ECO 4114 POST-KEYNESIAN THEORY: MONEY AND EFFECTIVE DEMAND Syllabus Instructor: Marc Lavoie January 2006 Office: 200 Wilbrod St., Room 08A Tuesday: 17:30 - 20:20 Telephone: 562 5800 (ext. 1687) E-mail: [email protected] Office hours: Tuesday: 14:30- 16:00 or by appointment Email: [email protected] Website: http://aix1. uottawa. ca/~robinson/Lavoie/index. html COURSE OBJECTIVES In this course I shall present approaches, theories and models, which are generally ignored by orthodox theory, i.e., what has been taught in intermediate micro and macro. This alternative approach to neoclassical economics is called post-Keynesian theory. The main objective of this course is to show that a coherent and powerful alternative to mainstream theory can be built; and that this alternative relies on the works of Keynes, Kalecki and the classical authors, as developed by economists such as Joan Robinson, Nicholas Kaldor, Luigi Pasinetti and Paul Davidson. The emphasis will be on the positive contributions of this tradition. For those who wish to oppose mainstream economic policies, i.e., the economic policies endorsed by the establishment (austerity policies, zero-inflation policies, downsizing, salary cuts, social program cuts, the ‘Washington consensus’, etc.), post-Keynesian economics offers a solid theoretical economic background. It also turns out that some aspects of post-Keynesian consumer theory are key aspects of heterodox environmental economics. Students that have absolute faith in market mechanisms or who are likely to become angered or annoyed when listening to implicit or explicit criticisms of what they have taken great pains to learn in previous courses are advised to drop the course and take something else. 2 TEXTBOOK There is one recommended text, which is a book of short readings, which has been ordered from the Bookstore: J.E. King (ed.), The Elgar Companion to Post Keynesian Economics, Edward Elgar Pub., 2003, paperback. French readers may find it useful to use my introduction to post-Keynesian (PK) economics, a few copies of which can also be found at the Bookstore: M. Lavoie, L’économie postkeynésienne, La Découverte (Repères), 2004. This book is in the process of being translated for Macmillan/Palgrave, under the title Introduction to Post-Keynesian Economics, and I will put up the translation on my website as it becomes available. OTHER USEFUL GENERAL PK REFERENCES There are several post-Keynesian textbooks, which students may wish to consult. Most of them are on reserve at the Morisset Library. Marc Lavoie, Foundations of Post-Keynesian Economic Analysis, Edward Elgar, Aldershot (U.K.), 1992. Holt and Pressman (eds), A New Guide to Post Keynesian Economics, Routledge, 2001. Lee, Frederic S., Post Keynesian Price Theory, Cambridge University Press, 1998. Paul Downward, Pricing Theory in Post Keynesian Economics, Edward Elgar, 1999. T.I. Palley, Post Keynesian Economics: Debt, Distribution and the Macro Economy, London : Macmillan Press, 1996. Paul Davidson, International Money and the Real World, Macmillan, 1982. Paul Davidson, Post Keynesian Macroeconomic Theory, Edward Elgar, 1994. Philip Arestis, Post-Keynesian Approach to Economics, Edward Elgar, 1992. Fernando J. Cardim de Carvalho, Mr Keynes and the Post Keynesians, Edward Elgar, 1992. 3 Alfred S. Eichner, The Macrodynamics of Advanced Market Economies, M.E. Sharpe, 1987 (1992). Peter J. Reynolds, Political Economy: A Synthesis of Kaleckian and Post Keynesian Economics, Wheatsheaf, Sussex, 1987. Louis-Philippe Rochon, Credit, Money and Production: An Alternative Post-Keynesian Approach, Edward Elgar, Cheltenham, 2000. Engelbert Stockhammer, The rise of Unemployment in Europe: A Keynesian Approach, Edward Elgar, Cheltenham, 2004. Phil A. O’Hara (ed.), Encyclopedia of Political Economy, 2 volumes, Routledge, Londres, 1999 (2001 paperback). These two books are to be found in the reference section of the Morisset Library. WEBSITES Here are a few suggestions of interesting websites that provide an extensive amount of information regarding heterodox economics and critiques of mainstream economics. Check the sites listed at: http://aix1.uottawa.ca/~robinson/english/other_links.htm Check also: The heterodox network: http://www.open.ac.uk/socialsciences/hetecon/index.htm The Post-Autistic Network: http://www.paecon.net/ A funny and original, but also informative, website, that of Aussie Steve Keen: http://www.debunking-economics.com/ STUDENT EVALUATION (i) a mid-term exam [25%] (ii) a final exam [45%]; (iii) a term paper [30%]; (iii) the outline of the term paper and participation [5%]; 4 The due date for the term paper is Tuesday March 21st 2006. The paper should be around 3500 words. The paper should be printed in 12 pt font, double-spaced or with 1½ spacing. There are about 250 words in a double-spaced page. Penalties will be awarded to papers which are not given on time. There will be a 20% penalty per office day late. There is another deadline: each student must present a written document (about one