Recent Developments in Post-Keynesian Economics.

This is a collection of papers given at meetings in the United Kingdom of the Post-Keynesian Study Group. The Group was established in 1988 with a grant from the Economic and Social Research Council of the United Kingdom. The collection begins with an introduction by the editors. The introduction describes the elements of the post-Keynesian approach and differentiates it from neoclassical economics. The post-Keynesians try to root their theories in economic history and institutions. They emphasize the importance of class interests and power in a world of imperfectly competitive markets, giant multinationals, and credit (endogenous) money. They formulate alternative theories of price-setting, tax incidence, and market structure. They are continuing the work of Keynes, Kaldor, Kalecki, Robinson, and others. I find them to be fascinating, a breath of fresh air in an increasingly stale room.

The first paper is "Human Logic in Keynes's Thought: Escape from Cartesian Vice." The author is Bill Gerrard. Gerrard explains that Keynes revolted against formalism as a purely rational and contemplative approach to knowledge. Keynes also objected to the excessive use of logical deduction and mathematical method. The Cartesian vice from which Keynes escaped was an excessive belief in the rational nature of the world and of our knowledge of it. Keynes believed, instead, that our knowledge of the world was inherently vague and provisional because the future is always unknowable and our knowledge of the present always incomplete. And so Keynes relied on F. P. Ramsey's distinction between formal logic and human logic to formulate his own approach to knowing and acting. Keynes's approach relied on human logic, not formal logic.

In the second paper, "From Keynes's Vision to Keynesian Economics," by Athol Fitzgibbons, Keynes's ethical and practical approach to economic policy in an uncertain world is shown to be different from the deterministic models of the economics textbooks. The paper is painfully short but also instructive in laying out the fundamentals of Keynes's vision.

Suzanne W. Helburn contributed the third paper, "On Keynes's Ethics." Helburn explains that Keynes was neither a utilitarian nor an act-consequentialist in his ethics. Instead, his ethics partake more of the classical Greek search for virtue as the foundation of a moral public life in society. In his ethics of virtue, the influence on Keynes of Edmund Burke's profoundly conservative thought is quite strong.

Adrian Winnett's "Some Semantics of Endogeneity" is the fourth paper. One of the distinctive features of post-Keynesian monetary theory is the insistence that the money stock in a modern capitalist economy is endogenous. And with money endogenous, monetarism as a viable policy collapses. However, Winnett points out that post-Keynesians should be very careful about what they mean when they say that the money stock is endogenous. Otherwise, they could end up reducing post-Keynesian theory to the status of a mere special case or they could end up merely quibbling over the slopes of curves or shifts in curves.

The fifth paper is by Malcolm C. Sawyer and is entitled "On the Origins of Post-Keynesian Pricing Theory and Macroeconomics." First, Sawyer makes it clear that Keynes did not use price rigidity to explain involuntary unemployment. Then, Sawyer briefly explains the different approaches to price-setting that came out about the same time as Keynes's General Theory. These price-setting approaches generally involved price rigidity, but only with respect to changes in demand conditions, not with respect to changes in costs or other factors. And, the Keynesian involuntary unemployment result is not dependent on any of the rigid price approaches.

The sixth essay, "Price and Monopoly in Kalecki's Theory," is by Jerzy Osiatynski. Osiatynski outlines Kalecki's several attempts to formulate a microeconomic theory of pricing and income distribution that could be linked to his macroeconomic theory of investment and profit determination. The paper is an interesting treatment of how one master theoretician struggled with the difficulties of theory building.

The seventh essay is a gem. "Rentiers in Post-Keynesian Models" by Amitava Krishna Dutt helps enlarge our field of inquiry by building and using models with three classes. The third class is the rentier class, which earns income from interest on money loans. Dutt explores the effects of different savings rates between the rentier and the capitalist class and he explores the effects of changing interest rates and the degree of flexibility in the real wage rate. The results will surprise many readers.

The eighth essay explores the incidence of taxation in post-Keynesian models where taxation can affect the rate of unemployment through changing aggregate demand. Neoclassical models cannot explore such a situation, for they assume full employment. "A Post-Keynesian Approach to the Incidence of Taxation" by Richard Damania and Douglas Mair opens up a new line of inquiry into tax incidence.

Paul Auerbach contributes the ninth paper, "Vertical Integration, Planning and the Market." Auerbach explains that the dichotomy drawn between the market and the firm is a false one. He shows that firms and markets often spring up and evolve together, with the growth of the firm giving rising to new and deeper markets while deeper markets make the planning within the expanding firm more reliable and efficient. This is an important point, often missed.

The tenth paper, "Macroeconomic Policy Co-ordination and Commodity Input Prices," is by Peter Reynolds. He argues that in recent years the increased synchronization of the major industrial economies has increased the instability of the global economy. In the absence of effective commodity stabilization programs, this increased instability has placed a heavy burden on countries that specialize in producing primary commodities.

The collection of essays is well worth reading.