1 Economics 706 Macroeconomics II Gerald Epstein Fall, 2013 Office Hours: Jerry Epstein: Thompson 916 Monday, 2 – 4 PM and by appointment Telephone: (O) 577-0822 email: [email protected] Gordon Hall Office: 319 The class will normally meet in the Ninth Floor seminar room of Thompson Tower. In the event that the Thompson seminar room is being used for a department function, we will inform you of the substitute room we will use that day. If some of you would like to set up a regular meeting outside class to discuss class-related issues, let me know. Feel free to email at any time about class business. On non-class days, I spend a lot of time in my Gordon Hall office. Grading 1. There are two papers worth 35 points each. The first will be on issues of economic theory and methodology in Keynes’s work and in post-Keynesian economics. The second will be on one of a number of topics covered in the second part of the class. The first will be due roughly around the middle of the semester and the second will be due shortly after classes are over. 2. Class participation is worth 30 points. This includes short papers, preparation of questions and comments about readings, class presentations and class discussion. The more active you are in class discussions, the more interesting the course will be. It will be almost impossible to get an A in the course unless you get most of the points here. I will announce in class short – paper assignments and class presentation assignments, etc. 3. Prerequisites: Econ 705 or equivalent and some familiarity with Marxian theory. Moodle Site 1 2 Using the moodle site for this course will be important. Most of the articles and non-book readings (and even a few book readings) are on or accessible through the site. There will also be class notes and other important materials posted there as well. Also, we may ask you to upload some of your assignments to the moodle site. So make sure you have access to and can use the site. Books 1. Buy J.M. Keynes; The General Theory of Employment, Interest and Money at Amherst Books (sometimes referred to as the GT). We will use this immediately. 2. You may also buy Lance Taylor’s , Maynard’s Revenge; The Collapse of Free Market Macroeconomics, Cambridge: Harvard University Press, 2010. THis is also available at Amherst Books. At various points in the course we may refer to parts of this book as well. Reading List: Part One Part One will deal with the witings and thought of John Maynard Keynes and some Post-Keynes work. Parts Two and Three will cover theories of competition and their effects on macro and micro economic theory (and the relation between the two), the rising influence of financial markets on economic outcomes since about 1980, theories of the ‘financialization’ of the nonfinancial firm in the current era, and analyses of the current global financial and economic crisis. Please note that items on the reading list followed by ** are either on the moodle site or on electronic reserves. Volumes of Keynes's Collected Works are on regular reserve. Items with an ** are required reading and items with a * are important. HP is Jim Crotty’s home page, where many of Crotty’s articles are available. (http://people.umass.edu/~crotty/) Do not Panic: This list is bibliographic. I will only discuss a very small percentage of it in class, but you can use it to help with your research for assigned papers. I. Keynes’ Vision of the Capitalist Macroeconomy: The Economics and Politics in The General Theory and Related Works. Crotty has an unpublished and in-process manuscript tentatively titled Keynes's Radical Views on the Economic Role of the State: the Centrality of Planning and Public Investment - hereafter Keynes Manuscript. It is available on moodle. It is a description and analysis on the evolution of Keynes’s policy views, as informed by 2 3 the evolution of his theoretical perspective, from WWI until his death in 1946. I will assign sections to read over the first half of the course.