Monetary Production Economy Research Articles

The Minskyan System, Part I Properties of the Minskyan Analysis and How to Theorize and Model a Monetary Production Economy

This is the first part of a three-part analysis of the Minskyan framework. Via an extensive review of the literature, this paper looks at 12 essential elements necessary to get a good understanding of Minsky's theory, and argues that those elements are central to comprehend how a monetary production economy works. This paper also shows how important these 12 elements are for the modeling of the Minskyan framework, and how the omission of one of them may be detrimental to an understanding of the essential dynamics that Minsky put forward: the Financial Instability Hypothesis.

A general equilibrium model of a production economy with asset markets

In this paper, a general equilibrium model of a monetary production economy is presented. The model is characterized by three classes of agents: a representative firm, heterogeneous households, and the government. Two markets (i.e., a labour market and a goods market, are considered) and two assets are traded in exchange of money, namely, government bonds and equities. Households provide the labour force and decide on consumption and savings, whereas the firm provides consumption goods and demands labour. The government receives taxes from households and pays interests on debt. The Walrasian equilibrium is derived analytically. The dynamics through quantity constrained equilibria out from the Walrasian equilibrium is also studied by means of computer simulations.

Universal assurances in the public interest: evaluating the economic viability of basic income and job guarantees

This article evaluates the strategies of guaranteeing unconditional basic income against those of guaranteeing employment. It is argued that, moral justifications notwithstanding, an open-ended commitment to either policy requires a clear grasp of its macroeconomic effects and institutional aspects. The tax-driven approach to money (also known as 'modern money') reveals that, while government funding for either proposal is not 'operationally' constrained, it produces disparate economic outcomes, depending on the program design of the universal guarantee. A modern money critique of the basic income proposal demonstrates that, in a monetary production economy, the unconditional supply of the monetary unit is inherently inflationary. By contrast, job guarantees can provide an important safety net by simultaneously stabilising prices. Additionally, job guarantees offer an institutional vehicle for achieving other social goals that are important to all advocates of universal assurances. The paper concludes that, to provide for all members of society, a joint policy option is necessary and outlines the broad contours of such a policy.

A dynamic general disequilibrium model of a sequential monetary production economy

Abstract A discrete, deterministic, economic model, based on the framework of non-Walrasian or disequilibrium economics, is presented. The main feature of this approach is the presence of non-clearing markets, where not all demands and supplies are satisfied and some agents may be rationed. The model is characterized by three agents (i.e., a representative firm, a representative consumer, and a central bank), three commodities (i.e., goods, labour and money, each homogeneous) and three markets for their exchange. The imbalance between demand and supply in each market determines the dynamics of price, nominal wage and nominal interest rate. The central bank provides the money supply according to an operating target interest rate that is fixed accordingly to Taylor’s rule. The model has been studied by means of computer simulations. Results pointed out the presence of business cycles that can be controlled by proper policies of the central bank.

Keynes and Commons on Money

Post Keynesians and institutionalists share several common ideas. As Robert Keller showed, they have the same conception of time, money, and (1983). Because time is historical, it implies that decisions are irreversible and that uncertainty matters and shapes the behavior of economic actors. This appears notably through the use of money, which permits the transfer of purchasing power from the to the present (satisfaction of animal spirits) and the transfer of expected purchasing power in a safe form, from the present to the (liquidity preference). Thus, sticky monetary contracts are essential in a monetary production economy to stabilize expectations induced by uncertainty. However, expectations and interests of each group in the are not necessarily convergent. This implies that the creation and the enforcement of these contracts is a source of tension between groups with different economic power. Therefore, we live in a world in which relations of subordination and a concentration of economic power are the rule and perfect competition does not and cannot exist. If one looks more specifically at the writings of John Maynard Keynes and John R. Commons, it is possible to find many similarities as Glen Atkinson and Theodore Oleson (1998) have shown. Among these essential similarities are their conception of time and the way the economy works. Both consider time irreversible and that the economy is turned toward the future. In Commons' works, the concept of futurity expresses this idea: economic actors create and exchange property rights, the value of which depends on expected incomes. Thus, agents live in an uncertain world and are subject to the unseen pressure of society to evaluate monetarily an unseen future (1959, 440). In Keynes, all this appears in his theory of investment and employment, according to which entrepreneurs try to calculate the marginal efficiency of capital and to fix the level of employment at the point of effective demand. Keynes and Commons

