Post Keynesian Research Articles

Victoria Chick (1936–2023), a Restless Challenger to Mainstream Economics: An Appreciation§

Abstract In this article on Victoria (Vicky) Chick (1936–2023), we intend to cover the main research areas into which Chick devoted her life’s work. We categorise the contributions into three broad fields. First, her work on Keynes’s General Theory and the message that economists have taken from it since its publication. Chick wrote extensively on the many misinterpretations of the General Theory that have clouded its message. Instead, through her writings, she offered an alternative perspective and interpretative line that became central to the post-Keynesian school of thought. Second, her work on Keynes gave her the starting point for her novel understanding on the monetary nature of the economy and was the inspiration in the development of the banking stages of history approach that shows the evolutionary nature of banking theory and practice. Finally, the way in which The General Theory built its argument and the misinterpretation that many mainstream economists took from it led Chick to develop her methodological approach on open and closed systems of analysis and the importance of developing judgement as part of teaching in economics.

Gardiner Means’ Contributions to Post-Keynesian and Political Economics

ABSTRACT Certain post-Keynesian (PK) authors consider Means as one of the founding figures of PK theory and a notable contributor to heterodox economic thought in general. Paradoxically, many surveys of PK economics do not mention his name at all. It is the purpose of the current study to scrutinize the possible reasons behind the contradictory evaluations of Means’ contributions among PK authors. Based on a critical analysis of his stance on Keynesian and political economics traditions as well as his labor analysis, I argue that Means’ ideas and PK theory remain in harmony on the surface but conflict at a more fundamental level.

Demand and growth regimes of the BRICs countries – the national income and financial accounting decomposition approach and an autonomous demand-led growth perspective

We contribute to the recent debate in post-Keynesian economics (PKE), comparative political economy (CPE) and international political economy (IPE) on growth regimes. The paper presents an analysis of changes in demand and growth regimes in the BRICs countries, Brazil, Russia, India, and China, after the Global Financial Crisis and the Great Recession of 2007–2009. It discusses and applies two approaches: a first one based on national income and financial accounting decomposition and a second one based on the Sraffian Supermultiplier (SSM) growth model, distinguishing the dynamics of autonomous expenditure growth from those of the induced components of aggregate demand. It is argued that the SSM approach provides the bridge between the traditional approach based on national income and financial accounting decomposition and the analysis of growth drivers, both in PKE as well as in CPE and IPE. This is illustrated by pointing out some changes in the underlying political economy and economic policy growth drivers in each of the countries.

Revisiting ‘Pricing and the Investment Decision’

ABSTRACT ‘Pricing and the Investment Decision’, written with Peter Kenyon and published in Kyklos in 1976 contributes to post-Keynesian economics by analysing the determination of the mark-up of price over unit cost by large oligopolistic firms. Mark-ups are set to provide sufficient retained earnings under expected future conditions to finance the level of the firm’s planned investment expenditure. This provides a causal link at the microeconomic level from planned investment to corporate saving via the price level, paralleling the causal link at the macroeconomic level from aggregate investment to national saving and from mark-ups to income distribution. Although the explanation of the mark-up through linking pricing to investment plans is widely accepted as part of post-Keynesian pricing analysis, these contributions have not attracted interest from the mainstream and even amongst among post-Keynesians there are competing explanations of pricing. We discuss the impact that explaining pricing through investment needs has had and relate this outcome to the debate about micro-foundations of macroeconomics.

Synthesizing feminist and post-Keynesian/Kaleckian economics for a purple–green–red transition

The aim of this article is to discuss why we should synthesize feminist and post-Keynesian/Kaleckian economics. We answer three related questions. Why does post-Keynesian economics need feminist economics? Why does feminist economics need post-Keynesian macroeconomics? Finally, what is the relevance of synthesizing feminist and post-Keynesian economics for policy analysis in the twenty-first century? We then present a theoretical synthesis model bringing together and extending the existing macroeconomic models in feminist post-Keynesian economics. Finally empirical findings based on this synthesis model are discussed in a policy context.

