New Keynesian Economics Post Keynesian Alternatives (Routledge Frontiers of Political Economy, 9)

409 Pages·1998·3.47 MB·English

by  Roy J. Rotheim

NEW KEYNESIAN ECONOMICS/POST
KEYNESIAN ALTERNATIVES
This collection of original essays by the world’s most prominent Post Keynesian
Economists offers a critique of what has come to be known as New Keynesian
Economics and provides alternative conceptions to each of its principal areas:
(cid:127) price and quantity adjustments
(cid:127) the labour market
(cid:127) the capital market
(cid:127) coordination failures
(cid:127) public policy
The volume is a response to Mankiw and Romer’s New Keynesian Economics, and to
the claim that New Keynesian Economics has provided a unique micro-economic
foundation for so-called Keynesian features and Keynesian results.
John Maynard Keynes wrote that any theory based on such foundations was
theoretically flawed, did not represent the world in which we lived and would entail
disastrous consequences if used as the basis of public policy. Adhering to this position
of Keynes, Post Keynesians reject any neoclassical foundation for Keynesian
economics. Instead, they provide a richer theoretical foundation—which does not
rely on the classical dichotomy embraced by all neo-classical economists—consistent
with Keynes’ monetary theory of production.
Roy J.Rotheim is Professor of Economics at Skidmore College, Saratoga Springs,
New York. He was previously Executive Editor of Challenge—The Magazine of
Economic Affairs and Associate Editor of the Eastern Economic Journal. His principal
publications have been in the areas of Keynesian uncertainty, economic theory, and
the history of economic thought.
ROUTLEDGE FRONTIERS OF POLITICAL
ECONOMY
1 Equilibrium Versus Understanding: Towards the Rehumanization of Economics
within Social Theory—Mark Addleson
2 Evolution, Order and Complexity—Edited by Elias L.Khalil and Kenneth E.
Boulding
3 Interactions in Political Economy: Malvern After Ten Years—Edited by Steven
Prassman
4 The End of Economics—Michael Perelman
5 Probability in Economics—Omar F.Hamouda and Robin Rowley
6 Capital Controversy, Post Keynesian Economics and the History of Economic
Theory: Essays in Honour of Geoff Harcourt, Volume One—Edited by Philip
Arestis, Gabriel Palma and Malcolm Sawyer
7 Markets, Unemployment and Economics Policy: Essays in Honour of Geoff
Harcourt, Volume Two—Edited by Philip Arestis, Gabriel Palma and Malcolm
Sawyer
8 Social Economy: The Logic of Capitalist Development—Clark Everling
9 New Keynesian Economics/Post Keynesian Alternatives—Edited by Roy J.
Rotheim
10 The Representative Agent in Macroeconomics—James E.Hartley
11 Borderlands of Economics: Essays in Honour of Daniel R.Fusfeld—Edited by
Nahid Aslanbeigui and Young Back Choi
12 Value Distribution and Capital—Edited by Gary Mongiovi and Fabio Petri
13 The Economics of Science—James R.Wible
14 Competitiveness, Localised Learning and Regional Development: Specialization
and Prosperity in Small Open Economies—Peter Maskell, Heikki Eskelinen,
Ingjaldur Hannibalsson, Anders Malmberg and Eirik Vatne
15 Labour Market Theory: A Critical Assessment—Ben J.Fine
16 Women and European Employment—Jill Rubery, Mark Smith, Damian
Grimshaw
17 Explorations in Economic Methodology: From Lakatos to Empirical Philosophy
of Science—Roger Backhouse
18 Wanting and Choosing: Essays on Subjectivity in Political Economy—David P.
Levine
NEW KEYNESIAN
ECONOMICS/POST
KEYNESIAN
ALTERNATIVES
Edited by Roy J.Rotheim
London and New York
First published 1998
by Routledge
11 New Fetter Lane, London EC4P 4EE
This edition published in the Taylor & Francis e-Library, 2003.
Simultaneously published in the USA and Canada
by Routledge
29 West 35th Street, New York, NY 10001
© 1998 Roy J.Rotheim
All rights reserved. No part of this book may be reprinted or
reproduced or utilized in any form or by any electronic,
mechanical, or other means, now known or hereafter
invented, including photocopying and recording, or in any
information storage or retrieval system, without permission in
writing from the publishers.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloguing in Publication Data
A catalogue record for this book has been requested
ISBN 0-203-43215-0 Master e-book ISBN
ISBN 0-203-74039-4 (Adobe eReader Format)
ISBN 0-415-12388-7 (Print Edition)
CONTENTS
List of contributors viii
Foreword ix
G.C.HARCOURT
Introduction 1
ROY J.ROTHEIM
PART I
Prices, outputs and markets
1 Setting the record straight 15
PAUL DAVIDSON
2 Keynes and the New Keynesians on market competition 39
J.A.KREGEL
3 New Keynesian macroeconomics and markets 51
ROY J.ROTHEIM
4 Price theory and macroeconomics: stylized facts and
New Keynesian fantasies 71
EDWARD J.NELL
PART II
The labour market