( Jim Crotty is very interested in receiving feedback from students either in the form of criticism or of constructive suggestions for improvement of the manuscript. ) Biographies of Keynes *R. Skidelsky, John Maynard Keynes: 1883-1946: Economist, Philosopher, Statesman (Penguin, 2003). This is the best available Keynes biography. It is even better in the three original volumes. D. Moggridge, Maynard Keynes: An Economist’s Biography (Routledge, 1992). A more boring but still useful presentation by the editor of Keynes’s Collected Works. Understanding Keynes’s views on political economy through his own work. If you don’t understand his ‘vision’ and his policy views before you read the GT, you will only see the IS-LM curve and counter-cyclical macro policy, and you will miss his call for the radical transformation of capitalism. These readings will help you do that. Read as many as you can. ** , "The General Theory of Employment," Quarterly Journal of Economics, Feb. 1937, 41, No. 2, pp. 209-23. A must read because it shows that the concept of fundamental uncertainty is the key to Keynes’s macro theory. ** , "National Self-Sufficiency," Yale Review, June 1933, 22 (4), pp. 755-769. This is the most important short statement of Keynes’s ‘radical’ positions on policy. You have to read it. Essays in Persuasion, Collected Works, Volume IX, sections 4, 5, and **"The Economic Consequences of Mister Churchill," pp. 207-30, "Can Lloyd George Do It?," pp. 86- 125, "Social Consequences of Changes in the Value of Money," pp. 59-75, R. _____, Collected Works, Volume XIX-I, "Liberalism and Industry," pp. 638-48, Volume XIX-II ** "Does Unemployment Need a Drastic Remedy?" and "Reply to Critics," pp. 219-32, R. _____, Collected Works, Volume XX, "A Note on Economic Conditions in the U.S.," pp. 561-88, R. **_____, Collected Works, Volume XX, "The Question of High Wages," pp. 3-16, (to be read with ch 2 of the GT),R. 3 4 _____, Collected Works, Volume XXI, "The Dilemma of Modern Socialism," pp. 33-38, , “The State and Industry,” pp.84-92 , “Democracy and Efficiency,” pp. 491-500 , “The Monetary Policy of the Labour Party,” pp. 128-37, . __, Collected Works, Volume XXVII, "The Maintenance of Employment," pp. 352- 57, R. __, Collected Works, Volume VI, "Historical Illustrations," pp. 132-85, R. __ , Volume V, "The Industrial Circulation and the Financial Circulation," pp. 217-34, R. Other analyses of broad political-economic issues in Keynes’s work **J. Crotty, “Was Keynes a Corporatist: Keynes’s Radical Views on Industrial Policy and Macropolicy in the 1920s,” Journal of Economic Issues, Sept 1999, pp. 1-23. HP. This was a short article taken from Crotty’s Keynes Manuscript. If you want a sample of the material in the Manuscript, you could read it, but we hope to get a chance to read the Manuscript version. *F. Carvalho, “Keynes and the reform of the capitalist social order,” Journal of Post Keynesian Economics, Vol. 31, No. 2, Winter 2008-09, pp. 191-211. This is an important Post Keynesian’s view of Keynes’s “radicalism.” However, it misses completely Keynes's emphasis on direct government control of 2/3 to 3/4 of capital investment along with strict capital controls and managed trade, and thus misses the most radical of Keynes's policy proposals. **J. Crotty, "Keynes on the Stages of Development of the Capitalist Economy: An Essay on Methodology," Journal of Economic Issues, Sept. 1990, 24(3), 76l-80, R. HP. II. Keynes' Vision of the Capitalist Macro-economy: The Implications of "Keynesian Uncertainty" for Economic Methodology and Economic Theory. **J.M. Keynes, The General Theory, Preface plus chapters: 1, 3, 5, 8-10, 11 and 12, 13-15, 18, 19, 21, 22, 23 and the curious chapter 24. Chapter 12 is central because it contains Keynes’s fullest discussion of the effects of uncertainty on financial markets and the capital investment decision. **J.M. Keynes, "The General Theory of Employment," Quarterly Journal of Economics, 41 (2), Feb. 1937, 209-23. As noted above, this post GT defense of that book demonstrates that the concept of fundamental uncertainty is the key to Keynes’s macro theory. It is a must-read. , The Treatise on Money: Part II, Collected Works, VI, 319-24. 4 5 **J. Crotty, "Are Keynesian Uncertainty and Macrotheory Incompatible? Conventional Decision-Making, Institutional Structure and Conditional Stability in Keynesian Macromodels." In G. Dymski and R. Pollin, eds. New Perspectives in Monetary Macroeconomics, (Univ. of Michigan Press: Ann Arbor, 1994), pp. 105-47. , HP. This is an essential reading both because it provides a summary of several of my lectures about the implications of fundamental uncertainty for macro-theory, and it extends as well as interprets Keynes’s treatment of this crucial issue. **R. O`Donnell, Keynes: Philosophy, Economics and Politics, (London: Macmillan, 1989). Chs 11*, 12* and 14* are a must; 8 and 9 are recommended. (you will be able to get these on eReserves and or Moodle) *G.L.S. Shackle, Epistemics and Economics (Cambridge, 1972 and Transaction, 1993), especially chs. 1*, 7, 8, 12*, 15*, 16*, 18, 19*, 20, 21*, 33, 34, 36*, 37*, 38 (the *s are perhaps the most interesting). Shackle is one of the great figures in the economics of true uncertainty. (you will be able to get these on eReserves) **J. Crotty, "Neoclassical and Keynesian Approaches to the Theory of Investment," JPKE, 14(4), Summer 1992, pp.