upon the results of this economic process.10 In fact, the Post Keynesians' own vision of pervasive uncertainty would seem to lean against such conclusions, for how, in a world of such uncertainty, could the government possibly form policies that are compatible with full employment and price stability? Under uncertainty, there can be no perfect ex ante knowledge of the relationship between actions and particular outcomes. To claim that government can improve upon free-market outcomes by reducing uncertainty, one must somehow infer that the government is able to obtain information that is unavailable to market participants in regard to future prospects. If Davidson has some reason to believe that government does indeed have access to such information, it is not stated here."

"Davidson's Post Keynesian account suffers from a related problem. Against his enemies, the proponents of efficient markets, Davidson is anxious to assure us that the future is uncertain. But he nevertheless has a mechanical view of what will happen if government spending in a recession takes place as massively as he wishes. Then, he assures us, the economic doldrums will end and all will be well. How does he know that business and consumer confidence will respond so readily to the injection of government money? Evidently, the future is uncertain, but somehow this state of affairs alters when government enters the scene.Why should we believe this? Why assume that business confidence is so rigidly determined? Is it not rather the result of many causes that, if indeed the future is uncertain, cannot be readily specified?"

"[A]mong its many other deficiencies, as spelled out by Mises and his followers, monetarism’s most fundamental flaw is identical to the most fundamental flaw of Keynesian, Post-Keynesian, New Classical, and other theories advanced by macroeconomists during the past seventy or eighty years: not only does the theory leave out critical variables, but it is too simple, being expressed in huge, all-encompassing aggregates that conceal the real economic action taking place within the economic order."

"The Carter Administration, like its predecessors, is not really coping with the causes of unemployment. Under the influence of post-Keynesian conceptions it seeks once again to stimulate the economy through deficit spending and credit expansion, through tax rebates and public works, and talks about raising minimum wages and increasing unemployment compensation. It is resorting to the very measures that create unemployment rather than alleviate it.Throughout the Keynesian and post-Keynesian era, the inexorable laws of economics have not changed. Unemployment still is, and always has been, a cost phenomenon. A worker whose employ ment adds valuable output and is profitable to his employer can always find a job. A worker whose employment inflicts losses is destined to be unemployed."

"I am very unsympathetic to the school that calls itself post-Keynesian. First of all, I have never been able to understand it as a school of thought. I don't see an intellectual connection between a Hyman Minsky, on the one hand, who happens to be one of the oldest friends I have, and someone like Alfred Eichner, on the other, except that they are all against the same thing, namely the mainstream, whatever that is. The other reason why I am not sympathetic is that I have never been able to piece together (I must confess that I have never tried very hard) a positive doctrine. It seems to be mostly a community which nows what it is against but doesn't offer anything very systematic that could be described as a positive theory. I have read many of Paul Davidson's articles and they often do not make sense to me. Some of post-Keynesian price theory comes forth from the belief that universal competition is a bad assumption. I have all my life known that. So I have found it an unrewarding approach and have not paid much attention to it."