Classical-Keynesian Political Economy, not Neoclassical Economics, is the Economic Theory of the Future

Abstract

ABSTRACT This article implies that the time is ripe for a new paradigm in economic theory comprising classical (Ricardian) and Keynesian elements of analysis. The central Section Five presents the basic equations of classical-Keynesian political economy, the price and the quantity equation, based on three constitutive principles: the classical labour value and surplus principles and the Keynesian principle of effective demand. Subsequently, two employment mechanisms implied in the super-multiplier relation, the classical-Keynesian quantity equation, are mentioned, the internal and the external employment mechanism. Section Seven provides an analysis of the actual situation on the basis of the external employment mechanism, associated with cumulative processes of increasing disequilibria and inequalities. Given this, it ought to be replaced by the internal employment mechanism, allowing for Keynesian employment and distribution policies (Section Eight). However, the internal mechanism can only be implemented if a new world economic order is brought about, based upon a supranational currency, that is, Keynes's bancor, to ensure balance of current account equilibria worldwide. Section Ten sets forth Keynes's social liberalism, the social philosophy underlying classical-Keynesian political economy, the fundamental social ethical value of which is the Common Good. Social Liberalism thus emerges as the alternative to Capitalism and Socialism.