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.
This chapter surveys possible factors explaining cross-country variation in the development and stability of the financial system. Specifically, it distinguishes between the (1) policy view, which focuses on specific policies and institutions to strengthen and deepen the financial sector; (2) the political economy view, which regards the level and structure of financial development and the underlying institutional infrastructure a function of political decision processes; and (3) the historical view, which focuses on exogenous determinants of financial sector development related to geographic endowments and history and the persistence in the level and structure of financial systems.
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.
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.