Understanding Globalization, Financialization, Competition and Crisis
Chapter 7: Is New Keynesian Investment Theory Really “Keynesian”?: Reflections on Fazzari and Variato
In the Spring 1994 issue of this journal, Steve Fazzari and Anna Marie Variato pursue two related themes. First, they argue that the New Keynesian theory of financial markets provides the rigorous microfoundation for investment instabil ity missing from the less formal Post Keynesian theory. Second, though New Keynesian theory is based on the standard ergodic stochastic assumption of Neoclassicism while Post Keynesian theory posits a nonergodic world of fundamental uncertainty (FU), Fazzari and Variato argue that the New Keynesian assumption of asymmetric information (AI) makes the two theories complements rather than substitutes. While their effort at crossparadigm fertilization is admirable, the arguments they present in support of the complementarity thesis are not convincing.
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