Monetary Theory Of Production Research Articles

Augusto Graziani on Italian Economic Development (1950–1970)

ABSTRACT Italian economic thought between the 1960s and 1990s provided important scientific contributions and one of its most authoritative representatives was certainly Augusto Graziani (1933–2014). On the international plane, Graziani is mainly known for his monetary theory of production while his theory of development and his analysis of the Italian economic have drawn relatively little debate. The purpose of this work is to illustrate his analysis of development in the light of two main considerations: (i) Graziani was very interested in long-term development issues for a long time. The 1969 collective book Lo sviluppo di un’economia aperta (The development of an open economy), the various editions of his L’economia italiana (The Italian economy) (1972, 1979 and 1989) and his contributions on the economy of Southern Italy (Mezzogiorno) are part of an organic, continuous, detailed and impressive explanatory work of the economic events that affected Italy from the 1950s onward and on which Graziani devoted more than thirty years of his scientific activity. (ii) His analysis of development offers interesting tools for interpreting the effects of some Italian policy choices critically debated by a part of the contemporary literature.

Post-Keynesian Economics: New Foundations, by Marc LavoieChapter 4: Credit, Money and Central Banks

ABSTRACT This article focuses on an analysis of chapter 4 of Lavoie’s magnus opus, Post-Keynesian Economics: New Foundations. It is the opening chapter of the macroeconomic section of the book. As we argue, following Keynes’s ‘monetary theory of production’, but also in line with Schumpeter, starting the discussion over macroeconomics with money makes sense. It is impossible, in post-Keynesian economics, to discuss the real economy independently of the monetary side of the analysis. In this sense, money and production, and debt, are linked within an endogenous money framework. This article covers and discusses all aspects of this chapter.

Revisiting some aspects of Marx's theoretical corpus in the light of modern economics

This research is aimed to revisiting some aspects of Marx’s theoretical corpus in the light of modern economics. First, we argue that Marx's labor theory of value is a monetary theory of production that allows for a resolution of capital measurement problem and precedes Keynes's General Theory. We then turn to reveal that Marx's monetary theory is a general theory of money from which arise a monetary theory of credit and a theory of paper money, both integrated into the theories of value and surplus value. Lastly, we discuss how Marx's foreign trade theory is integrated into his competition theory, and is not based on the unequal exchange hypothesis.

Marx Meets Keynes in the Classroom: Teaching a Simple Model of Modern Capitalism

ABSTRACT This paper presents a pedagogical model of the way modern capitalism works, which can be taught by using one single graph. Specifically, we extend earlier research by introducing features of the monetary theory of production [Graziani 1994. La Teoria Monetaria Della Produzione. Montepulciano: Editori del Grifo; Graziani 2003. The Monetary Theory of Production. Cambridge: Cambridge University Press] and distribution [Pivetti 1991. An Essay on Money and Distribution. London: Macmillan] into an existing model of the principle of effective demand [Andini 2009. ‘Teaching Keynes’s Principle of Effective Demand Within the Real Wage Vs. Employment Space.’ Forum for Social Economics 38 (2–3): 209–228.]. The resulting framework can be used for teaching a number of relevant economic propositions, which are consistent with the Marxian/Keynesian tradition in political economy. Among these, it is argued that both labour exploitation and ‘final finance’ loans play a fundamental role for the capitalist system to be money-profitable on aggregate.

A Keynes + Schumpeter Model to Explain the Relationship Between Money, Development and Crises

ABSTRACT Over the years, many economists have underlined the opportunity to integrate the lessons of Keynes and Schumpeter. Recently, Dosi and his co-authors have developed a ‘Keynes + Schumpeter’ model that describes a ‘complex evolving system’. This work presents a different version of a K + S model that highlights the role of bank money in the introduction of innovations, an essential part of Schumpeter’s analysis neglected by Dosi and his co-authors. The aim of this work is to integrate the visions of Keynes and Schumpeter in a way allowing: (i) to elaborate a monetary theory of production that highlights the relationship between money, development and crises; (ii) to show that the explanation of the relationship between money and crises derived from our K + S model is sounder than the explanations developed by Keynes in The General Theory, which is based on the liquidity preference theory, and by Schumpeter in Business Cycles, which, instead, is based on the concept of creative destruction.

On the monetary nature of the interest rate in a Keynes–Schumpeter perspective

Keynes, in the General Theory, explains the monetary nature of the interest rate by means of the liquidity preference theory. The objective of this article is twofold. The first objective is to point out the limits of the liquidity preference theory. The fundamental limitation of this theory is that it does not allow to realize the intent declared by Keynes in 1933 to elaborate a monetary theory of production The second objective is to present a more solid theory of the monetary nature of the interest rate. It will be shown that an essential element of this explanation is Schumpeter’s analysis of the role of bank money in a capitalist economy. In fact, this analysis represents a fundamental tool to explain the characteristics that, according to Keynes, distinguish a monetary economy from a real-exchange economy

Postkeynesianismus

This article takes an in-depth look at post-Keynesianism as a paradigmatic alternative to the dominant neoclassical mainstream. It quickly becomes clear that post-Keynesianism is not a unified school of thought, but rather an assortment of theoretical approaches that share certain methodological and epistemological similarities and characteristic postulates. The Article does not attempt to describe the full array of Kaleckian, Kaldorian and Sraffian variants of post-Keynesian theory but instead analysis the paradigmatic and formal structure of one particular form of post-Keynesianism, the monetary theory of production in order to reconstruct these characteristic postulates from the axiomatic core of post-Keynesianism. It then sets out the theory of market participation, an alternative theory of economic policy that builds on monetary production economics.

