Post Keynesian Economics Through the Lens of History of Thought

Thomas Palley Senior Economic Policy Adviser, AFL-CIO Washington, DC [email protected] My definition of Post Keynesian economics

• “Post Keynesian economics refers to the set of macroeconomic perspectives that (i) believe economic reality is characterized by fundamental uncertainty; (ii) use Keynes’ theory of effective demand determined output; (iii) believe 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; and (iv) hold that 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.

Mercantilists, Political Arithmetick (Petty) & the Physiocrats (Quesnay)

ANGLO-SAXON SCHOOL Smith (Invisible hand) Locke & Hume (Monetarism) GERMAN HISTORICAL SCHOOL (Hildebrand, Schmoller, Marx, 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 4 Figure 4 Classical macro Steindl) Keynes Neoclassical Marxists The General Theory (Roemer, Bowles, Gintis) Figure 4

Figure 4 Figures 4 & 5 Figure 5 Figure 2. The Anglo-Saxon school in the history of thought.

Mercantilists, Political Arithmetick (Petty) & the Physiocrats (Quesnay)

ANGLO-SAXON SCHOOL Smith (Invisible hand) Locke & Hume (Monetarism) GERMAN HISTORICAL SCHOOL

Malthus Ricardo

Marginalists Lausanne School (Jevons, Mill, Edgeworth, (Walras, Pareto) Menger, Marshall, Clark)

Neoclassicals Under-consumptionists (Hicks, Arrow, Debreu) (Hobson, Mummery)

Classical macro

Keynes The General Theory Figure 3. The German historical school in the history of thought.

Mercantilists, Political Arithmetick (Petty) & the Physiocrats (Quesnay)

GERMAN HISTORICAL SCHOOL ANGLO-SAXON SCHOOL (Hildebrand, Schmoller, Marx, List, Knapp, Weber)

Marxists American institutionalists (Commons, Veblen, Berle & Means)

Classical Austrians & Marxists Schumpeterians

Modern Marxists (Kalecki, Sweezy, Baran, Steindl)

Neoclassical Marxists (Roemer, Bowles, Gintis) Figure 4. 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