Post Keynesian Economics Through the Lens of History of Thought

Thomas Palley Senior Economic Policy Adviser, AFL-CIO Washington, DC [email protected] Definition of Post Keynesian Economics

• “(i) Post Keynesian economics refers to the set of macroeconomic perspectives that use Keynes’ theory of effective demand determined output. (ii) This theory of output determination holds at all times, though the scale of output response to an increase in effective demand can vary with economic conditions. (iii) The failure of the economy to automatically adjust to full employment is not the result of market imperfections including nominal wage, price or interest rate rigidities – though these features may also affect employment and output. (iv) The real wage is not equal to the marginal disutility of labor except in the limiting circumstance of full employment.” Figure 1. A stylized history of economics.

Political Arithmetick (Petty) & the Physiocrats (Quesnay)

Anglo-Saxon school Smith (Invisible hand) Locke & Hume (Monetarism) German historical school (Hildebrand, Schmoller, List, Knapp, Weber) Malthus Ricardo

Marginalists Lausanne School (Jevons, Mill, Edgeworth, (Walras, Pareto) Marxists Menger, Marshall, Clark) American institutionalists (Commons, Veblen, Berle & Means) Neoclassicals Classical Austrians & Under-consumptionists (Hicks, Arrow, Debreu) Marxists Schumpeterians (Hobson, Mummery)

Modern Marxists (Kalecki, Sweezy, Baran, Figure 2 Figure 2 Steindl) Keynes Classical macro The General Theory Neoclassical Marxists (Roemer, Bowles, Gintis) Figure 2

Figure 2 Figures 2 & 3 Figure 3 Figure 2. Post Keynesian varieties of Keynesianism.

American Insitutionalists Ricardo

Keynes Schumpeterians

Keynesian Sraffians Modern Marxists Institutionalists (Galbraith) Kaldorians

ISLM neo-Keynesians (Hicks, Samuelson, Tobin)

Minskyians Fundamental Keynesians (Shackle, Davidson)

Neo-Kaleckians

Regulationists, SSA school