On the nature and role of financial systems in Keynes’s entrepreneurial economies

In his debate with Bertil Ohlin, Keynes observed that entrepreneurs, when deciding to invest, have to be sure they will access the amount of finance necessary to initiate the investment process and that they will be able, when the time comes, to fund their debts in ways that are adequate to the profile of assets they are purchasing. In this statement, Keynes outlines the functions of financial systems in Entrepreneurial Economies, the type of economies he hypothesizes we live in. In entrepreneurial economies, investing firms have to be able to get hold of the necessary amount of means of payment required to purchase or order investment goods and to build balance sheets where in- and outflows of cash are broadly matched within reasonable margins of safety. This means that financial systems’ primary role in Keynesian economics is not to allocate savings or capital but to allocate liquidity and to allow investors to build liquid balance sheets. The article develops this proposition, presenting Keynes's basic concepts on the matter and showing how modern financial systems perform their role.     

Vicarelli’s Keynes and the New-Keynesian analytical method

This article provides a critical review of the foundations of the new Keynesian apparatus, to evaluate the actual strength of the Keynesian inheritance. As a reference of the Keynesian vision, Fausto Vicarelli’s recognition of the Keynesian message is adopted. The critical recognition of the new Keynesian methodology focuses on its analytical foundations, the recent extensions and on the criticality of its empirical performances and controls. The new Keynesian construction is shown to lack truly Keynesian roots in at least three key theoretical features: the role of the microfoundations, the stability of equilibrium, and expectations formation. The directions of an ongoing research narrowing the new Keynesian theoretical fracture from Keynesian economics are addressed.     

Vicarelli’s Keynes (and today’s international disorder)

The article speculates about the legacy of Fausto Vicarelli’s interpretation of John Maynard Keynes’s work in the times of a major global crisis. In particular, it puts an emphasis on those aspects of Keynes’s “method” that Vicarelli rightly considered as revolutionary in his Keynes, of 1977, as well as in other writings. The article then turns to Vicarelli’s reconstruction of Keynes’s early work in international economics (Indian Currency and Finance, Economic Consequences of the Peace) and reflects upon the continuing relevance of the philosophy inspiring Keynes’s plans of global reform in the Forties, also in the light of Vicarelli’s (Keynes-inspired) vision of the problem of policy space at the international level.     

Duplication, Growth and ‘Total Return Economics’

Maintenance consumption is an expense recovered in product prices, yet also a source of taste satisfaction which must be exhausted, rather than reinvested, from the capital affording it. This riddle is solved in the duplication rules: the cost of maintenance consumption is recovered in pay and prices, but an equal flow is exhausted from the human capital of the worker earning the pay. The rules impact tradition in several ways. If output is defined in principle as value added, then it cannot also be described as consumption plus net investment without double-counting the maintenance consumption recovered in prices. Also rate of return in the stationary state is not zero, but is the rate sufficient to offset the exhaustion of individual human capital. The rules lead to new insights into economic return, and support an argument that all growth at the scale of closure is due to productivity gain rather than to thrift.     

Institutionalism and the “Common Man” Through the Lens of Philip Klein: Business Cycles,the Public Sector,and Keynes’s Economics

This article reviews and assesses Philip Klein’s work on business cycles and macroeconomics, the public sector, and the economics of John Maynard Keynes. The article makes several findings. First, Klein built on the pioneering efforts of Wesley Mitchell to advance the development of cycle indicators and to outline an eclectic theory of cycles that remains useful for synthesizing a broad literature. Second, Klein’s essays on macroeconomics contain enduring discussions of the malleability of the “natural” rate of unemployment and the value of a behavioral approach to expectations. Third, he refocused the institutionalist attention on the public sector by introducing “higher efficiency” and other concepts to help explain how government policy plays a role in economic life. Fourth, Klein emphasized the role of fiscal policy in moderating business cycles. Fifth, his work points in the direction of today’s post-Keynesian institutionalism, both by stressing that Keynes was “profoundly institutionalist” in his approach and by arguing that conjoining Keynes and institutionalism would provide a stronger foundation for macroeconomic theory and policy.     

‘Economics with Training Wheels’: Using Blogs in Teaching and Assessing Introductory Economics

Blogs provide a dynamic interactive medium for online discussion, consistent with communal constructivist pedagogy. The author of this article describes and evaluates a blog assignment used in the teaching and assessment of a small (40–60 students) introductory economics course. Using qualitative and quantitative data collected across four semesters, students’ participation in the blog assignment is found to be associated with student ability, gender, and student perceptions of the blog. Importantly, students with past economics experience do not appear to crowd out novice economics students. Student performance is positively associated with the quality of their blog participation after controlling for student ability, suggesting that a focus on quality of student engagement could further improve learning outcomes. Students generally report overall positive experiences with the blog assignment.     

Integrating Schumpeter and Keynes: Hyman Minsky’s Theory of Capitalist Development

Taking the idea that institutional reproduction is not obvious and that institutions are vulnerable has significant conceptual implications. Institutional vulnerability can arise through communication between actors in a common language. To apprehend this requires an elaboration of John Searle's (1995, 2005) argument that language is the fundamental institution. Ontologically, language delineates and circumscribes a community. A community cannot function without a common language, and language at the same time constitutes a community's boundaries, allowing for focused and effective communication within a community. Communication through language introduces ambiguity as well, however, and so institutional reproduction, mediated by language, is a deeply contentious process. Communication across boundaries may particularly "irritate" a system, as Niklas Luhmann has argued. How can institutions then be re-identified through change? Searle's general form for institutions is in need of elaboration. We develop arguments by drawing upon Luhmann's (1995) systems analysis and notion of communication.     

Economic policy as expectations management: Keynes’ and Friedman's complementary approaches1

We investigate how Keynes and Friedman, respectively, address the issue of the disequilibria at stake in a monetary economy through a shared concern for the formation of expectations. We show that Keynes was interested in the coordination of long-term expectations regarding non-monetary assets prospective yields, while Friedman focused on the adaptation of short-term nominal expectations. Regarding the remedies to these disequilibria, both economists called for devices that aim to stabilise market expectations. As a direct outcome, Keynes designed policies that aim to stabilise the long-term state of expectations while Friedman basically aimed at the acceleration of the competitive adjustment process.     

‘… More of Keynes and Less of Milton Friedman!’ 1

This paper gives an account of the scientific work of a pioneer whose heterodox ideas stimulated debate in development economics for more than three decades. It will be shown that his intellectual biography—in particular, his experiences as a victim of National Socialism—provided an important stimulus for his commitment to the problems of the socially underprivileged. This led him to initiate several studies of unemployment in the depressed areas of Great Britain during the Great Depression and the Second World War. Then, starting from the late 1940s, during the years of his affiliation with the UN, he made pathbreaking contributions to the economics of underdevelopment in fields such as the deterioration of terms of trade, the basic needs strategy, and food security. The topics will be discussed both in the context of history of thought and with regard to recent work in development economics.     

Keynes’s liquidity preference and the usury doctrine: their connection and continuing policy relevance

The purpose of this paper is to support the spirit of the early medieval prohibition of payment for the use of money, with arguments based on the economics of Keynes. At the heart of the usury doctrine is the idea that a creditor cannot expect both the security of a claim on a fixed sum of money and to derive an income from it; security comes at a price, one way or another. The consequences of the unwillingness of modern society to accept this are illustrated by reference to two problems of the modern international financial and monetary system: bank bailouts and the lack of a supranational reserve currency.