Keynes's Approach to Money: An Assessment After Seventy Years

This paper first examines two approaches to money adopted by Keynes in the General Theory. The first is the more familiar ‘supply and demand’ equilibrium approach of Chapter 13 incorporated within conventional macroeconomics textbooks. Indeed, even Post Keynesians utilizing Keynes's ‘finance motive’ or the ‘horizontal’ money supply curve adopt similar methodology. The second approach of the General Theory is presented in Chapter 17, where Keynes drops ‘money supply and demand’ in favor of a liquidity preference approach to asset prices that offers a more satisfactory treatment of money's role in constraining effective demand. In the penultimate section, I return to Keynes's earlier work in the Treatise on Money as well as the early drafts of the General Theory to obtain a better understanding of the nature of money. I conclude with policy implications.     

Relevance of recent developments in monetary theory for developing economies: A sceptical note

Recent contributions to the theory of money claim derivation from Keynes' General Theory, but come to conclusions different from the latter. This paper analyses how their claim to Keynesian lineage is wrong in substance, for the essence of the Keynesian contribution on money lies in the special position which money occupies vis-à-vis goods, and the uncertainty elements in the functioning of a money economy. It then analyses how equilibrium analysis (which Keynes sought to unseat), has reasserted itself, due partly to the neoclassical methodology of analysis through comparative statics and the concept of thriftiness cast in personal rather than corporate terms.Following on from this, this paper refers to the great deficiency of the Keynesian approach as being reliance on analysis confined to the level of the market and inadequately linked with the institutional features of the capitalist system, which the Kaleckian version of the General Theory of Employment emphasizes. This aspect is then used by the author to analyse the political economy of a developing economy.     

The aggregate supply of output and a constant price level

Summary When they are treating the case of an economy operating at less than full employment macro theorists commonly assume that the aggregate supply function for output is perfectly elastic with respect to the price level. In this paper we demonstrate that an aggregate supply of output which is perfectly elastic at some price level cannot be derived from the interaction of the demand for and supply of labor in a competitive market even when the labor supply conditions are Keynesian in nature - e.g., rigid money wage rates.     

On the scope of hydraulic macroeconomics: Some reflections on Alan Coddington's Keynesian Economics

Summary The questions which Alan Coddington's posthumous bookKeynesian Economics brings to the fore as well as the thought-provoking (rather than fully acceptable) answers it provides make it worthy of being taken up for further analysis and discussion. This review article is intended to be one possible contribution in this respect. It focuses on the way Coddington's book deals with subjectivist approaches in economics and criticises it for going astray in this respect by adopting a mistaken view on the proper method of economics and giving a mistaken interpretation of both Keynesian economics and the economics of Keynes.I am indebted to L. H. Hoogduin, I. M. Kirzner, J. A. Kregel, S. K. Kuipers, J.A.H. Maks, J. Muysken and J. Pen for their valuable comments and discussion on an earlier version of this paper. Of course, they cannot be blamed for any remaining errors.A. Coddington,Keynesian Economics: The Search for First Principles, George Allen and Unwin, London, etc., 1983. Pp. 129. £ 9.95     

Consumption,income distribution and taxation: Keynes' fiscal policy

The General Theory argued that income distribution affected consumption. Greater income equality put more money into the hands of people with higher MPCs, leading to increased consumption; and greater inequality had the reverse impact. Yet, of the six objective factors that Keynes identified as affecting consumption, only distribution has failed to become part of mainstream consumption theory. This paper examines the reasons why this is so, and then develops a model incorporating the after-tax distribution into a Keynesian consumption function. Empirical tests of this model find that after-tax income distribution is a significant determinant of consumption.     

对“吉芬商品”的重新解释及实证分析

“吉芬商品”作为一种反常的经济现象,引起了众多经济学家的兴趣。在西方传统的经济学理论中,对其做出了较为详细的解释。笔者通过对反常经济现象的观察和思考,利用凯恩斯经济学中最基本的供需曲线对其做了全新的解释,并且通过对深圳市房地产市场的实证分析,进一步验证了新解释的可靠性。     

对"吉芬商品"的重新解释及实证分析

“吉芬商品”作为一种反常的经济现象，引起了众多经济学家的兴趣。在西方传统的经济学理论中，对其做出了较为详细的解释。笔者通过对反常经济现象的观察和思考，利用凯恩斯经济学中最基本的供需曲线对其做了全新的解释，并且通过对深圳市房地产市场的实证分析，进一步验证了新解释的可靠性。     

