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Sheila C. Dow

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Sheila C. Dow

The chapter explores the links between Geoff Hodgson’s ontological commitments and his epistemology. On the one hand, Hodgson believes that the absence of uniformity in socio-economic systems, located in historical time and geographical space, implies that economic explanations must rest on a combination of general and specific theories. This claim underpins his critique of excessive generalisation characteristic of the mainstream, but also his evaluation of Adam Smith and John Maynard Keynes. On the other hand, Hodgson denies that the complexity of the subject matter, and the attendant impossibility of complete knowledge, justify the postmodernist credo that ‘anything goes’. Instead, Hodgson argues that an open-system ontology implies an open system of knowledge that allows for a variety of approaches, and underlines the value of the pragmatist method of abduction, namely, the formulation of new explanatory hypotheses through the creative connection of alternative approaches.

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Sheila C. Dow

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Keynes, Post Keynesians and methodology

Beyond Keynes, Volume Two

Sheila C. Dow

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Sheila C. Dow

Monetary policy has gone through significant changes in the wake of the banking crisis that began in 2007, reverting to a more traditional form. Before the crisis, mainstream theory and the practice of monetary policy had been identified as converging on a ‘new consensus’, focused on the role of the interest rate in a neutral-money framework, with an independent central bank prioritizing the control of inflation. There were dissenting voices, notably post-Keynesians anticipating the crisis, focusing on the non-neutrality of money and considering a wider range of monetary policy instruments. The crisis itself forced central banks to consider a wider range of policy goals and to employ a wider range of instruments. Nevertheless a difference persists between the mainstream theoretical approach, which sees monetary policy being transmitted through its impact on expectations in asset markets and asset pricing, and the post-Keynesian approach, which focuses on the transmission through real social experience. We explore current issues for monetary policy in terms of goals and instruments, and the relationship between central banks and government. The chapter concludes by outlining unresolved issues for the future.

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Sheila C. Dow

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Sheila C. Dow

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Sheila C. Dow

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Sheila C. Dow

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Sheila C. Dow

The paper considers the different ways in which we can approach reform of banking regulation by reflecting on different views on the nature and purpose of money and banks. We consider first the mainstream theory of banking and the interpretation of moral hazard as an expression of calculative rational behaviour, such that reform of banking regulation is formulated in terms of financial incentives and constraints. Post-Keynesian banking theory rather emphasises banks' role in providing society's money and thus the centrality of social conventions, particularly confidence in the money asset. The key is to design regulation so as to allow banks to play their supportive role in the economy, while suppressing scope for a negative role. This approach involves a broader understanding both of moral hazard and of regulation itself.