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Post-Keynesian economics is a school of economic thought with its origins in The General Theory of John Maynard Keynes, with subsequent development influenced to a large degree by Michał Kalecki, Joan Robinson, Nicholas Kaldor, Sidney Weintraub, Paul Davidson, Piero Sraffa and Jan Kregel. Historian Robert Skidelsky argues that the post-Keynesian school has remained closest to the spirit of Keynes' original work.It is a heterodox approach to economics.
The term "post-Keynesian" was first used to refer to a distinct school of economic thought by Eichner and Kregel (1975)and by the establishment of the Journal of Post Keynesian Economics in 1978. Prior to 1975, and occasionally in more recent work, post-Keynesian could simply mean economics carried out after 1936, the date of Keynes's General Theory.
Post-Keynesian economists are united in maintaining that Keynes' theory is seriously misrepresented by the two other principal Keynesian schools: neo-Keynesian economics, which was orthodox in the 1950s and 60s, and new Keynesian economics, which together with various strands of neoclassical economics has been dominant in mainstream macroeconomics since the 1980s. Post-Keynesian economics can be seen as an attempt to rebuild economic theory in the light of Keynes' ideas and insights. However, even in the early years, post-Keynesians such as Joan Robinson sought to distance themselves from Keynes, and much current post-Keynesian thought cannot be found in Keynes. Some post-Keynesians took a more progressive view than Keynes himself, with greater emphases on worker-friendly policies and redistribution. Robinson, Paul Davidson and Hyman Minsky emphasized the effects on the economy of practical differences between different types of investments, in contrast to Keynes' more abstract treatment.
The theoretical foundation of post-Keynesian economics is the principle of effective demand, that demand matters in the long as well as the short run, so that a competitive market economy has no natural or automatic tendency towards full employment.Contrary to the views of new Keynesian economists working in the neoclassical tradition, post-Keynesians do not accept that the theoretical basis of the market's failure to provide full employment is rigid or sticky prices or wages. Post-Keynesians typically reject the IS–LM model of John Hicks, which is very influential in neo-Keynesian economics, because they argue endogenous bank lending to be more significant than central banks' money supply for the interest rate.
The contribution of post-Keynesian economicshas extended beyond the theory of aggregate employment to theories of income distribution, growth, trade and development in which money demand plays a key role, whereas in neoclassical economics these are determined by the forces of technology, preferences and endowment. In the field of monetary theory, post-Keynesian economists were among the first to emphasise that money supply responds to the demand for bank credit, so that a central bank cannot control the quantity of money, but only manage the interest rate by managing the quantity of monetary reserves.
This view has largely been incorporated into mainstream economics and monetary policy, which now targets the interest rate as an instrument, rather than attempting to accurately control the quantity of money.In the field of finance, Hyman Minsky put forward a theory of financial crisis based on financial fragility, which has received renewed attention.
There are a number of strands to post-Keynesian theory with different emphases. Joan Robinson regarded Michał Kalecki's theory of effective demand to be superior to Keynes' theories. Kalecki's theory is based on a class division between workers and capitalists and imperfect competition.Robinson also led the critique of the use of aggregate production functions based on homogeneous capital – the Cambridge capital controversy – winning the argument but not the battle. The writings of Piero Sraffa were a significant influence on the post-Keynesian position in this debate, though Sraffa and his neo-Ricardian followers drew more inspiration from David Ricardo than Keynes. Much of Nicholas Kaldor's work was based on the ideas of increasing returns to scale, path dependence, and the key differences between the primary and industrial sectors.
Paul Davidsonfollows Keynes closely in placing time and uncertainty at the centre of theory, from which flow the nature of money and of a monetary economy. Monetary circuit theory, originally developed in continental Europe, places particular emphasis on the distinctive role of money as means of payment. Each of these strands continues to see further development by later generations of economists.
Modern Monetary Theory is a relatively recent offshoot influenced by the macroeconomic modelling of Wynne Godley and Hyman Minsky's ideas on the labour market, as well as chartalism and functional finance.
Recent work in post-Keynesian economics has attempted to provide micro-foundations for capacity underutilization as a coordination failure (economics), justifying government intervention in the form of aggregate demand stimulus.
Much post-Keynesian research is published in the Review of Keynesian Economics (ROKE), the Journal of Post Keynesian Economics (founded by Sidney Weintraub and Paul Davidson), the Cambridge Journal of Economics, the Review of Political Economy, and the Journal of Economic Issues (JEI).
There is also a United Kingdom academic association, the Post Keynesian Economics Society (PKES). This was previously called the Post Keynesian Economics Study Group (PKSG) but changed its name in 2018. In the UK, post-Keynesian economists can be found in:
In the United States, there are several universities with a post-Keynesian bent:[ further explanation needed ]
In Canada, post-Keynesians can be found at the University of Ottawa and Laurentian University.
In Germany, post-Keynesianism is very strong at the Berlin School of Economics and Lawand its master's degree course: International Economics [M.A.]. Many German Post-Keynesians are organized in the Forum Macroeconomics and Macroeconomic Policies.
The University of Newcastle in New South Wales, Australia, houses the post-Keynesian think-tank the Centre of Full Employment and Equity (CofFEE).
Major post-Keynesian economists of the first and second generations after Keynes include:
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John Maynard Keynes, 1st Baron Keynes, was an English economist, whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in mathematics, he built on and greatly refined earlier work on the causes of business cycles. One of the most influential economists of the 20th century, his ideas are the basis for the school of thought known as Keynesian economics, and its various offshoots.
Piero Sraffa was an influential Italian economist who served as lecturer of economics at the University of Cambridge. His book Production of Commodities by Means of Commodities is taken as founding the neo-Ricardian school of economics.
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Jan A. Kregel is an eminent post-Keynesian economist.
Alfred S. Eichner was an American post-Keynesian economist who challenged the neoclassical price mechanism and asserted that prices are not set through supply and demand but rather through mark-up pricing.
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Paul Davidson is an American macroeconomist who has been one of the leading spokesmen of the American branch of the post-Keynesian school in economics. He is a prolific writer and has actively intervened in important debates on economic policy from a position that is very critical of mainstream economics.
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Victoria Chick is a Post Keynesian economist who is best known for her contributions to the understanding of Keynes's General Theory and to the establishment of Post Keynesian economics in the UK and elsewhere.
Larry Randall Wray is a professor of Economics at Bard College and Senior Scholar at the Levy Economics Institute. Previously, he was a professor at the University of Missouri–Kansas City in Kansas City, Missouri, USA, whose faculty he joined in August 1999, and a professor at the University of Denver, where he served from 1987 to 1999. He has served as a visiting professor at the University of Rome, Italy, the University of Paris, France, and the UNAM, in Mexico City. From 1994 to 1995 he was a Fulbright Scholar at the University of Bologna. From 2015 he is a Visiting professor at the University of Bergamo.
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