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Colin White

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A History of the Global Economy

The Inevitable Accident

Colin White

Providing an exceptional overview and analysis of the global economy, from the origins of Homo sapiens to the present day, Colin White explores our past to help understand our economic future. He veers away from traditional Eurocentric approaches, providing a truly global scope for readers. The main themes include the creative innovativeness of humans and how this generates economic progression, the common economic pathway trodden by all societies, and the complementary relationship between government and the market.
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Teodoro Dario Togati

This chapter addresses two key questions: why did Keynes lose his generality battle and what can be done to restore his generality claim? In answer to the first, the chapter argues that one major reason why Keynes lost his generality battle is that he did not develop a good articulation of his ‘research programme’ in Lakatosian terms. For example, unlike the Arrow–Debreu microeconomic model underlying the general equilibrium macro, the GT does not provide a unifying vision of the economy. As for the second question, this chapter seeks to identify the conditions under which the generality claim can be restored. The most important of these is the one identified by Pasinetti, namely the full-blown articulation of a ‘monetary theory of production’ research programme. This requires developing an autonomy of macro-perspective, placing the emphasis on the role of conventions, institutions and aggregate variables as emergent, persistent features of the economy.

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Alessandro Vercelli

This chapter investigates the rational foundations of liquidity preference theory as sketched by Keynes in The General Theory. Mainstream theory focuses on two determinants of liquidity preference related to weak uncertainty: risk aversion and transaction flexibility. Keynes, on the other hand, focused mainly on the nexus between liquidity preference and strong uncertainty, distinguishing two basic determinants: strong uncertainty aversion, and strong intertemporal flexibility. Though each of these determinants has been the object of specific interpretations of liquidity preference theory, this chapter suggests that we may encompass their analysis within a more general conceptual framework. To this end, the Keynesian concept of weight of argument plays a crucial role. In particular, we show that its variations along different phases of the business cycle alter the impact of each of the components of liquidity preference.

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Jonathan F. Cogliano, Peter Flaschel, Reiner Franke, Nils Fröhlich and Roberto Veneziani

In the previous chapters, we have examined classical production prices in linear models in which each industrial sector produces a single output—also known as the basic Leontief model. We have proved that, under some general assumptions on technology, production prices are well-defined, unique and strictly positive. We have interpreted these production prices as a long-period equilibrium: prices of production emerge when capitalist profit-maximizing behavior, and workers’ competition for jobs, ensure that a uniform profit rate and a uniform wage rate emerge in all sectors. Furthermore, under some additional mild assumptions, all sectors are operated in a classical long-period equilibrium.

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Value, Competition and Exploitation

Marx's Legacy Revisited

Jonathan F. Cogliano, Peter Flaschel, Reiner Franke, Nils Fröhlich and Roberto Veneziani

This book provides a comprehensive and rigorous, yet accessible, analysis of classical and Marxian price and value theory using the tools of contemporary economic analysis. The broad conceptual framework and methodology of Marx and the classical authors offers interesting and relevant perspectives on the basic structure and evolution of modern capitalist economies. Arguably, the book provides a deeper and more nuanced understanding of today's economic problems than can be gained via mainstream approaches.
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Jonathan F. Cogliano, Peter Flaschel, Reiner Franke, Nils Fröhlich and Roberto Veneziani

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Angel Asensio

John Maynard Keynes’s invaluable contribution to economic theory was to conceive a method to analyse a system whose future is fundamentally uncertain. Subjective views regarding the future play a crucial role in Keynes’s General Theory because, owing to ontological uncertainty and limited cognitive capacity, ‘there is no scientific basis on which to form any calculable probability whatever’ (Keynes [1937] 1973, p. 114). The position of the system at any point in time, accordingly, results from the forces involved in the decision the individuals have made in accordance with their subjective views: ‘Or, perhaps, we might make our line of division between the theory of stationary equilibrium and the theory of shifting equilibrium—meaning by the latter the theory of a system in which changing views about the future are capable of influencing the present situation’ (ibid., p. 293). In such a context, expectations may be unfulfilled unpredictably, although they may be fulfilled sometimes (by chance rather than by an objective knowledge). This is the reason why, although the system that emerges from private and public decisions tends to some equilibrium position at any point in time, the equilibrium is subject to endogenous change in the subjective views regarding the future. Equilibrium in this sense is intrinsically dynamic, which raises difficulties compared with the orthodox definition of equilibrium. In Macroeconomics after Keynes, Victoria Chick pinpointed the essence of the method Keynes utilised to build his ‘shifting equilibrium’ theory (Chick 1983). The method consists basically in taking the views about the future – along with other variables such as wages and the capital stock – as given at a point in time. This allows one to analyse the aggregate outcome of the individual decisions at any point in time, by means of a static – though ‘shifting’ – equilibrium model (Chick 1983, chs 2 and 13). Hence the dynamics of the system can be analysed as the change in equilibrium produced over time by the effect of the changing views about the future and other explanatory variables. This was the subject of Victoria Chick’s insightful presentation of The General Theory in terms of a static model of a dynamic process (see also Kregel 1976).

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M.G. Hayes

Joan Robinson argued that it is the task of Post-Keynesians to reconcile the work of Keynes and Sraffa. The central difficulty is to reconcile equilibrium with uncertainty and the solution lies within Keynes’s distinction between short-, medium- and long-term expectation and furthermore between the long term and the technical long period. Recognition that the ‘expectations’ of Keynes’s state of short-term expectation are equilibrium prices, in a carefully defined and qualified sense, makes it possible to replace his Marshallian concept of normal prices with Sraffa’s prices of production. There is a definite case for seeking to recast the principle of effective demand without the Marshallian theory of value. The task is to achieve this without losing either an empirically useful concept of equilibrium or the concept of fundamental uncertainty.

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Jonathan F. Cogliano, Peter Flaschel, Reiner Franke, Nils Fröhlich and Roberto Veneziani

One of the key contributions of recent debates in value theory and in exploitation theory is the idea that there is no ‘transformation problem’ to be solved in Marx’s labor theory of value (LTV). Labor values are not meant to provide an explanation of classical production prices. In line with much of the recent literature, we have argued, however, that a coherent account of values and the labor content of goods can be provided that is able to inform the empirical and theoretical analysis of the basic laws of capitalism, of the exploitative nature of capitalist relations of production, and of the determinants of the key magnitudes of capitalist economies, especially from a macroeconomic perspective..