金融危机下中国经济振兴政策——兼评凯恩斯的需求理论和供应学派的经济主张

在此次由美国次贷危机引发的金融危机中,我国政府前后推出了一系列政策,这些政策无不是为了稳定金融市场,遏制经济恶化。这些政策方案充分体现了凯恩斯经济学所阐述的需求理论和供应学派经济学所阐述的供给理论,以及与这两种理论相适应的政策建议,对我们具有特别的借鉴意义——因为所有经济问题都可以归结为需求与供给的均衡。     

Rational spirits and the post Keynesian macrotheory of microeconomics

Summary The argument that post Keynesian theory rejects rationality and maximization as a basis of agent behaviour and is thus non-rational and lacking micro-foundations is contrasted by reference to Keynes' use of his early work on probability in the General Theory. Instead of presuming rational choice over perfectly known events, post Keynesian theory builds on Keynes' explanation of agents' rational beliefs in uncertain propositions about their knowledge of the world. These rational spirits lead to the recognition of the macro constraints to individual action or a macrofoundations of microeconomics linked to the role of money and to the role of liquidity preference as both a measure of rational belief and a determinant of money prices which equate the rates of return on all existing and newly produced goods. In this equilibrium prices will generally diverge from costs of production, in contrast to perfect competition but in concordance with the post Keynesian microeconomic theories of mark-up pricing.Comments by L. Hoogduin are gratefully acknowledged. He is relieved from any responsibility for my impressionistic presentation of Keynes' views on probability.     

Der streit um keynes im lichte unserer erfahrungen

Summary The Keynes Controversy in the Light of Our Experience. — In 1953, Erich Schneider in an important paper tried to “solve” the Keynes controversy in Germany. He defended Keynes against attacks by R?pke, Hahn, Meyer, and others, who pretend that an application of his theory inevitably leads to permanent inflation, and he maintained, logically arguing, that Keynes’s theory is “general” in the sense that it leads to certain results in depression as well as inflation. In the present paper it is suggested that the Keynesian revolution changed the attitudes of entrepreneurs, trade unions and politicians considerably so that today the government is expected to run a full employment policy, the result of which is a tendency towards creeping inflation. Though in theory applicable to both depression and inflation, employment of Keynesian tools to control overall monetary demand is really successful in depressions only. Thus, given the above-mentioned expectations of trade unions and entrepreneurs, Keynesian policies have to be sustained by policies on the microeconomic level to allow for steady growth of national incomes and a stable price level.

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Résumé La controverse sur Keynes à la lumière de nótres expériences. -En 1953, Erich Schneider entreprit de ?résoudre?, en un article important, la controverse en Allemagne sur Keynes. Il y défend Keynes contre les attaques de R?pke, Hahn, Meyer, et d’autres, qui disent que le Keynesianisme aboutit nécessairement en une inflation permanente; et il appuie sur la Symmetrie logique des analyses Keynes pour la dépression et l’inflation. Dans l’article que voici, l’auteur maintient que la révolution Keynesienne, tout en avan?ant la théorie, a modifié considérablement les attitudes des entrepreneurs, des syndicats, et des politiciens, de sorte qu’on exige actuellement que le gouvernement adopte toujours une politique de plein emploi, ce qui, à son tour, crée une tendance vers l’inflation lente. Quoi que théoriquement applicables à l’inflation aussi bien qu’à la dépression, les instruments Keynesiens pour le contróle de la demande totale d’argent ne s’appliquent avec le succès désiré qu’à la dépression. Plus on s’approche du plein emploi, plus il est nécessaire d’ajouter aux mesures macroéconomiques Keynesiennes des mesures microéconomiques afin d’assurer un accroissement économique constant avec un niveau stable des prix.

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Resumen La controversia por Keynes vista a través de nuestras experiencias. -En un artfculo publicado en 1953 bajo el titulo ?La controversia por Keynes? Erich Schneider trat? de reducir la teoria económica de Keynes a su justo valor, con el fin de objetivizar las discusiones a que dicha teoria habia dado lugar en Alemania. Defendió a Keynes contra la critica de R?pke, Hahn, Meyer y otros, segün la cual el keynesianismo produciria inevitablemente una inflation permanente, demostrando que la teoria keynesiana era aplicable no solo en situaciones de depresi?n sino también, anàlogamente, en situaciones de inflation. En el présente articulo el autor opina que la ?Teoria General? de Keynes, además de hacer progresar la teoria económica, ha influido en la actitud de empresarios, sindicatos y politicos, por cuanto prédomina la idea de que el gobierno se encargará siempre de asegurar el pleno empleo. Esta expectatita y el comportamiento correspondiente del gobierno producen una tendencia permanente de inflation. A pesar de que la teoria keynesiana es lógicamente simétrica, cabe esperar que la adoption de medidas keynesianas para controlar la demanda total monetaria solo tendràn éxito en fases de depresión. Habiendo pleno empleo, las medidas keynesianas, macroecon?micas, necesitan ser complementadas por medidas microecon?micas con el fin de hacer factible un crecimiento económico adecuado, manteniendo a la vez la estabilidad del nivel de precios.