How can we restore the generality of the General Theory?

AbstractIn this paper, I tackle the key issue raised by Pasinetti, namely why Keynes failed to accomplish his revolution and build a unifying ‘monetary theory of production’ framework. I argue that this occurred because, following his Marshallian background, he adopted an oversimplified view of the structure of theories, a problem which, following Leontief, might be labelled as ‘implicit theorising’ (IT). By making a comparison between the General Theory and standard macroeconomics based on Lakatos’s ‘research programme’ notion, this paper explores IT in a systematic fashion and stresses two key points. First, Keynes did not attack the ‘true’ orthodox postulates but only the conclusions deriving from them. Secondly, he failed to articulate his own research programme effectively. Based on these points, the paper concludes that filling such gaps in Keynes’s theory is the precondition for restoring his generality claim.

Augusto Graziani and recent advances in the monetary theory of production

Augusto Graziani and recent advances in the monetary theory of production

Does fiscal policy affect the monetary transmission mechanism? A monetary theory of production (MTP) response to the new consensus macroeconomics (NCM) perspective

AbstractDrawing on the contributions of Augusto Graziani to the so‐called monetary theory of production, this article aims to show that an accommodative monetary policy—as defended in the new consensus macroeconomics theory and supported by current practice around the world—has the maximum effect in stimulating aggregate demand and income when it is implemented in conjunction with a coordinated discretionary fiscal policy that boosts the demand for and the supply of loans via the reduction of the liquidity risk and the insolvency risk. As a result, the potentially beneficial effects of the traditional Keynesian fiscal multiplier are significantly amplified.

Some Unusual Consequences Arising from the Alternative Money Theories

In the paper, it is considered the main consequences arising from the modern money theory, the monetary theory of production, and the continuity principle. The new standpoint on the processes of making loans and deposits is presented. As a result, it is proposed the new classification of deposits regarding their crucial ability to create or absorb liquidity. And it is also suggested to consider the bank loans and deposits as lifetime annuities. It is discovered the perspective of development of completely new direction in risk management for banking system and separate bank as well. Particularly, it is substantiated the replacement of the loans’ and deposits’ maturities by the customers’ lifetimes as the time horizons to estimate the credit and liquidity risks. The new content for such financial stability indicators as the loan-to-deposit ratio, the total exposures at credit risk, money inflows/outflows indicator and the reserves at Central bank-to-loans ratio is suggested.

Do Shadow Banks Create Money? ‘Financialisation’ and the Monetary Circuit

AbstractThe rise of the shadow banking system is viewed through the theoretical lens of Graziani's Monetary Theory of Production. Graziani's categories of ‘initial finance’ and ‘final finance’ are used to analyse the new forms of credit created in the shadow banking sector. It is argued that the accumulation of leverage in the shadow banking system and the creation of credit money by the traditional banking sector are symbiotic processes. While Graziani's triangular debtor‐bank‐creditor relationship remains central, the circuit operates in a perverse form in which household debt is stored on the balance sheets of shadow banks, allowing the banking system to break the historical connection between money creation and productive activity.

Augusto Graziani's Equilibrio generale ed equilibrio macroeconomico: a key milestone in a long journey out of the neoclassical mainstream

Educated in the best Italian cultural and economic tradition, Augusto Graziani was a scholar of great finesse and erudition. These qualities come out clearly in Equilibrio generale ed equilibrio macroeconomico (1965a), interpreted here as the initial step in a process that eventually brought Graziani to the final rejection of methodological individualism and the reconstruction of microeconomics on macroeconomic bases achieved with The Monetary Theory of Production (2003). In his 1965 book, Graziani shows that, save for the Sraffian–Kaldorian heterodox alternative, extending Walras to dynamics in a multisectoral framework requires assumptions logically equivalent to those of single good models. This also points implicitly towards the need of interpreting the mainstream temporary equilibrium method in terms of path dependency when it refers to multiple sectors, and thus precludes that it converges towards a ‘plain’, long-term intertemporal general equilibrium. The latter is a notion generally associated with the name of Walras and early marginalists, but which owes much to later developments by Hayek, Lindahl and Hicks.For the single period, Graziani's work on the monetary circuit can be read as an original variant of the monetary temporary equilibrium of Myrdal, where money and debt, combined with errors in exogenous expectations, explain the path-dependency of short-term equilibria. For continuation analysis, this is completed with insights from Wicksell, Schumpeter, Marx and Kalecki, whereby the circuit provides a simple explanation of the Keynesian fallacy of composition critique of microeconomics.But the book is also an important contribution to an Italian debate on capital theory, which emerged mainly in Il Giornale degli Economisti in the 1960s, in parallel with the more cosmopolitan ‘two Cambridge capital controversies’ that developed at the same time in the top American and British journals. Both originated in Sraffa's famous 1960 contribution and should thus be examined together.