Macroeconomic policy at the end of the age of abundance

Progressive policy proposals influenced by post-Keynesian economics emphasise the use of fiscal policy and income redistribution to maintain aggregate demand at levels which achieve full employment. Given persistent evidence of weak demand, excess capacity and unemployment in rich economies since around 1980, expansion of demand would have been appropriate over much of this period. Tighter supply constraints – both short-run constraints due to disruption caused by climate change and geopolitical tensions, and longer-run constraints due to absolute carbon budgets – impose additional challenges in designing policy. In order to increase investment sufficiently to achieve net zero goals, constraints on consumption may be required. Such constraints would weaken the multiplier mechanisms emphasised by post-Keynesian analysis, implying lower growth and higher public debt stocks. Traditional progressive policy proposals will need updating to reflect these constraints. New institutional arrangements will be required to implement updated policy packages.

THE FUTURE OF POST-KEYNESIAN ECONOMICS: Post-Keynesian Economics at 50

This article discusses the future of post-Keynesian economics by considering three angles: i) the future of post-Keynesian economics as an institution or as a school of thougth; ii) the future of post-Keynesian theory; and finally, iii) the future of post-Keynesian within the profession. My conclusion is fairly positive overall, although the place of post-Keynesian economics within the profession is certainly not enviable.

Post-Keynesian economics and social policy: equality of opportunity or equality of place?

This article shows that post-Keynesian economics is more closely tied to the proposal of equality of place rather than that of equality of opportunity. More precisely, it advocates for the approach of utilizing equality of place as a means to attain equality of opportunity. These are two conceptions of social policy. Equality of opportunity distinguishes between poor and non-poor, and state intervention is focused on poor people. This mode of intervention promotes individuals’ improvements in human capital, assuming that the poor can reach the position they want through a competitive process. In contrast, the idea of equality of place is intertwined with the concept of decommodification and supply-side subsidies. It envisions a scenario in which markets might not ensure that people can access fundamental rights. Consequently, it suggests an alternate role for state intervention. Because some heterodox and post-Keynesian authors have identified with the principle of equality of opportunity, it is important to clarify the nature of the relationship between social policy and post-Keynesian economics. The principle of equality of place can provide a framework of social policy that is consistent with the tenets of the post-Keynesian tradition.

Social processes of oppression in the stratified economy and Veblenian feminist post Keynesian connections

Conceptions of social stratification and oppression should be central to post Keynesian inquiry. The article takes a Veblenian feminist view to discuss aspects of oppression in economies of stratification and outlines connections to areas of post Keynesian economics. The article is structured around “five faces of oppression” delineated by political theorist Iris Young: exploitation, violence, powerlessness, cultural imperialism, and marginalization. The paper reframes those based on a conception of evolving social processes and diverse economic relations, and employs Veblen’s theory of surplus and stratification, which has a broad understanding of domination that goes beyond capital accumulation. The article provides illustrations of these interconnected aspects of oppression, and discusses how each is co-opted today. The article presents specific connections to post Keynesian economic analysis and concludes by highlighting the potential of post Keynesian economics for social justice.

Falling labour share and anaemic growth in Portugal: A post-Keynesian econometric analysis

AbstractIn recent decades, the labour share has experienced a downward trend in Portugal at the same time as a weaker and anaemic growth pattern. This seems to suggest that the fall in the labour share represents an important constraint on Portuguese economic growth, which is contrary to the orthodox claims around wage restraint policies – namely, that such policies are a necessary condition of improved macroeconomic performance, owing to their positive effects on private investment through higher profits and on net exports through reduced unit labour costs and a corresponding rise in competitiveness. This study assesses the relationship between labour share growth and economic growth by performing a time series econometric analysis focused on Portugal from 1971 to 2021. Findings show that labour share growth has positively impacted on economic growth in Portugal, which is in line with heterodox claims and particularly with post-Keynesian economics on the beneficial effects on private consumption played by the growth of wages. Findings also confirm that the Portuguese economy has followed a wage-led growth regime instead of a profit-led growth regime; that is, a rise in wages increases aggregate demand and, therefore, boosts economic growth because its beneficial effect on private consumption more than compensates for a prejudicial effect on private investment and on net exports. The study points out the urgent need to adopt public policies to support the growth of wages to avoid more decades of dismal growth and a new ‘secular stagnation’ in Portugal.

