Book Review: Post-Keynesian Economic Science (Lavoie)
Post-Keynesian Economics: New Foundations by Marc Lavoie is a masterful overview of post-Keynesian economical thought. It is an academic text, as well as it is aimed at readers amongst a proficient understanding of economic science already nether their belt. Within the text, he draws upon the unlike schools of idea that contain post-Keynesian economics, as well as shows that they supply a coherent understanding of macroeconomics.It is an first-class resources for those who aim to induce got a detailed understanding of economical thought.
Book Description
The volume was published inward 2014 past times Edward Elgar. The primary text is 584 pages, as well as has 62 pages of references. The book's chapters are:
- Essentials of heterodox as well as post-Keynesian economics.
- Theory of choice.
- Theory of the firm.
- Credit, coin as well as fundamental banks.
- Effective need as well as employment.
- Accumulation as well as capacity.
- Open-economy macroeconomics.
- Inflation theory.
- Concluding remarks.
This volume is the mo version of the text Foundations of Post-Keynesian Economic Analysis, which was published inward 1992. Professor Lavoie has likewise written a shorter Introduction to Post-Keynesian Economics (2006). He describes the text every bit "targeted mainly at honours students as well as masters students, but I am sure as shooting that PhD students tin flaming likewise practise goodness from it."
Marc Lavoie is a prolific writer inward post-Keynesian economics, as well as is a Professor of Economics at the University of Ottawa.
Scope Of This Review
The breadth of the topics inside this volume is as well as hence nifty that I volition non endeavour to address them here. I facial expression that I volition encompass unlike topics it raises during after articles. Instead, I volition focus on why I recommend it, as well as who would practise goodness from reading it. Additionally, I practise non induce got a rigid grasp of the many schools of idea inside post-Keynesian economics, as well as hence I cannot justice whether all of them are beingness treated fairly.
Why Study Post-Keynesian Economics?
The motivation for studying post-Keynesian economic science is that it appears to offering the strongest description of macroeconomics. I worked every bit a senior quantitative involvement rates analyst, as well as I had extensive sense amongst macro rates strategy. However, coming every bit an outsider to economics, I was troubled past times the ad hoc nature of economical analysis used inward the fiscal markets, as well as the express usefulness of inquiry that was churned out past times official bodies, such every bit fundamental banks,
At first, Hyman Minsky appeared to live ane of the few economists whose writings offered useful insights. Later on, I became acquainted amongst Modern Monetary Theory (MMT). Both MMT as well as Minsky's views agree inside the broad spectrum of post-Keynesian thought. It is only ane time I delved into this broader post-Keynesian literature it became clear why conventional economic science was essentially useless for understanding developments inward the macro economy.
The "Keynesian" part of the term "post-Keynesian" may enhance ideological hackles. I practise non desire to locomote involved inward discussing the politics of post-Keynesian economics, but I would indicate out that it is distinct from the mainstream "Keynesian" economical consensus of the 1960s as well as 1970s.
The Target Audience Of This Book
If y'all wishing to empathise how economies evolve, y'all withdraw to empathise post-Keynesian economics. And if y'all are serious almost next this business of study, this volume (or ane similar) is an invaluable resource. That said, the volume is non especially cheap, nor is it calorie-free reading. It is definitely non an introductory work.
(Update: The toll of the volume came upward on the discussions of this article when it was cross-posted to Seeking Alpha. There is a soft encompass version of the text which is quite a flake cheaper, but that version seemed to live only available inward the U.K now. It volition hopefully live available elsewhere soon.)
I believe that this volume is best suited for:
- economics students;
- readers amongst a proficient grounding inward economic science but non post-Keynesian economics;
- readers amongst a grasp of some areas of post-Keynesian economic science (such every bit Modern Monetary Theory), as well as desire to dig deeper into the theory.
Since diverse sections are (partially) reprinted from other publications, readers amongst a rigid background inward post-Keynesian economic science would induce got to justice for themselves almost the novelty of the contents.
I would stance the volume every bit a reference, as well as it may live best to read it inward the fellowship of your interest. In particular, I would propose that mortal novel to post-Keynesian economic science should read the start chapter last, or to skim over it. It discusses the diverse schools of thought, as well as it would live best to run across how they dealt amongst diverse subjects before worrying almost how to kind out them
The difficulty grade of the text varies depending on the subject. The discussions of coin as well as banking inward Chapter iv are straightforward, every bit they correspond to a straightforward dependent area (at to the lowest degree if y'all approach the dependent area without blinkers). Conversely the give-and-take of "ontological versus epistemic uncertainty" inward Chapter 2 is somewhat arcane. (Some readers may induce got the contrary preferences than the reviewer.) This disparity is an additional argue why I would recommend reading the subjects inward the fellowship of interest.
