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A Post Keynesian Perspective on Twenty-First Century Economic Problems

Edited by Paul Davidson

This book explores key economic problems and new policies for the global economy of the 21st century. The contributors discuss to what extent past policy errors were due to the incompetence of policymakers, and highlight problems including: international payments imbalances and currency crises, volatile security markets, inflation, achieving full employment, income distribution and alleviating individuals and nations of poverty.
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Chapter 10: Full employment policies must consider effective demand and structural and technological change: a prime point of Pasinetti's political economy

Mathew Forstater


10. Full employment policies must consider effective demand and structural and technological change: a prime point of Pasinetti’s political economy Mathew Forstater After Keynes and Sraffa, heterodox political economy has taken several different lines of development. Some, especially American post Keynesians such as Davidson, Minsky and their followers, have elaborated Keynes’s emphasis on the role of money and finance and the uncertainty of investor expectations, and its implications for aggregate effective demand and the determination of aggregate employment. The relative inattention of the American post Keynesians to issues of structural and technological change and the implications of the theory of value and distribution for the theory of output and employment in the economy as a whole reflects The General Theory, where Keynes ignored technology and perhaps himself never ‘fully escaped’ the marginalist approach to value and distribution. Other heterodox economists have focused on one or the other of Sraffa’s ‘negative’ and ‘positive’ contributions. The former regards the critique of the neoclassical (or marginalist) theory of value and distribution, the latter the revival of classical and Marxian approaches to the same topic. Both of these projects have been the focus of neo-Ricardian (or Sraffian) political economists. For the most part, Sraffians have paid relatively little attention to money and uncertainty on the one hand, and technical change on the other, while considerable attention has been paid to effective demand, in particular the attempt to reconcile the principle with Sraffian price theory...

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