Introduction to Post-Keynesian Economics: New Foundations by Marc Lavoie

Introduction to Post-Keynesian Economics: New Foundations by Marc Lavoie

Effects of macroeconomic aggregates on the functional distribution of income in Colombia between 2000 and 2020

The study aims to contribute to the discussion of the economic variables that determine the functional distributionof income –measured as the share of wages in value added– in the three main sectors of Colombia, based on the theoretical position of the Post-Keynesian school. This school argues that this measure of income distribution may present a better measurement approximation than traditional distribution measures such as the Gini –since wage compensation and valueadded would be obtained from taxpayers’ information and not from surveys such as the Gini. Therefore, a sectoral analysisof the functional income distribution is presented, and a panel data model is estimated for the period 2000-2020. The results allow us to infer that the functional income distribution is explained and in fact improves with an increase in output, trade balance, taxes, and investment; however, the individual effect of each of these variables on the distribution is inelastic. Thus, it is concluded that the Post-Keynesian postulate is partially fulfilled in Colombia in the period under study.

Post-Keynesian Economics: New Foundations by Marc LavoieChapter 8: Inflation Theory

ABSTRACT The conflicting claims approach to the theory of inflation so thoroughly surveyed and well presented in Chapter 8 of Lavoie's [(2022). Post-Keynesian Economics. New Foundations. Cheltenham, UK: Edward Elgar Publishing] book is deservedly becoming increasingly consensual among heterodox (and even some notable mainstream) macroeconomists. However, the relevance of a concept (and the very existence of) a single NAIRU (Non-Accelerating Inflation Rate of Unemployment) derived consistently from the very premises of the conflicting claims approach is still very controversial. In this review article, we will be to argue that a NAIRU is not really useful for the conflicting claims approach. The key aspects explored here are: (1) the different roles of hysteresis in the output and labor markets; (2) the assumptions concerning real profit markups of firms; and (3) the extent to which money wage increases actually incorporate past (or expected) inflation. We also add some remarks regarding the role of changes in international commodity prices and nominal exchange rates that further illustrate the necessary relation between conflicting claims inflation and the theory of distribution and relative prices.

Post-Keynesian Economics: New Foundations by Marc LavoieChapter 1: Essentials of Heterodox and Post-Keynesian Economics

ABSTRACT Marc Lavoie’s very long (74-page), very stimulating and sometimes very provocative first chapter has the title ‘Essentials of heterodox and post-Keynesian economics’. It deals with an extremely broad range of issues in economic methodology and in the sociology (broadly defined) of different schools of thought in economics, in addition to providing a substantial discussion of theoretical and policy questions. Space constraints prevent me from dealing with many of these very interesting and occasionally contentious propositions. Instead I shall confine my contribution to an assessment of Marc’s position on the heterodox and orthodox schools of thought (sections 1.2 and 1.3, pp. 4–16); on the related question of ‘atomism versus holism’ (section 1.3.3, pp. 17–24); on the different post-Keynesian strands, with particular reference to his treatment of Hyman Minsky, Piero Sraffa and Michał Kalecki (section 1.4.3, pp. 40–46); and on the important question of whether we should adopt a ‘narrow tent’ or ‘broad tent’ definition of post-Keynesianism (section 1.4.4, pp. 46–49).

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.

