Post Keynesianism Contrasted With Neoclassical Economics

The following is reproduced from "An Essay on Post-Keynesian Theory: A New Paradigm in Economics", Al Eichner and Jan Kregel's 1975 Journal of Economic Literature article. Of course, the table being a summary, all entries are highly stylized.

Aspect	Post Keynesian Theory	Neoclassical Theory
Dynamic properties	Assumes pronounced cyclical pattern on top of a clearly discernible growth path	Either no growth, or steady-state expansion with market mechanisms assumed to preclude any but a temporary deviation from that growth path
Explanation of how income is distributed	Institutional factors determine a historical division of income between residual and non-residual shareholders, with changes in that distribution depending on changes in the growth rate	The distribution of income explained solely by variable factor inputs and the marginal productivity of those variable factor inputs
Amount of information assumed to be available	Only the past is known, the future is uncertain	Complete foresight exists as to all possible events
Conditions that must be met before the analysis is considered complete	Discretionary income must be equal to discretionary expenditures	All markets cleared with supply equal to demand in each of those markets
Microeconomic base	Imperfect markets with significant monopolistic elements	Perfect markets with all micro units operating as price takers
Purpose of the theory	To explain the real world as observed empirically	To demonstrate the social optimality if the real world were to resemble the model

Daniel Defoe On Debt As Money

In this passage, Roxana is preparing to move from Paris to Amsterdam. She liquidates her possessions, and uses jewelry and bills of exchange as money to carry with her.

"I could not but approve all his measures, seeing they were so well contrived, and in so friendly a manner, for my benefit; and as he seemed to be so very sincere, I resolved to put my life in his hands. Immediately I went to my lodgings, and sent away Amy with such bundles as I had prepared for my travelling. I also sent several parcels of my fine[Pg 181] furniture to the merchant's house to be laid up for me, and bringing the key of the lodgings with me, I came back to his house. Here we finished our matters of money, and I delivered into his hands seven thousand eight hundred pistoles in bills and money, a copy of an assignment on the townhouse of Paris for four thousand pistoles, at three per cent. interest, attested, and a procuration for receiving the interest half-yearly; but the original I kept myself.

I could have trusted all I had with him, for he was perfectly honest, and had not the least view of doing me any wrong. Indeed, after it was so apparent that he had, as it were, saved my life, or at least saved me from being exposed and ruined—I say, after this, how could I doubt him in anything?

When I came to him, he had everything ready as I wanted, and as he had proposed. As to my money, he gave me first of all an accepted bill, payable at Rotterdam, for four thousand pistoles, and drawn from Genoa upon a merchant at Rotterdam, payable to a merchant at Paris, and endorsed by him to my merchant; this, he assured me, would be punctually paid; and so it was, to a day. The rest I had in other bills of exchange, drawn by himself upon other merchants in Holland. Having secured my jewels too, as well as I could, he sent me away the same[Pg 182] evening in a friend's coach, which he had procured for me, to St. Germain, and the next morning to Rouen. He also sent a servant of his own on horseback with me, who provided everything for me, and who carried his orders to the captain of the ship, which lay about three miles below Rouen, in the river, and by his directions I went immediately on board. The third day after I was on board the ship went away, and we were out at sea the next day after that; and thus I took my leave of France, and got clear of an ugly business, which, had it gone on, might have ruined me, and sent me back as naked to England as I was a little before I left it." -- Daniel Defoe, Roxana: The Fortunate Mistress (1724).

Defoe's novel, Robinson Crusoe, is more well-known among economists. For example, one can read Stephen Hymer's "Robinson Crusoe and the secret of primitive accumulation" (Monthly Review, 1971).

Gramsci: Laissez Faire As State Regulation

I am of the opinion that talk of more or less government intervention in markets is incoherent in, for example, the United States today. It is not as if some configuration of property rights, contract law independent of the state, corporations with limited liability, and markets of various types are all natural constructs, existing prior to all human interventions. I have gone on about this before. I might also note Philip Mirowski's view that sophisticated neoliberals recognize that a capitalist market order must be constructed; it does not come about naturally. I do not know that he would now think that all those in, for example, think tanks inhabiting the outer layers of the russian doll structures that neoliberals have build for propagandizing would recognize the role of government in constructing a market order.

Anyways, I have recently stumbled on Antonio Gramsci making a closely related point:

"The ideas of the Free Trade movement are based on a theoretical error whose practical origin is not hard to identify; they are based on a distinction between political society and civil society, which is made into and presented as an organic one, whereas in fact it is merely methodological. Thus it is asserted that economic activity belongs to civil society, and that the State must not intervene to regulate it. But since in actual reality civil society and State are one and the same, it must be made clear that laissez-faire too is a form of state 'regulation', introduced and maintained by legislative and coercive means. It is a deliberate policy, conscious of its own ends, and not the spontaneous, automatic expression of economic facts. Consequently, laissez-faire liberalism is a political programme, designed to change - in so far as it is victorious - a State's leading personnel, and to change the economic programme of the State itself - in other words the distribution of the national income." -- Antonio Gramsci, Prison Notebooks, "The Modern Prince", Some Theoretical and Practical Aspects of 'Economism'

Given the current conjuncture in, say, the United States, that bit about income distribution is of contemporary relevance. I think a study comparing and contrasting the ideas of Michel Foucault and Antonio Gramsci on how ideas become dominant in society would be interesting to read.

Elsewhere

• Greg Hill describes issues in getting into (Arrow-Debreu) equilibrium.
• I want to remember to sometime read Wolfgang Eichert's article, Long-period Positions in Multi-sectoral Cobb-Douglas Economies. The abstract sounds like an extension of two posts of mine.
• I also want to remember to sometime read Saverio Fratini's article Real Wicksell Effect, Demand for Capital and Stability.
• Robert Paul Wolff has posted a series critiquing game theory.
• Here is another article on rethinking economics.
• Unlearning Economics says the Cambridge Capital Controversy still matters.
• J. W. Mason is teaching international trade.

Update: On 6 February, completed series for R. P. Wolff, added an Unlearning Economics link, and added a link for J. W. Mason.