One of the heterodox theories, Post-Keynesian Theory is a school of economic thought that had been developed from Keynesian economics. Pioneers are Sidney Weintraub, Paul Davidson, Joan Robinson and Hyman Minsky and George Shackle. The school born in Cambridge Economics School, which is John Maynard Keynes's main country. Post Keynesians claim that they are the real successor John Maynard Keynes and reject two other Keynesian schools such as New-Keynesian economics which is closer to Neoclassical Economics, and Neo-Keynesian Economics which have strictly orthodox. Unlike other schools, Post-Keynesians aimed the new economy model with Keynes's theories. In fact, some Post-Keynesian economists had a more progressive view than Keynes about labor policies and re-distribution. The foundation of the school was coming from the principle of effective demand which matters long-run an short-run with same. That means, In perfect competition or competitive market, there is no leaning to full employment. Unlike Neo-classical economists, Post-Keynesians rejects that market failure occurs from sticky wages and prices. So they don't accept IS/LM model which was strongly supported by Neo-Classical economists. According to Zeliha Goker and Kutlu Dane, to achieve full employment the state should either increase aggregate demand via investment and so the growth and employment will rise, or should create jobs as the “employer of last resort” for the ones who want to work, and so create infinitely elastic labor demand without any expectation of profit(Zeliha and Dane,2013). So the Post-Keynesian economists created a new school for improving economic methods and created solutions for rising inflations and fluctuations by supporting workers and providing income distribution.
Assumptions and Disagreements
According to Post Keynesians, uncertainty and time have to consider for economics situation. Also they reject to ideas of Monetarists and Rational expectation economists, In fact Post-Keynesians claims that the Government is active and the economy is unstable(Dow,2011). Price level is exterior and is not sensitive for demand. Prices are determined by suppliers. Also demand of money is internal and sensitive for interest rate. According to Weintraub, the reason of inflation is the increasing wage costs. Another Post-Keynesian Davidson blames Neo-Classic Economists for ignoring uncertainty principles(anomaly) for forecasting the future. Other accusation from Robinson is that Neo-Classical economist has no theory to explain income distribution, because of struggle to get higher share from income. Post-Keynesian economists defends that the economy can't be balanced with automatic mechanism as Neo-classical economists mention, because of monopoly and oligopoly structures.
The key determinant of growth and income distribution that changes of relative prices are investments. The effect of income that changes from investment is important than subtition effects from relative prices. According to Post-Keynesian economists, resources of investments are not savings, but profits. In general, savings are consider as real estates. In order to financing investments, firms try to increase profits and not distribute sharing. In Addition, Post Keynesian economists claims that the uncertainty principle that big effect of expectations have to be considered in analyzes. Expectations with uncertainty principle shows fluctuations, so income and employment.
According to Post-Keynesians demand of money is not the reason of inflation, the reason of inflation is the struggle for income distribution. For example, The crises from exterior increase prices for The economy with oligopoly market and strong unions. Increasing Prices forces firms to increases wages. Increasing wages makes profit lower and oligopoly firms start the increase prices again. That's how the inflationist circle starts. So the reason of the...
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