The Ethics Inside the Monetary Circuit: How Bank’s Social Responsibility Affects Money Creation

<p>The paper aims to introduce ethical remarks into the monetary circuit (or monetary theory of production)<br />approach in order to study the mechanism of money creation when banks discriminate production on an ethical<br />plane. By the micro-foundation of the banks’ and firms’ behaviour, it will be shown that the ethical<br />discrimination of firms by banks is implemented by the differentiation of the mark-ups on the loan rate and how<br />this discrimination leads the system to create different credit markets according to the capacity (or willingness)<br />of firms to satisfy (or not) the ethical claims of the banks.</p>

Transnational Corporations in a Global Monetary Theory of Production - a Macroeconomic Perspective

This paper aims to put forward an original conceptual framework and a renewed perspective on monetary analysis applied to transnational corporations based on some of the views of Bernard Schmitt developed over the last forty years. After reviewing the terminological principles of the theory of money emissions, we show that Bernard Schmitt's theoretical insights have enabled the successful integration of money and output at the conceptual level along the lines of a Keynesian monetary theory of production. We then examine the issue of the definition of the transnational corporation and its exponential rise in the world economy with regard to the globalisation process. Finally, the inclusion of transnational corporations in the theory of money emissions allows us to redefine transnational production as an additional conceptual level in monetary macroeconomics, with far-reaching implications as far as the monetisation of transnational production and the subsequent reform of international payments are concerned.

Money, income, and profit: lessons from the monetary theory of production

In this paper we analyze Augusto Graziani’s numerous contributions to the monetary theory of production, which he developed from a theoretical but also a policy-oriented perspective. We focus on the rejection of the neoclassical dichotomy, the causal relation between production and money creation, and the definition of macroeconomic saving. These three dimensions of Graziani’s work can be identified in the framework of the monetary circuit, in the tradition of classical and Marxian economic thought. The outcome of Graziani’s investigations sheds light on the working of a monetary economy of production from the issuance of bank money to the distribution of income and capital accumulation.

On Graziani's monetary theory of production

In the paper it is underlined that, building on previous German and French literature, in various outstanding contributions Graziani analyses the working of a credit capitalist economy, that is an economy in which banks’ decisions on the amount of credit provided to firms are the starting point in the functioning of the economy. In particular, in Graziani’s vision, the power of banks and that of firms conflict each other, whereas the role of workers is a residual one.

Orthodoxy and etherodoxy in graziani's thought

This contribution attempts to evaluate Augusto Graziani’s legacy. His thinking, shaped by the neoclassical orthodoxy, and by Keynes’ work, has structured an original, heterodox framework. His heterodoxy, was marked by the progressive overcoming of the concept of looking for a possible equilibrium, which did not legitimize the concept of naturalness or, even less, that of classical full employment of the General Equilibrium approach. Dynamics is the core of his analysis which considers relevant to deal with development, as opposed to the static approach of growth. In this perspective, banks-firms nexus in a monetary theory of production is crucial to reach an unqualified equilibrium. Coming to real world, the need to govern the economy through a process of development brings back to our dualism. His lucid analysis of the Italian experience reveals his profound reformist commitment and his well grounded distrust of the healing miracle entrusted to market mechanisms.

A Veblenian Feminist Articulation of Monetary Theory of Production

The article presents a further articulation of the monetary theory of production inspired by the writings of Thorstein Veblen. Particularly I offer a formulation of the monetary theory of production as part of broader theorizing about social provisioning and the life process. This includes an analytical focus on non-commodities; an extension of the Veblenian dichotomy to non-market activities; discussion of Veblen’s theory of social valuation in connection to monetary theory of production and class; delineation of as social processes that constitute social provisioning and their commodity and non-commodity aspects. The goal is bridging the gap between monetary theory of production and analysis of “the social.”

A Stock Flow Consistent Analysis of a Schumpeterian Innovation Economy

AbstractSchumpeter argued that boom and bust cycles are inherent to the rise of innovation and constitute an unavoidable consequence of the way the capitalist system reacts to the emergence of a wave of innovations. This contribution aims to describe Schumpeterian economic development in a ‘monetary theory of production’ framework, emphasizing the crucial role played by credit creation, conceived as ‘the monetary complement’ of innovation. By adopting a stock flow consistent analytical approach, we analyze both the structural change process triggered in the real economy by the emergence of innovation, and the monetary dynamics arising during the various stages of the development process.