Circuit theory of banking and finance

Drawing on monetary circuit theory, this study develops an approach to analyze the integrated functions of banking and finance in a monetary production economy. The study proposes a micro-founded, circuit-sequenced model of a decentralized-decisions economy, where production, exchange, and investment from households and firms are integrated through money creation and funds allocation operated, respectively, by banks and non-bank financial intermediaries. The model is used to draw implications on: the special nature of banks and the role of non-bank financial intermediaries; the relationship between saving and investment; and the channels through which finance may cause the circuit process to break down. The study also discusses how the circuit approach can be used for an integrated analysis of economic and financial structural change.

Theories of Value and the Monetary Theory of Production

This paper extends earlier work (Wray 1991; see also Wray 1992b) that argued that liquidity preference theory should be interpreted as a theory of value. Here I will argue that two theories of value are needed for analysis of a monetary production economy: the labor theory of value and the liquidity preference theory of value. Both Keynes and Marx were trying to develop a monetary theory of production; Marx, of course, adopted a labor theory of value in his analysis, and it was previously argued that Keynes adopted a liquidity preference theory in his. A monetary theory of production should adopt both, however, and I will argue that Keynes seems to have recognized this. Further, Keynes did adopt labor hours as the measure of value and said he agreed that labor produces all value. I admit it is still a leap to claim that Keynes accepted both theories of value. Instead, I argue he should have adopted both and will show that this is consistent with the purposes of the General Theory.

Modigliani-Miller On Capital Structure: A Post-Keynesian Critique

The celebrated Modigliani-Miller (hereafter MM) proposition that the value of the firm depends on its profitability and not on its capital structure (Modigliani and Miller 1958) is avowedly an application to the field of finance of the doctrine that money is neutral. The broad purpose of this paper is to call into question the claim for the neutrality of money in the particular case of the money-contract relationship represented by corporate gearing, 1 by invoking essentially the same argument as post-Keynesians use to dispute it in the general macroeconomic case: that, in a monetary production economy operating under conditions of intractable uncertainty and in which firms and households constitute categorically distinct functional entities, money and money contracts have a unique and positive role. Orthodox capital structure theorists divide into two camps. 2 The fundamentalists, specifically MM themselves, argue that the world approaches perfection sufficiently closely, or that imperfections are mutually offsetting to a sufficient degree, for gearing not to matter in reality. 3 The revisionists, including authors of finance texts writing for a wide readership for whom theoretical ingenuity may not necessarily be the highest value, attempt to accommodate, within the confines of orthodoxy, what Edwards (1987 p.1) describes as (t)he stark contrast between Modigliani and Miller's theoretical analysis and empirical observations of the importance attached to capital structure... by both firms and investors. In essence, their argument is that imperfections are important enough to make gearing matter, that they are in fact the key to understanding why firms make the gearing decisions they do. This paper takes issue with fundamentalist and 1 or leverage in US parlance 2 This statement is perhaps in need of some qualification, since it is not clear that the group of theorists who seek to explain capital structure outcomes in terms of information asymmetries can straightforwardly be classified as belonging to either camp. [For a sympathetic survey of such views, see Edwards (1987)]. To undertake a full critique of this approach within this paper would be too much of a digression from its central purpose. Suffice it to say that these writers seem to have discovered facts about agents' consciousness - that gearing decisions have information content - of which, on all the empirical evidence available, the agents in question, corporate managers and stock market traders, seem blissfully unaware. 3 This is the essence of the argument to be found in Miller (1977), in which he seeks to vindicate the original MM position against the view which he sees as having subsequently become dominant and which I label revisionist.