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Riassunto La controversia su Keynes alla luce délie nostre esperienze. -In un articolo ?La controversia su Keynes?, Erich Schneider nel 1953 ha tentato di ricondurre la discussione sulla teoria economica di Keynes alla sua vera origine. Egli difende quindi Keynes dal rimprovero di R?pke, Hahn, Meyer e di altri che il keynesianesimo conduca inevitabilmente ad una permanente inflazione mettendo in evidenza la simmetria logica dell’analisi di Keynes per depressione ed inflazione. Qui viene supposto che la ?General Theory? di Keynes oltre ai progressi délia teoria produsse anche modificazioni délie opinioni di imprenditori, sindacati e politici che condueono all’attesa che il governo si preoccupi sempre délia piena occupazione. Questa attesa e il corrispondente comportamento del governo producono una permanente tendenza d’inflazione. Sebbene la teoria lógicamente sia simmetrica, i modi di procedere dei soggetti economici condurrebbero a questo che l’applicazione di misure di Keynes per il controllo dell’intera domanda monetaria abbiano il successo desiderato soltanto in depressione. Con alta occupazione, misure macroeconomiche di Keynes devono essere integrate con intervenu sul micropiano per rendere possibile una sufficiente crescenza economica in stabilità di prezzi.

     

A history of aggregate demand and supply shocks for the United Kingdom, 1900 to 2016

This paper presents a history of aggregate demand and supply shocks spanning 1900 – 2016 for the United Kingdom. Sign restrictions derived from a workhorse Keynesian model are used to identify the signs of those shocks. We compare the 30 largest shocks implied by a vector autoregressive model in unemployment and inflation with the narrative historical record. Our approach provides a new perspective on well-known events in economic history. We highlight two episodes of particular interest: an aggregate supply shock in the late 1920s, which we attribute to changes in the bargaining power of labor, and positive aggregate demand shocks in the mid-1970s, which we attribute to fiscal policy.     

Exogenous changes and policy reforms,labor migration,and welfare in a Keynesian economy

This paper examines the potential interaction between international labor migration, exogenous changes or policy reforms, and pre-existing distortions, such as generalized excess supply due to price-wage rigidities. Within this Keynesian income-expenditure context, it is suggested that (i) when international labor migration exists, the traditional Keynesian conclusions regarding the welfare effects of exogenous distortions, i.e., increase in exports need to be modified, and (ii) in the presence of price-wage rigidities, regardless of whether or not labor is internationally mobile, a policy reforming the country's tariff-subsidy structure may not be welfare improving.     

“凯恩斯与弗里德曼”之金融理论比较研究——兼评我国经济刺激计划

本文从经济思想的角度探讨了凯恩斯金融理论与弗里德曼金融理论在属性上的本质区别:前者属于国家干预主义学派,后者属于新经济自由主义学派。详细对比了两种金融理论在内容上的巨大差异,诠释了这两种理论在货币传导机制上的巨大分歧,发现了两种理论分别能够解决不同的经济问题:凯恩斯理论可解决生产过剩的经济危机,而弗里德曼理论则适用于解决"滞胀"这种经济现象。最后运用凯恩斯金融理论分别从消费需求和投资需求两个方面分析了我国目前正在实施的经济刺激计划所带来的经济政策效果,得出了我国的最终目标是要建立一个消费主导型的经济社会,让全体国民享受到经济发展所带来的福祉。     

基于广义价值论的内生增长理论初探

增长理论是经济学的重要部分,关系到每一个人的福利和一个国家的地位。文章运用广义价值论研究经济增长问题,以分工为切入点,把分工产生的新增利益和该利益的公平分配统一起来,论述了递增性假设之外另一条增长的可能路径。主要结论如下：（1）基于比较优势的分工交换可以持续地产生比较利益即超过自给自足收益的净收益,这一收益不依赖于技术的递增或递减变化,具有普遍持久稳定性;（2）由分工交换产生的净收益构成原始积累的重要来源,既促进了生产规模和分工范围的扩大,又支持了研发和技术进步;（3）劳动生产力任何提高的效应都通过分工交换产生的比较利益加以放大,在一个分工交换系统中,行为主体提高比较优势产品和比较劣势产品的生产力分别具有正的和负的外部性;（4）基于广义价值论的内生经济增长体现了效率与公平的统一,一个好的制度是能够保证在交易中各方的比较利益率相等,掠夺性制度不仅直接损害经济增长,也不具备长期可持续性。     

The macrodynamics of business cycles: A comparative evaluation Mohammed H.I. Dore Oxford: Blackwell Publishers, 1993, 242 pp.

