Davidson on the History of Post Keynesianism

Paul Davidson (2003–2004 and 2005) presents a history of Post Keynesian economics in response to King (2002).

In contrast to King (2002) and Hamouda and Harcourt (1988), Davidson (2003–2004: 247) argues that neither Sraffians nor Kaleckians should be identified as Post Keynesians.

Sraffians, Davidson contends, do not accept Keynes’ emphasis on uncertainty and have no proper place for money in their economic system, and Michał Kalecki, unlike Keynes, did not think interest rates had an important effects on economic life, his monetary analysis was different from that of Keynes, and his theory (unlike Keynes’) assumed that some degree of monopolistic competition was a necessary condition for involuntary unemployment (Davidson 2003–2004: 247, 249). In addition, Sraffians and Kaleckians do not overthrow the neoclassical ideas of neutral money and ergodicity (Davidson 2003–2004: 263).

Whether Joan Robinson, Nicholas Kaldor, and Roy Harrod were really the first Post Keynesians or better seen as “forefathers” and a “foremother” of Post Keynesianism is, according to Davidson, a minor “quibble,” but Kalecki should not be classified as a Post Keynesian (Davidson 2003–2004: 247).

Next, Davidson notes the animosity between Roy Harrod and the Cambridge Keynesians (such as Robinson, Kahn, and Kaldor), and to a lesser extent the bad relations between Robinson and Kaldor (Davidson 2003–2004: 249–250).

This may well have hindered a unified Post Keynesian front in the post-WWII period, and another consequence was that two Post Keynesian generalisations of growth theory were developed in the UK: that of Roy Harrod and that of Joan Robinson in the Accumulation of Capital (1954) (Davidson 2003–2004: 250).

Another impediment was the hysterical McCarthyism that plagued America after 1945 and caused British Post Keynesianism to be suspect, which greatly hindered it in the US in those years (Davidson 2003–2004: 250–251).

While King sees the Cambridge capital controversy as instrumental in the emergence of Post Keynesian economics as a distinct school (King 2002: 80), Davidson sees the publication of Sidney Weintraub’s book An Approach to the Theory of Income Distribution (1958) as the moment when Post Keynesian economics emerged, and also holds that Weintraub was the “founding father of Post Keynesianism in the United States” (Davidson 2003–2004: 251–252).

In America, a major development was the foundation of the Journal of Post Keynesian Economics by Sidney Weintraub and Paul Davidson in 1978, as Post Keynesians were being excluded from mainstream journals (Davidson 2003–2004: 257).

In contrast to King, Davidson does not see Minsky as a Post Keynesian, and notes that

“Minsky often told me that he never wanted to be identified as a Post Keynesian (hence he fails King’s test of identifying oneself as a Post Keynesian). …. In reality Minsky was, and always wanted to be, a mainstream Keynesian who used the Modigliani variant of the IS-LM system and whose major distinction from other mainstream Keynesians was that he possessed knowledge of actual real-world financial markets.” (Davidson 2003–2004: 252).

Furthermore, Davidson does not see Alfred Eichner’s work as essentially Post Keynesian, but as an attempt to generalise Kalecki’s theory and even as a “special case of the emerging New Keynesian theory where wage and price rigidity was an essential element” (Davidson 2003–2004: 256).

In short, although Davidson once adopted a “broad tent” view of what Post Keynesianism is (Davidson 2005: 394–395), he now sees this “broad tent” approach to Post Keynesianism as adopted by Hamouda and Harcourt (1988) as a stumbling block to a coherent Post Keynesian school, and prefers a “narrow tent” definition of Post Keynesianism (or “fundamental Keynesianism”) as a school that rejects the three classical axioms, namely, the ergodic axiom, the neutral money axiom and the gross substitution axiom (Davidson 2003–2004: 263; Davidson 2005: 395–397).

BIBLIOGRAPHY
Davidson, Paul. 2003–2004. “Setting the Record Straight on ‘A History of Post Keynesian Economics,’” Journal of Post Keynesian Economics 26.2 245–272.

Davidson, Paul. 2005. “Responses to Lavoie, King, and Dow on what Post Keynesianism is and who is a Post Keynesian,” Journal of Post Keynesian Economics 27.3: 393–408.

Hamouda, O. F. and Geoffrey Colin Harcourt. 1988. “Post-Keynesianism: From Criticism to Coherence?,” Bulletin of Economic Research 40.1: 1–33.

King, J. E. 2002. A History of Post Keynesian Economics since 1936. Edward Elgar Publishing, Cheltenham, UK and Northampton, MA.

Hamouda and Harcourt on the History of Post-Keynesian Economics

Hamouda and Harcourt (1988; reprinted in Hamouda and Harcourt 2003) provide a review of the history of “broad tent” Post Keynesian economics and its various strands, and a response to the charge that Post Keynesian economics is not coherent.