5 Wages and employment: a Keynesian model 106
CLAUDIO SARDONI
6 New Keynesian macroeconomics and the determination of
employment and wages 118
MALCOLM SAWYER
v
CONTENTS
7 Some questions for New Keynesians 134
SERGIO NISTICÓ
FABIO D’ORLANDO
Appendix by BENEDETTO SCOPPOLA
8 Social norms as rational choices 153
MURRAY MILGATE
CHERYL B.WELCH
9 New Keynesians, Post Keynesians and history 168
JOHN B.DAVIS
10 Elements of conflict in UK wage determination 182
PHILIP ARESTIS
IRIS BIEFANG-FRISANCHO MARISCAL
PART III
Money, credit rationing and asymmetric information
11 Menu costs and the nature of money 205
MALCOLM SAWYER
12 Knowledge, information and credit creation 214
SHEILA DOW
13 Post and New Keynesians: the role of asymmetric information
and uncertainty in the construction of financial institutions
and policy 227
DORENE ISENBERG
14 Disembodied risk or the social construction of creditworthiness? 241
GARY A.DYMSKI
15 A Kaleckian view of New Keynesian macroeconomics 262
TRACY MOTT
PART IV
Post Walrasian macroeconomics
16 Beyond New Keynesian economics: towards a post Walrasion
macroeconomics 277
DAVID COLANDER
17 Complex dynamics in New Keynesian and Post Keynesian models 288
J.BARKLEY ROSSER, JR.
vi
CONTENTS
18 Post Keynesian and strong Keynesian macroeconomics:
compatible bedfellows? 303
COLIN ROGERS
PART V
Public policy
19 On a recent change in the notion of incomes policy 328
GIOVANNI CARAVALE
20 Money and interest rates in a monetary theory of production 339
BASIL J.MOORE
21 Macroeconomic policy for the long haul 356
HERBERT GINTIS
Bibliography 370
Index 396
vii
CONTRIBUTORS
Philip Arestis, University of East London, England.
Iris Biefang-Frisancho Mariscal, University of East London, England.
Giovanni Caravale, formerly University of Rome, ‘La Sapienza’, Italy.
David Colander, Middlebury College, USA.
Paul Davidson, University of Tennessee, Knoxville, USA.
John B.Davis, Marquette University, USA.
Fabio D’Orlando, University of Rome, ‘La Sapienza’, Italy.
Sheila Dow, University of Stirling, Scotland.
Gary A.Dymski, University of California-Riverside, USA.
Herbert Gintis, University of Massachusetts-Amherst, USA.
G.C.Harcourt, University of Cambridge, England.
Dorene Isenberg, Drew University, USA.
J.A.Kregel, University of Bologna, Italy.
Murray Milgate, University of Cambridge, England.
Basil J.Moore, Wesleyan University, USA.
Tracy Mott, University of Denver, USA.
Edward J.Nell, New School for Social Research, USA.
Sergio Nisticó, University of Rome, ‘La Sapienza’, Italy.
Colin Rogers, University of Adelaide, Australia.
J.Barkley Rosser, Jr., James Madison University, USA.
Roy J.Rotheim, Skidmore College, USA.
Claudio Sardoni, University of Rome, ‘La Sapienza’, Italy.
Malcolm Sawyer, University of Leeds, England.
Cheryl B.Welch, Simmons College, USA.
viii
FOREWORD
It is a pleasure and a privilege to write a Foreword to Roy Rotheim’s volume on
New Keynesian Economics/Post Keynesian Alternatives. I have known Roy since he
was a graduate student and have noted with sustained admiration his range of
scholarship, sound judgement and fine analytical abilities. I also know personally
most of the contributors to the volume, and their writings, and for them too I
have much respect. What inspires them all is their thorough understanding of both
the economy and Keynes’s interpretation of it. So the contributors are not
expressing mere piety sixty years on from the publication of The General Theory
and fifty years on from the death of Keynes; rather, it is that they recognize deep
insights when they see them and want to build on the basis of those insights. To do
so not only means making the positive contributions to theory and policy which
characterize this volume but also requires the need to criticize error, no matter
how well intentioned the perpetrators of it.
Thus, the New Keynesian theories are criticized because they are a thorough
misnomer. They are based on a misinterpretation of Keynes which has disastrous
consequences for understanding and policy. That Keynes-type results in the
economy emanate from price-stickiness is a howler in two senses: it is a false
reading of The General Theory and, more importantly, of how the economy actually
works. If we are ever to get a just, equitable and efficient society, policies which
try to increase the flexibility of markets are exactly the wrong ones to propose—
that way lies greater instability, crisis and ultimately chaos. The essays in this
collection are therefore greatly to be welcomed as an offset to this highly influential
but misleading school of thought. The essays show the value of knowing what the
really great in the profession actually said and, even more important, what the
economy itself is able to tell us.
Now read on.
G.C.Harcourt
Cambridge
March 1997
ix