In his latest book, Mohammed Dore has provided a much needed exposition of macroeconomic and business cycle theory since the advent of Keynes' General Theory. The book provides under one cover extended derivations of the main models that must be mastered if one is to be proficient in macroeconomic theory. It is, however, much more than just an expository volume; it is also a work of highly structured evaluation and criticism. The theories considered fall into the broad classifications of New Classical, New Keynesian, and endogenous cycle theories. The theories are rated on how well they account for ten stylized facts describing business cycles. The winner of the Dore sweepstakes is Richard M. Goodwin's endogenous cycle theory. While heartily endorsing Dore's criticism of representative agent models, this review expresses reservations about abandoning micro foundations.     

Ricardo and Keynes on war finance

Conclusion Ricardo and Keynes were remarkably close on many of the practical problems of war finance, despite their sharp and somewhat polemical difference on the question of whether an over-issue of currency or an excessive aggregate demand was exclusively the cause of inflation. During a war, when both the quantity of money and aggregate demand are excessive, they would both predict inflation. And, they stood together in the fight against the evils of inflation, because it caused a violent and unjust redistribution of income and wealth. They both accepted the obvious fact that wartime expenditures would crowd out private spending, but they denied that this would necessarily affect interest rates. Keynes expected the short-run marginal efficiency of capital to adjust to the rate of interest established by the Bank of England; whereas Ricardo expected the bank rate to adjust to the long-run rate of profit under a regime of full convertibility. Ricardo recognized, however, that the bank could set arbitrarily low nominal rates of interest, even during a period of inflation, if its currency were not convertible. Finally, they both opposed large increases in the national debt and recommended redeeming the debt with a property tax after the end of the war. Would any Classical or Keynesian economists be so bold today? An earlier draft of this paper was presented at the universities of Padua, Venice, Western Ontario, and Saskatchewan.     

评后凯恩斯主义货币政策理论

后凯恩斯主义作为西方非主流经济流派,源于凯恩斯的“货币经济”思想,在对于“货币-经济”关系的分析中,后凯恩斯主义者运用“预期、时间序列以及不确定性”对新古典阿罗-德布鲁世界进行了批判,并由此生发出“水平主义”和“结构主义”的后凯恩斯主义货币政策理论。     

How to derive keynesian results from first principles: A survey of new-Keynesian economics

Summary In the 1980s theoretical research in macroeconomics was dominated by what has become known as new-Keynesian economics. The principal aim of new-Keynesian economics is to explain how Keynesian results can be reconciled with the neo-classical principles of utility and profit maximization. This paper provides a survey and an assessment of New Keynesian economics. In our view, the theoretical foundation of new-Keynesian economics would be strengthened if more institutional detail is added to the analysis. The real challenge for new-Keynesian economics is to develop macroeconomics (and microeconomics) from a theory that takes the working of markets seriously.We would like to thank David Colander, Paul Davidson. Theo van de Klundert and Simon Kuipers for their comments on this paper and Esther Langeveld for research assistance. Of course, the usual disclaimer applies. An extended version of this paper, which addresses teh empirical evidence in substantially more detail is available as Research Memorandum no. 488 of the University of Groningen. Parts of section 3 are based on Van Ees (1991) and Garretsen (1992).     

“Mr Keynes and the ‘Classics’” Again: A Methodological Enquiry

Keynes is usually interpreted as proposing, or intending to propose an original theory of employment and income. However, this paper shows that Keynes was actually proposing more than a theoretical alternative. He saw himself breaking away from the ‘Classics’ at the connected levels of theory and methodology. This paper thus argues that modern economists going back to the old story of the relation between Mr. Keynes and the ‘Classics’ can learn something about several controversial issues in macroeconomics and methodology like for instance the role of experiments and formal arguments in economics.The paper is the development of a chapter in my Ph.D. thesis and has greatly benefited from discussion with Mark Blaug, Anna Carabelli, Bill Gerrard, Marc Lavoie, Tony Lawson, Roy Rotheim, and especially Geoff Harcourt and Malcolm Sawyer. Errors and omissions are, of course, solely my responsibility. A first draft of the paper was presented at the UK Autumn HET Conference (Glasgow Caledonian University, September 1999) and the AISPE Conference (University of Florence, September 1999). Finally, the paper was completed when I was visiting Research Professor at the Economics Department and C-FEPS, University of Missouri Kansas City (UMKC), Kansas City (USA) and Visiting Fellow at Clare Hall College and CCEPP, University of Cambridge, Cambridge (UK). I would like to express appreciation to members of those institutions for providing a stimulating and pleasant working environment.