Mr Keynes and the Post Keynesians: Principles of Economics for a Monetary Production Economy

(1993). Mr Keynes and the Post Keynesians: Principles of Economics for a Monetary Production Economy. Journal of Economic Issues: Vol. 27, No. 4, pp. 1300-1303.

Mr. Keynes and the Post Keynesians: Principles of Macroeconomics for a Monetary Production Economy.

Attempts to establish the methodological connections between Keynes's uncertainty concept and the evolving post-Keynesian literature. It also considers why the Hicksian ISLM Keynesian approach went off the careful analytic tracks laid down by Keynes.

Mr. Keynes and the post Keynesians: principles of macroeconomics for a monetary production economy

Mr. Keynes and the post Keynesians: principles of macroeconomics for a monetary production economy

Liquidity, loanable funds, and real activity

This paper develops a general equilibrium model of two traditional explanations of the monetary ‘black box’ linking money and real activity: the liquidity effect and the loanable funds effect. These effects are modeled with a monetary production economy in which central bank injections of cash are funnelled into the economy through the credit market. Since only borrowers have direct access to the newly injected cash. monetary injections cause nominal interest rates to fall. If firms are borrowers, then monetary injections also increase current and future real activity.

More revolutionary than thou

THE KEYNESIAN REVOLUTION AND ITS CRITICS: ISSUES OF THEORY AND POLICY FOR THE MONETARY PRODUCTION ECONOMY by Gordon A. Fletcher New York: St. Martin's Press, 1987. 348pp., $35.00 A commonplace of the history of economic thought, repeated by Fletcher, holds that Keynes was the first economist of the 1930s to reject Say's Law of Markets. It is argued that Fletcher ignores many of Keynes's contemporaries, especially those influenced by Knut Wicksell, who disagreed with Say but who used a framework for monetary analysis that was sounder in all respects than that of Keynes's General Theory.

La généralisation de la théorie de la monnaie en économie monétaire de production

La généralisation de la théorie de la monnaie en économie monétaire de production

The Keynesian Revolution and its Critics: Issues of Theory and Policy for the Monetary Production Economy.

Part 1 Money in the economy: the institution of money - an introduction the monetary economy money, investment and saving - Keynes' crucial distinction, Say's Law in a monetary economy. Part 2 The Keynesian revolution and its critics - Robertsonian economics: Keynes' revolution the Robertsonian critique the principle of effective demand Keynes' theory of investment and saving Robertson and Keynes or investment and saving the finance of investment the rate of interest a monetary theory of the rate of interest the conditions for money as the standard the market rate of interest and its economic significance the Keynesian economic problem and its solution. Part 3 The Keynesian revolution and its critics - monetarists and Austrians: the consequences of Mr Keynes? monetarism - the counter-revolution - Keynes and the Keynesians - rational expectations the Austrians - tenets of the faith - Hayek and the trade cycle - two routes to serfdom employment policy the Keynesian revolution in context.

El dinero en la historia del pensamiento económico: la teoría monetaria postkeynesiana y su confrontación con la ortodoxia

Las disputas en torno a determinados aspectos del dinero, como su neutralidad y el carácter endógeno o exógeno de la oferta monetaria, han sido permanentes entre las distintas escuelas de pensamiento y autores, estando su origen, probablemente, en la época de desarrollo del pensamiento escolástico. En este artículo pretendemos, en primer lugar, realizar un recorrido cronológico e histórico sobre el tratamiento científico económico del dinero, para, en segundo lugar, poner sobre la mesa la macroeconomía ortodoxa a la que han dado lugar las interpretaciones al respecto, así como los enfoques alternativos frente a este pensamiento dominante. Finalmente, intentamos poner en valor los desarrollos monetarios post-keynesianos, integrados en lo que denominan “Economía Monetaria de Producción”, confrontándolos con la llamada Nueva Síntesis Neoclásica.