Post-Keynesian Economics: New Foundations, by Marc LavoieChapter 7: Open Economy Macroeconomics

ABSTRACT Reviewing Marc Lavoie’s comprehensive and well-structured discussion of open-economy macroeconomics allows us to revisit some key Post-Keynesian contributions and confirm their continued relevance to our understanding of international economic, financial and monetary relations. In the process Lavoie draws a consistently sharp contrast with standard-theory concepts and models, much of it organized around his elaboration of endogenous money in an international context and modern trade flows embedded in a highly globalized and financialized world economy which have little to do with comparative advantage. He thereby provides us with a conceptual road map for a meta-economic revolution which recognizes that the world economy has a growth dynamic all of its own rather than being just the sum of its parts, the two-hundred or so national economies connected to each other through their balance of payments and exchange rates.

Post-Keynesian Economics: New Foundations, by Marc LavoieChapter 5: Effective Demand and Employment

ABSTRACT This article examines Chapter 5 ‘Effective Demand and Employment’ in Post-Keynesian Economics: New Foundations by Marc Lavoie. This chapter covers one of the most distinctive contributions of the post-Keynesians, and one of its most profound insights. Analysis of effective demand and employment is a crucial and distinct foundation of post-Keynesian economics. Identifying the determinants of the level of employment and output represent one of the most significant contributions of post-Keynesian analysis. This is in total contrast to mainstream theory, according to which the level of output and employment are determined in the labour market, with labour seen as just another commodity, and the wage rate playing the role of the price equating supply and demand for labour. For post-Keynesians, the main determinant of the level of output and employment is the level of effective demand rather than the wage rate. Their views on the labour markets, taking into account segmented labour markets and efficiency wages, are considered. The determinants of profits and the profit share play important roles in the determination of employment and output. It is argued that fiscal policy plays a vital role in economic stabilisation, and that the typical arguments regarding its limitations are incorrect.

Post-Keynesian Economics: New Foundations by Marc Lavoie Chapter 3: Theory of the firm

ABSTRACT This article represents a systematic presentation of the post-Keynesian alternative to mainstream economic theory. It places observation of reality at the centre of the investigation and derives — through an in-depth examination of post-Keynesian literature — an analytical model capable of interpreting the behaviour of firms in a capitalistic market economy. The chapter on which this article focuses is in a book covering the core elements of this heterodox model, which creates a coherent framework for investigating and interpreting the workings of an economic system that approximates reality.

Post-Keynesian essays from down under: Theory and policy in an historical context

Abstract‘Post-Keynesian’ became an umbrella term for those heterodox economists wanting to move away from the dominant neo-classical paradigm but not comfortable with another umbrella term of ‘political economy’. This review is about the contributions to understanding societal and economic change from an established and internationally recognised group of post-Keynesian economists. Many of the features which differentiate them from other, and sometimes fluid, subsets of post-Keynesian economists derive from their Kaleckian inspiration.

Post-Keynesian Economics: New Foundations, by Marc Lavoie Chapter 6: Accumulation and Capacity

ABSTRACT This article reviews the chapter on growth and distribution of the 2022 edition of the book Post-Keynesian Economics: New Foundations by Marc Lavoie. The review goes through most of the chapter’s main topics, including the main classes of growth and distribution models along post-Keynesian lines and the criticism and extensions of these models. It stresses the macroeconomic paradoxes that result from the relation between aggregate demand and either income distribution or debt dynamics in these models. The review also addresses the new additions to the chapter, among which the recent contributions on the controversy on the convergence towards the normal capacity utilization rate and the non-capacity creating autonomous demand growth models, and Lavoie’s new section on wealth and personal income distribution. At last, the review discusses three issues raised by the chapter’s reading: the relation between realism and complexity for a model’s calibration, the consequences of abstracting the financial side of growth models, and how we address financial issues in growth and stock-flow consistent (SFC) models. The chapter reviewed is balanced and constructive; it critically informs the reader and provides a good map of the post-Keynesian literature on growth and distribution, addressing the canons while bringing novelty.