A Post-Keynesian Approach
Edited by Claude Gnos and Louis-Philippe Rochon
Chapter 5: Money Creation, Employment and Economic Stability: The Monetary Theory of Unemployment and Inflation
Alain Parguez INTRODUCTION This contribution should be read as the core of two chapters of a forthcoming book co-authored with Jean-Gabriel Bliek and Olivier Giovannoni, the provisional title being ‘Money creation, employment and economic stability’. It is the outcome of a converging set of events which dismissed my previous doubts. First, a discussion with Bliek at the European Investment Bank (Luxembourg) convinced me that it was possible to shake the faith of true policy makers in a ‘hard-squeeze economic policy’ by explaining the core principles of modern monetary economy, as long as they are sustained by hard empirical studies. Next, I became aware of a converging set of criticisms arising from economists of various orientations: the monetary circuit theory is not worthy of attention because it is not embodied in any models; it cannot explain what a sensible economic policy should be because it ignores the stock dimension and, worst of all, it postulates full employment (Kregel, 2006; Accoce and Mouakil, 2007). I shall ignore the last accusation since most of my previous work has dealt with explanations of unemployment. I do not understand why emphasizing money exists to remove the scarcity constraint is tantamount to a super-postWalrasian or Say-like theory. It is true that I reject the Keynesian liquidity preference theory (I am not the only one) but only because it lacks sensible foundations in a true monetary economy. As for ignorance of the ‘stock dimensions’ and thus the role of capacity utilization, the reproach is illfounded. It is...
You are not authenticated to view the full text of this chapter or article.