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Contemporary Post Keynesian Analysis

Edited by L. Randall Wray and Mathew Forstater

Original articles by leading scholars of post Keynesian economics make up this authoritative collection. Current topics of the greatest interest are covered, such as: perspectives on current economic policy; post Keynesian approaches to monetary theory and policy; economic development, growth and inflation; Kaleckian perspectives on distribution; economic methodology; and history of heterodox economic theory. The contributors explore a variety of prevailing issues including: wage bargaining and monetary policy in the EMU; the meaning of money in the internet age; stability conditions for small open economies; and economic policies of sustainable development in countries transitioning to a market economy. Other enduring matters are examined through the lens of economic theorists – Kaleckian dynamics and evolutionary life cycles; a comparison between Keynes’s and Hayek’s economic theories; and an analysis of the power of the firm based on the work of Joan Robinson, to name a few.
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Chapter 17: Analysing and Fighting Recession with Reference to Keynes

Claude Gnos


17. Analysing and fighting recession with reference to Keynes Claude Gnos1 In recent years New Keynesian writers have commanded the attention of economists and policy-makers by renewing the arguments for government action in favor of demand management. By the same token, they have been credited with restoring the aura of Keynes’s economics. This chapter is aimed at challenging this point of view. It is meant to constitute a first stage in a research program the objective of which is to examine just how relevant and effective Keynes’s theory of a ‘monetary economy of production’ – which post Keynesians and Circuitists currently set against the various strands of the neoclassical synthesis – is when it comes to analysing and combating the causes of present-day unemployment. The first section is dedicated to showing that the New Keynesian approach to employment is not consistent with Keynes’s theory of employment as characterized by the principle of effective demand.2 The second section focuses on the originality of Keynes’s view on unemployment and the way to cure it. In conclusion, the final section insists on the contrast between the two approaches. NEW KEYNESIAN ECONOMICS INCONSISTENT WITH KEYNES’S PRINCIPLE OF EFFECTIVE DEMAND To make our point, we need consider just two main characteristics of New Keynesian economics (NKE) and contrast them with Keynes’s principle of effective demand. First, it should be remembered that NKE appeared in the 1970s in opposition to the emergence of the New Classical economics which assumed continuous market clearing. New Keynesians hold that price and...

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