page), by February 14th, with an outline of the paper, and a bibliography of the documents which the student plans to use. An appointment must be taken before February 14th, during which the student will explain and justify the written document. Students who present an outline demonstrating that work is in good progress will get a high grade. In all cases the chosen topic must be approved. Students who hand in an essay based on an unapproved topic will get a zero mark for the term paper. Suggested topics for the essays: King’s Elgar Companion to Post Keynesian Economics (2003) provides about 80 entries on various topics, and is a useful source of essay topics and starting bibliographies. Your best bet is to find a topic within one or a couple of the entries listed in that book. Papers will be marked according to the following criteria; (i) quality of presentation (typed, fonts, footnotes, lack of typos, clear sections and subsections) (ii) fluidity of style, lack of spelling and grammar mistakes (iii) the depth of the paper (how deeply the topic has been covered, the quality of the analysis, not superficial) (iv) the width of the paper (whether the paper covered a lot of ground, and took several different sources into account) (v) the quality and extent of references (and whether standard norms of scientific papers were followed (see the references as they are presented in the King (2003) book) (vi) whether the topic pursued was the approved topic (vii) whether the paper was given on time You will find a complete guide about how to write a dissertation or an essay (references, etc.) on the following web site: http://www.sciencessociales.uottawa.ca/guide-en.asp The guide also explains what is plagiarizing. Check for the definition of plagiarism. Do not plagiarize. COURSE OUTLINE There are 12 lectures, one of which will be devoted to the mid-term exam. All dates are tentative. Most of the references can be found through the Library electronic journals. op.cit. means that the reference is part of the books to be found on reserve, as listed above. 1. An overview of post-Keynesian economics (Jan. 10) King (2003): Austrian School, Babylonian mode of thought, Bastard Keynesianism, Cambridge economic tradition, critical realism, Fundamentalist Keynesians, Institutionalism, Kaldorian Economics, Kaleckian Economics, Marginalism, New Classical Economics, New Keynesian Economics, Non-ergodicity, Time in economic theory, Uncertainty M. Lavoie (1992), ch. 1 (pp. 1-19). Lavoie (2004), ch.1 L.L. Pasinetti 2005. “The Cambridge school of Keynesian economics”, Cambridge Journal of Economics, 29 (6), November, pp. 837-848. 5 M. Setterfield, 2003. “What is analytical political economy?”, International Journal of Political Economy, Summer, 33 (2), pp. 4-16. 2. The Cambridge controversies and empirical research (Jan. 17) King (2003): Capital theory, Sraffian economics. M. Lavoie (1992), ch. 1 (pp. 20-41). A. Shaikh, 1990. “Humbug production function”, in J. Eatwell et al. (Eds), The New Palgrave: Capital Theory, Macmillan, pp. 191-194. A. Shaikh, 2005. “Nonlinear dynamics and pseudo-production functions”, working paper, New School University, forthcoming in Eastern Economic Journal. Find article on: http://homepage.newschool.edu/~AShaikh/ M. Anyadike-Danes and W. Godley. 1989. “Real wages and employment: A sceptical view of some recent empirical work”, Manchester School, June, 57 (2), pp. 172-187. 3. Microeconomics: An alternative theory of household choice (Jan. 24) King (2003): consumer theory M. Lavoie (1992), ch. 2. Lavoie (2004), ch. 2 part 1. R. Roy, 2005. “The hierarchy of needs and the concept of groups in consumer choice theory [1943]”, History of Economics Review, Summer, 42, pp.50-56. M. Lavoie, 2004. “Post-Keynesian consumer theory: Potential synergies with consumer research and economic psychology”, Journal of Economic Psychology, vol. 25 (5), pp. 639-649. John M. Gowdy and Kozo Mayumi,2001. “Reformulating the foundations of consumer choice theory and environmental valuation”, Ecological Economics, 39 (2), pp. 223-237. Alfred S. Eichner, 1992, op.cit., ch. 9: The household sector: expenditures and cash balances. 4. Microeconomics: objectives of firms (Jan. 31) King (2003): Competition M. Lavoie (1992), ch. 3, pp. 94-118. Lavoie (2004), ch. 2, part 2. E. Stockhammer, 2004. “Financialization and the slowdown of accumulation”, Cambridge Journal of Economics, 28 (5), pp. 719-741. John Kenneth Galbraith, Economics and the Public Purpose, Pelican Books, 1975 (1973), ch. 9- 10, pp. 108-125. 6 5. Microeconomics: cost and pricing theory (Feb. 7) King (2003): marginalism, pricing and prices, production M. Lavoie (1992), ch. 3, pp. 118-148. Lavoie (2004), ch. 2, parts 3-6. M. Lavoie, “Pricing”, in Holt and Pressman, op. cit., ch. 3. Andrews, P.W.S. 1949. “A reconsideration of the theory of the individual business”, Oxford Economic Papers, 1 (1), pp. 54-89. D. Amirault et al. 2004-2005. “A survey of the price-setting behaviour of Canadian companies”, Bank of Canada Review, Winter, pp.