The heterodoxs fight back!
Post-Keynesian Economics - Provisional program 2016-17 (in English)
Module Prof. Ernesto Screpanti
The course begins with a presentation of classical and Marxian economics, focusing on the theory of prices as determined by production condition, on Marx’s critique of Say’s law, and on the theories of crisis and business cycle.
Then Keynes’ and Kalecki’s approaches to effective demand are presented. The notion of underemployment equilibrium is illustrated. It is argued that the level of activity is determined by the autonomous components of aggregate demand, and that these are widely conditioned by the animal spirits of investors and the uncertainty of expectations. Prices are fixed by firms, on the ground of a markup rule, and are determined by production conditions. Income distribution plays a fundamental role in determining the magnitude of the income multiplier.
Finally, by means of the Aggregate Supply - Aggregate Demand model, a comparison is proposed between the monetarist, neo-Keynesian, and Post-Keynesian models.
Module Prof. Fabio Petri
This module tries to explain why the advances in capital theory due to Sraffa and others have persuaded many economists that the marginalist/neoclassical approach is irremediably flawed and therefore a turn to another approach appears inevitable. The module presents the basic structure of the neoclassical approach, the roots of its differences from the classical/Marxian approach, and the difficulties it encounters in dealing with capital goods both in its traditional versions and in its recent neo-Walrasian versions.
Module Prof. Sergio Cesaratto
This module takes stock of prof. Screpanti’s introduction to the Classical economists and Marx and of prof. Petri’s illustration of the marginalist value and distribution theory to show the relevance of the capital theory critique to rescue the Keynesian theory of effective demand from the reabsorption in neoclassical theory.
Garegnani (1978-79) firstly pointed out this relevance. In his contribution, he moved from the Wicksellian macroeconomic long-period equilibrium (that is, still the current reference for modern macroeconomics) and its weakness vis-à-vis the capital critique. He then exposes the most revolutionary aspects of Keynes’ General Theory, in particular the overturning of neoclassical saving-investment nexus. Unfortunately, Keynes also accepted some fundamental conclusions of the dominant theory and this opened the way to its reabsorption by that theory.
Keynes’ most original results were expressed in a short-run framework, with a given productive capacity. The challenge for heterodox economists is, therefore, to extend those results to a long period context, when capacity is allowed to vary. In this regard we shall consider two alternative demand-led growth models, the Sraffian supermultiplier model (Cesaratto et al. 2003) and the Neo-Kaleckian model (Lavoie 2006), and compare them (Cesaratto 2015, 2016).
The supermultiplier approach will be linked to another heterodox strong point, endogenous money theory. Nowadays, also many conventional economists and most central bankers increasingly provide open support this view.
Garegnani, P. (1978-79) ‘Notes on consumption, investment and effective demand, Parts I & II’, Cambridge Journal of Economics, 1978, pp. 335-353, and 1979, pp. 63-82.
Garegnani, P. (1990), ‘Quantity of capital’ in J. Eatwell, M. Milgate, P. Newman (a cura di), The New Palgrave: Capital Theory, pp. 1-75.
Petri, F. (2016), “What capital theory can teach us”, forthcoming in volume collecting the 2014-15 Pisa lectures on heterodox ecnomic theory.
Screpanti E., Zamagni S. (2005) An outline of the history of economic thought, second edition, Oxford: Oxford University Press. Sections: 2.2, 3.1, 4.3, 7.1, 7.2, 7.3, 9.5, 9.6
Lavoie, M. (2006) Introduction to Post-Keynesian Economics, Basingstoke: Palgrave Macmillan.
Suggestions for further readings
Cesaratto S. (2016) The modern revival of the Classical surplus approach: implications for the analysis of growth and crises, <Quaderni del Dipartimento di Economia politica e statistica>, Università di Siena, n. 735/2016.
Cesaratto, S. (2016) “Initial and final finance in the monetary circuit and the theory of Effective Demand.” Metroeconomica (forthcoming).
Cesaratto, S. (2015) “Neo-Kaleckian and Sraffian controversies on the theory of accumulation.” Review of Political Economy, 2015, 27 (2): 154-182.
Cesaratto, S., Stirati, A. & Serrano, F. (2003) Technical change, effective demand and employment. Review of Political Economy, 15, pp. 33-52.
Jakab, Z., Kumhof, M. (2015) ‘Banks are not intermediaries of loanable funds - and why this matters’, Bank of England, Working Paper No. 529. pp. 1-14 only
Lavoie L. (2013) ‘The monetary and fiscal nexus of neo-Chartalism: A friendly critical look’, Journal of Economic Issues, 47(1), pp. 1-32.
Lavoie M. (2005) ‘A primer in endogenous credit-money’, in: Rochon, L.P., Rossi S. (eds.), Modern Theories of Money. The Nature and Role of Money in Capitalist Economies, Edward Elgar, Cheltenham (UK).
McLeay M., Amar, R. Ryland, T. (2014) Money creation in the modern economy, Bank of England, Quarterly Bulletin, No. 1
McLeay M., Amar, R. Ryland, T. (2014) Money in the modern economy: an introduction, Bank of England, Quarterly Bulletin, No. 1
Petri, F. (2016) ‘Capital Theory’, in G. Faccarello, H. D. Kurz, eds., Handbook of the History of Economic Analysis vol. III.
Petri, F. (2015) Review of M. Lavoie, Post-Keynesian Economics: New Foundations, in Review of Political Economy, 2015 (4).
Screpanti, E. (1997) “Banks, increasing risk, and the endogenous money supply”, Economic Notes, 26(3), 567-88.