Post-Keynesian macroeconomics faces several challenges. The labor market and the supply side, first, have not been getting the attention that they deserve in Post-Keynesian growth theory. The failings of the Lucas-type ‘microeconomic foundations’, second, must not lead to a neglect of microeconomic behavior. Convincing macroeconomic theories must recognize and address the connections between macroeconomic relations and the microeconomic behavior whose aggregate manifestation the relations represent. Microeconomic behavior, third, takes place within an institutional structure that shapes economic behavior and economic outcomes. Macroeconomic theory must be both behavioral and structuralist.
The emphasis in post-Keynesian macroeconomics on wage- versus profit-led growth may not have been helpful. The profit share is not an exogenous variable, and the correlations between the profit share and economic growth can be positive for some exogenous shocks but negative for others. The terminology, second, suggests a unidirectional causality from distribution to aggregate demand while in fact distribution can itself be directly affected by shifts in aggregate demand. The reduced form correlations, third, depend on interactions with the labor market, and a focus on the goods market can be misleading. If, fourth, empirical estimates are taken at face value, the support for wage-led conclusions is much weaker than suggested by the literature. A focus on the growth benefits of a reduction in inequality, finally, makes for an impoverished policy discussion.
This note – written in response to – shows that (i) the Kaldor–Goodwin models in ; ) and provide good approximations to models with fast but finite adjustment of prices, (ii) the models can generate cyclical patterns that match the stylized facts, and (iii) an alternative model with instantaneous output adjustment and fixed prices produces a dynamic system that is virtually identical to the Kaldor–Goodwin; this model may describe parts of the service sector.
This paper makes three main points. Fiscal policy, first, may be needed in the long run to maintain full employment and avoid secular stagnation. If fiscal policy is used in this way, second, the long-run debt ratio depends (i) inversely on the rate of growth, (ii) inversely on government consumption, and (iii) directly on the degree of inequality. The analysis, third, suggests that policies and policy debates have been misguided. The recent rediscovery of ‘secular stagnation’ by Summers and others should be welcomed, but the suggested theoretical redirection is unclear and does not go far enough.
Peter Skott and Soon Ryoo
This paper examines the role of fiscal policy in a Keynesian OLG model. We show that (i) dynamic inefficiency in a neoclassical OLG model generates aggregate demand problems in a Keynesian version of the model, (ii) fiscal policy can be used to achieve full-employment growth, (iii) the required debt ratio is inversely related to both the growth rate and government consumption, and (iv) a simple and distributionally neutral tax scheme can maintain full employment in the face of variations in ‘household confidence.’
Soon Ryoo and Peter Skott
Most Kaleckian models assume a perfectly elastic labor supply, an assumption that is questionable for many developed economies. This paper presents simple labor-constrained Kaleckian models and uses these models to compare the implications of financialization under labor-constrained and dual-economy conditions. The paper complements the analysis in Skott and Ryoo (2008) which did not include labor-constrained Kaleckian economies. We show that for plausible parameter values the financial changes commonly associated with financialization tend to be expansionary in both dual-economy and labor-constrained settings.
Peter Skott and Ben Zipperer
Structuralist and post-Keynesian models differ in their assumptions about firms' investment behavior and pricing/output decisions. This paper compares three benchmark models: Kaleckian, Robinsonian and Kaldorian. We analyze the implications of these models for the steady growth path and the cyclical properties of the economy, and evaluate the consistency of the theoretical predictions with empirical evidence for the US. Our regression results and the stylized cyclical pattern of key variables are consistent with the Kaldorian model. The Kaleckian investment function and the Robinsonian pricing behavior find no support in the data.