The Post Keynesian response to neoclassical economics has involved (1) vigorous opposition, (2) cooperation, or (3) ignoring mainstream theory.
King (2012: 306), agreeing with Davidson, holds that neoclassical economics is so flawed and has such detrimental effects on society at large that strong opposition is the right approach for Post Keynesians.
King, however, notes that other Post Keynesians have called for cooperation or constructive dialogue with neoclassical economics. In support of this, it is claimed that this can yield results: for example, after 1990 central banks around the world abandoned monetarism and quasi-monetarism for the “Taylor rule” – which implicitly concedes that money supply is endogenous and central banks cannot directly control money supply, just as Post Keynesians argue (King 2012: 307).
King (2012: 309–310) thinks that neither “cooperation” with nor ignoring neoclassical economics is a sensible strategy, though he suggests that various aspects of mainstream economics continue to be useful and true knowledge that would continue to be part of a reformed economic science.
Next, King considers those maverick economists he calls “orthodox dissenters”: those economists from the mainstream who nevertheless have serious criticisms of their own discipline or at least propose modifications of it. King (2012: 312–314), however, reviews the list of these neoclassical dissenters, and, while welcoming engagement with them, sees little hope of them doing much for the state of modern economics.
Finally, King considers how Post Keynesians should approach other heterodox schools, such as Sraffians, Marxists, Institutional-evolutionary economists, social, feminist, and ecological economics (King 2012: 314).
Most interesting is King’s assessment of Sraffianism:
“By the end of the last century the Sraffians had been expelled (or, perhaps, had expelled themselves) from the Post Keynesian tradition, and in 2012 it is not at all clear whether the classical surplus approach to political economy (as its few remaining practitioners prefer it to be known) will long survive the retirement of the first post-Sraffa generation of theorists like Heinz Kurz and Neri Salvadori.” (King 2012: 314).That is to say, King (and various other Post Keynesians) no longer consider Sraffians as part of “broad tent” Post Keynesianism.
While King sees Marxist heterodox groups as being too fractious and their theory too problematic to be of much interest to Post Keynesians (King 2012: 315), he continues to defend the “broad tent” view of Post Keynesianism – including Kaleckians, Minskyians and fundamentalist Keynesians – as the most inclusive and reasonable. Post Keynesianism in this sense can engage with other heterodox traditions, and even other disciplines within the social sciences relevant to economics.
Philip Pilkington has a response and thoughts on this subject here in this interesting post:
Philip Pilkington, “The Great Unwinding: Some Thoughts on the Incoherence of Mainstream Economics,” Fixing the Economists, July 11, 2014.
King, J. E. 2012. “Post Keynesians and Others,” Review of Political Economy 24.2: 305–319.
I don't see the Taylor Rule as being generated in response to endogenous money theory. It was a practical response to the shocking failure of monetarism. Marginalist theory was already pregnant with it because there was always an unarticulated Wicksellian strain in the theory. But as can be seen from Krugman for example they still don't really understand the monetary system at all.ReplyDelete
It was staunch opposition to the marginalist theory that generated the Bank of England paper that came out a few months ago. So, I think that this is the best tactic. Mainstream economics is a mess anyway. They don't really have a coherent theory of anything. Its a hodgepodge and you can be a mainstream economist and disagree with others on the most elementary points. Post-Keynesian economics offers an actual coherent alternative. While I may disagree with a Marxian like King on policy, we will have very similar views on what policies etc. will do. One of the strengths of Post-Keynesianism is that there is strong consensus about the real economy. Something that the mainstream desperately lack because, frankly, I'm not sure that many mainstream economists are actually doing economics any more.
Thanks, that was a good read -- and have linked to it above.ReplyDelete
I especially liked this:
"Because of this you also see a smooth evolution of Post-Keynesian theory over the years. You do not see it wracked by ‘crises’ thrown up by the real-world as you do the mainstream. Rather you see it build upon itself in different directions. While the mainstream have a seeming crisis of faith every five to ten years that calls for a complete shake-up of the discipline, the Post-Keynesians roll calmly from one development in the theory to another."
That is so well written and obviously right.
E.g., the Post Keynesian response to the 2008-9 crisis was pretty much: "we told you so".
"though he suggests that various aspects of mainstream economics continue to be useful and true knowledge that would continue to be part of a reformed economic science."ReplyDelete
I really struggle to see what can be useful and true knowledge in mainstream economics. I suspect there is none.