Post Keynesian Econometrics, Microeconomics and the Theory of the Firm

Post Keynesian Econometrics, Microeconomics and the Theory of the Firm

Beyond Keynes, Volume One

Edited by Shelia C. Dow and John Hillard

This is the first of two volumes celebrating Keynes’s contribution to economics, and the development of post Keynesian economics in recent years. It reinstates the importance of Keynesian economics and its revival since the end of the 1980s, and the book’s authoritative chapters are presented by an outstanding group of international contributors.

Chapter 3: Market structure, uncertainty and unemployment

Malcolm Sawyer and Nina Shapiro

Subjects: economics and finance, econometrics, post-keynesian economics

Extract

Malcolm Sawyer and Nina Shapiro1 I INTRODUCTION Whilst it is clear that Keynes did not use imperfect competition in his analysis in the General Theory, there have been continuing suggestions that he should have done so and/or that his analysis would have been improved by doing so. Keynes, himself, however, did not see any reason to use imperfect competition. This is summarized in his response to Ohlin who had written, ‘In this as in some other respects Keynes does not seem to me to have been radical enough in freeing himself from the conventional assumptions. When reading his book one sometimes wonders whether he never discussed imperfect competition with Mrs Robinson’. Keynes replied in some puzzlement to this, when he wrote that he had ‘not been able to make out here what you [Ohlin] are driving at. The reference to imperfect competition is very perplexing. I cannot see how on earth it comes in. Mrs. Robinson, I may mention, read my proofs without discovering any connection’ (Keynes, CW XIV).2 In contrast, a number of writers have argued that Keynes’s results require imperfect competition. Kaldor (1978), for example, argued that ‘it is difficult to conceive how production in general can be limited with unutilized capacity at the disposal of the representative firm as well as unemployed labour – unless conditions of some kind of oligopoly prevail’. The same view – essentially an echo of Kaldor’s – is expressed in Weitzman (1982), where it is contended that the existence of increasing returns with...

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