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Sheila Dow

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Sheila Dow

In looking to Keynes for guidance on modern policy issues, we identify some general principles which can be carried forward to the present day. In order to address problems arising from the domestic and international monetary systems, we focus on the principle of effective demand and the theory of liquidity preference, applied to analysis of a monetary production economy. Yet for Keynes theorising started and ended with context. The analytical process started with identifying the problem and looking to relevant theory for illumination. Yet it was crucial to consider the nature of the context in order to assess the validity of the assumptions and, if necessary, to change them. We therefore consider the differences in monetary systems between the 1930s–1940s and the present day in order to form a Keynesian view of monetary reform.

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Sheila Dow

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Sheila Dow

The purpose of this chapter is to reflect on issues of monetary, financial, economic and social stability and the role of the state. The discussion is informed by the experience of the recent crisis and ensuing debates over how to make the system more robust. In particular, we consider the role of the state in supporting banking, and proposals for a central bank monopoly of money, including proposals for central bank digital currencies. We then consider issues surrounding the form and function of monetary policy; the independence of central banks; the role of regulation in promoting financial stability against a background of financial innovation; and finally the role of central banks in promoting social stability, including addressing climate change.

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Sheila Dow

The current situation offers great opportunities for Post Keynesians to offer a persuasive alternative to mainstream economics. This chapter explores these opportunities and the Post-Keynesian ideas of long standing for alternative theories and policies. The focus is put on two controversial issues which arise when considering the best route forward: the place, respectively, of mathematical modelling and pluralism. It is argued that Post-Keynesian modelling be considered as part of a pluralist methodology, as against dualism: the only-modelling and no-modelling positions. It is also argued that Post Keynesianism should be pursued, not only with a pluralist methodology, but also within a pluralist landscape alongside other schools of thought. This is quite compatible with Post Keynesians trying to persuade others that their approach is better than alternatives to understand reality.

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Sheila Dow

Uncertainty, as unquantifiable risk, was central to Keynes’s philosophy and economics, and continues to be relevant under modern conditions. For Keynes, knowledge is in general uncertain because of the organic nature of the subject matter; quantifiable risk is the special case. He developed a theory of how in practice we can still establish grounds for belief under uncertainty, drawing on weight of argument and multiple strands of reasoning, such that uncertainty is a matter of degree. The degree of uncertainty influences fundamentally the key variable in Keynes’s theory of effective demand: planned investment. Further, money plays a crucial role as the refuge from uncertainty, such that the rate of interest is a monetary rate. Applied to modern institutions and conditions, this theory is shown to explain the recent crisis.

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Sheila Dow

The contributions of Marc Lavoie and Mario Seccareccia to macroeconomics are many, important and various. These contributions extend beyond their own research to their leadership in fostering others’ research. They have exercised this leadership, not only through their editing activities (most recently Lavoie and Seccareccia, 2017), but also in creating a supportive and productive academic environment at the University of Ottawa. I benefited from this myself first in 1983 when I was invited to present a seminar there. For the first time, I encountered impatience with what was then the required convention for heterodox economists of discussing the mainstream account of a topic before moving on to the heterodox alternative. This was a liberating experience. Lavoie and Seccareccia share a fundamental concern to tailor economic analysis to addressing pressing socio-economic problems. Rather than being constrained, as is typical among mainstream economists, by internal methodological concerns, Lavoie and Seccareccia have pursued methodologies according to external methodological concerns, choosing whatever best suits the real policy problem at hand. They are methodological pluralists, allowing for a range of approaches to analysing a complex, evolving reality, while (as is proper for methodological pluralists) arguing strongly for the relative merits of their own chosen approach while critiquing alternatives (as in Seccareccia’s, 1988, critique of idealisation in mainstream economics, and Lavoie’s, 2018, critique of DSGE modelling). They also accordingly explore relevant developments in the history of economic thought.

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Sheila Dow

Following its revival in the 1980s, the idea of endogenous money became increasingly widely accepted. Indeed the 2008 global financial crisis was widely blamed on the untrammelled power of banks to create credit. As a result, among the ideas for reforming the monetary system are proposals designed to eliminate that power, that is, to make the money supply exogenous. The purpose of this paper is to go back to the theory of endogenous money in order to assess these proposals, in terms of what is desirable, but also crucially what is feasible. Central to this discussion is a consideration of the range of meanings given to money and endogeneity. It is argued that what is regarded as money under different conditions is an important element in money endogeneity, and is particularly relevant for the monetary reform debate.