Hamouda and Harcourt (1988: 1) note that in the late 1980s Walrasians like Frank H. Hahn and neoclassical synthesis economists like Robert Solow had a poor understanding of Post Keynesian economics and were not clear about what its theories involved.

They furthermore noted that “Post Keynesian economics” was itself an expression referring to heterogeneous groups in several strands (Hamouda and Harcourt 1988: 2).

Although not all Post Keynesians agree completely with their analysis, Hamouda and Harcourt (1988: 2) identify a number of “routes” or influences that led to the various Post Keynesian strands, as follows:

(1) Classical Political economy to Marshall and Keynes and to the American Post Keynesians
The first “route” runs from Classical economics to the British marginalist Alfred Marshall, and then to John Maynard Keynes. Keynes inherited his early economic thinking from Marshall, but emancipated himself from Marshallian neoclassical ideas in the General Theory and later work.

An important American Post Keynesian strand developed as inspired from the work of Keynes and included Sidney Weintraub, Paul Davidson, Jan Kregel and Hyman Minsky. Lorie Tarshis was also a North American Post Keynesian who independently developed a Keynesian macroeconomic theory that was developed from the work of Keynes, Richard Kahn, Joan Robinson and even Gardiner Means (Hamouda and Harcourt 1988: 6).

(2) Classical Political economy to Sraffa and later Sraffians
The second strand is the neo-Ricardian or Sraffian group. Piero Sraffa’s work is foundational for this strand, and that in turn was influenced by Classical political economy and Ricardo, or least Sraffa’s reinterpretation and reformulation of it.

Sraffa’s work was developed by later Sraffians/neo-Ricardians such as Pierangelo Garegnani, Krishna Bharadwaj, John Eatwell and Luigi Pasinetti, who introduced the Keynesian principle of effective demand into his theories.

(3) Classical Political economy to Marx to Kalecki and later Kaleckians
The third group runs from Classical economics, via Marx, to Michał Kalecki.

Kalecki was the important modern figure here, but, though influenced by Marx, was an unconventional Marxist and rejected the labour theory of value.

Kalecki developed a theory of effective demand, but using the ideas of mark-up pricing and social conflict as the determinant of wages (Hamouda and Harcourt 1988: 13).

Hamouda and Harcourt (1988: 14) see Joan Robinson and her followers as developers of this Kaleckian tradition in Post Keynesian economics.

Hamouda and Harcourt (1988: 18–19) also see Paolo Sylos Labini as having contributed to the Kaleckian strand of Post Keynesian theory.

Hamouda and Harcourt (1988: 3) also identify a number of “outstanding individual figures” who are not easily classified into one of the strands listed above: for example, Nicholas Kaldor, Luigi Pasinetti, Richard M. Goodwin (Hamouda and Harcourt 1988: 23), George L. S. Shackle, and Wynne Godley (Hamouda and Harcourt 1988: 23–24).

The final point that Hamouda and Harcourt (1988: 25) make is that it is within each strand that coherent approaches and macroeconomic theories have been developed.

They conclude:

“… within the various strands that we have discerned and described, there are coherent frameworks and approaches to be found, though obviously there remain within each unfinished business and unresolved puzzles. The real difficulty arises when attempts are made to synthesize the strands in order to see whether a coherent whole emerges. Our own view is that this is a misplaced exercise, that to attempt to do so is mainly to search for what Joan Robinson called ‘only another box of tricks’ to replace the ‘complete theory’ of mainstream economics which all strands reject. The important perspective to take away is, we believe, that there is no uniform way of tackling all issues in economics and that the various strands in post Keynesian economics differ from one another, not least because they are concerned with different issues and often different levels of abstraction of analysis.

An important implication of the above conclusion is that the policies which may be rationalized by post Keynesian analysis are very-much geared to concrete situations, the historical experiences and the sociological characteristics of the economies concerned. More generally, this approach which was that, for example, of Keynes, Kalecki, Joan Robinson and Arthur Okun, sometimes and most appropriately, has been dubbed the ‘horses for courses’ approach.” (Hamouda and Harcourt 1988: 25).

Of course, Hamouda and Harcourt wrote this article in 1988, and one could well argue that, since that time, there has been a convergence to some extent between the various strands, but also the emergence of new strands such as modern monetary theory (MMT).

BIBLIOGRAPHY
Hamouda, O. F. and Geoffrey Colin Harcourt. 1988. “Post-Keynesianism: From Criticism to Coherence?,” Bulletin of Economic Research 40.1: 1–33.

Hamouda, O. F. and Geoffrey Colin Harcourt. 2003 [1988]. “Post-Keynesianism: From Criticism to Coherence?,” in Claudio Sardoni (ed.), On Political Economists and Modern Political Economy: Selected Essays of G. C. Harcourt. Routledge, London. 209–232.