I stance the text Monetary Economics by Wynne Godley as well as Marc Lavoie every bit representing a to a greater extent than introductory text to post-Keynesianism. The stock-flow consistent models they develop inward that text shape a coherent introduction to macroeconomics. The reviewed Post-Keynesian Economics provides a deeper background explaining the modelling choices that were taken inward Monetary Economics.
What Is It About?
The breadth of the topics covered makes it extremely hard to summarise what this volume is about. Even after reading it, I would non fifty-fifty endangerment attempting to offering a summary of what post-Keynesian economic science is.
The difficulty faced is that post-Keynesian economic science consists of a number of schools of idea that induce got developed after the expiry of Keynes. These schools of idea had some disagreements, as well as ane tin flaming fence whether especial economists are genuinely "post-Keynesian" or not. This has atomic number 82 to the criticism that "post-Keynesian" economic science is incoherent.
Marc Lavoie's objective is to demo that these unlike schools of idea are unopen plenty inward globe stance to create a coherent torso of economics. He gives a "broad tent" stance of post-Keynesian economics; he describes himself every bit "a 'lumper' to a greater extent than than a 'splitter'" (page 44). An additional related objective is to demo that this torso of post-Keynesian economic science stands alone, as well as is non defined solely past times an opposition to "mainstream" economics.
The before Monetary Economics did supply a to a greater extent than coherent story, every bit it developed a serial of macroeconomic models inside a unmarried framework. (It did encompass some of the diverse controversies inward text sections at the terminate of chapters, but the mass of text followed the evolution of the models.) Post-Keynesian Economics presents diverse of import theoretical controversies. It is left to a greater extent than to the reader to create upward one's heed how coherent the viewpoints are.
I am most familiar amongst the debates around coin as well as banking. For example, at that topographic point are disagreements betwixt the views of those inward the Modern Monetary Theory (MMT) army camp as well as other post-Keynesians (including Marc Lavoie himself). But every bit he notes, these debates ended upward largely beingness over semantic differences, as well as the operational gap betwixt the 2 sides were really quite small.
On a related note, Lavoie discusses the promise of Wynne Godley that "the inwardness accounting equations as well as the dynamic stock-flow equations really institute a framework that constrains the make of possible results" (page 273). But, every bit he notes, "Unfortunately, things are non as well as hence simple" (page 273). Since researchers tin flaming disagree almost the behavioural rules to live followed past times the diverse sectors, they tin flaming create stock-flow consistent models that bear quite differently. My declaration is that past times demonstrating these differences inward semi-realistic mathematical models is much improve than purely verbal arguments or attempting to clit conclusions from alone unrealistic model frameworks. (For example, see the questionable debates almost "debt burdens" which are based on OLG models.)
The Advantages Of The Post-Keynesian Approach
The payoff of the post-Keynesian approach to macroeconomics is that a nifty bargain of mysterious events are non that hard to understand. Particular examples of involvement include:
- why is Nippon able to borrow at depression involvement rates, despite having a high debt-to-GDP ratio?
- why did euro expanse countries induce got debt crises, but no other developed countries?
- why did Quantitative Easing induce got no bear on on the charge per unit of measurement of inflation?
- why was the Financial Crisis almost alone unexpected?
- why is the USA economic scheme non accelerating despite years of negative existent rates?
Of course, after staring at predictive failures for years, other economists learned to while their theories ("it's all the fault of the nil lower bound!"). However, almost all of these issues are the outcome of mainstream economists clinging to unjustified theoretical assumptions almost the economy.
Unfortunately, post-Keynesian economic science highlights the importance of dubiety - the inability to fifty-fifty develop a probabilistic estimates for the time to come events. Additionally, the text is focussed on economical theory, as well as non edifice predictive models. That said, if your underlying theory is gibberish (for example, loanable funds), y'all stand upward piffling endangerment of edifice a useful economical model upon it. Therefore, reading this text volition non brand y'all into a star economical forecaster. The best it tin flaming offering is an increased endangerment of avoiding making the same errors every bit the consensus.
Concluding Remarks
Post-Keynesian Economics: New Foundations is an first-class resources for understanding the breadth of post-Keynesian economics. It provides a reliable, scholarly background on a broad make of topics, amongst a hefty laid of references for farther study. That said, it may live imposing for a novel reader.
I should depository fiscal establishment complaint that I did non necessarily concur amongst everything inside the text; given the size of the text, that is non surprising. I facial expression that I volition render to those topics later, as well as utter over them at greater length.
Finally, the volume is available at Amazon.com: Post-Keynesian Economics: New Foundations (affiliate link).
(c) Brian Romanchuk 2015
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