In the wake of the financial crisis of 2008, when econo mic theory is rightly challenged to show the relevance of its insights, it is reassuring to turn to readings that show why such theory really matters. These essays show how, and why, Australian economics has been able to draw on the best of twentieth-century economics to provide insights into the economic problems of the twenty-first century. In these essays Joseph Halevi, Geoff Harcourt, and John Nevile bring a rare scholarship to bear on fundamental questions of how we are to understand the unstable workings of capitalism. Their working through of ideas derived from Keynes, Kalecki and Harrod make this volume an essential reading for the renewal of macroeconomics in our times. Jan Toporowski, Professor of Economics and Finance, School of Oriental and African Studies (SOAS), University of London, UK Four leading post-keynesian and heterodox economists from down under provide us with a rich menu of essays on three of the great post-keynesians. The authors writings provide us with deep insights into the works of Keynes, Harrod and Kalecki, showing the continuing relevance of their analyses. It is a welcome collection of highly readable essays. Malcolm Sawyer, Emeritus Professor of Economics, University of Leeds, UK
Post-Keynesian Essays from Down Under Volume I: Essays on Keynes, Harrod and Kalecki Theory and Policy in an Historical Context Joseph Halevi Center CRIISEA of the Universit é de Picardie, Amiens, France, Senior Lecturer, University of Sydney, Australia, International University College, Turin G. C. Harcourt Visiting Professorial Fellow in the School of Economics, University of New South Wales, Australia Associate Professor, University of New South Wales, Australia and Emeritus Professor, University of New South Wales, Australia
Joseph Halevi, G. C. Harcourt, and 2016 Softcover reprint of the hardcover 1st edition 2016 978-1-137-47537-4 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6 10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2016 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave and Macmillan are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN 978-1-349-56948-9 DOI 10.1057/9781137475381 ISBN 978-1-137-47538-1 (ebook) This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Post-Keynesian essays from down under : essays on Keynes, Harrod and Kalecki / Joseph Halevi, Senior Lecturer, University of Sydney, Australia, G. C. Harcourt, Visiting Professorial Fellow in the School of Economics, University of New South Wales, Australia,, Associate Professor, Director of The Society of Heterodox Economists, University of New South Wales, Australia,, Emeritus Professor, University of New South Wales, Australia. volumes ; cm Summary: Joseph Halevi, G. C. Harcourt, and bring together a collection of their most influential papers on post-keynesian thought. Their work stresses the importance of the underlying institutional framework, of the economy as an historical process and, therefore, of path determinacy. In addition, their essays suggest the ultimate goal of economics is as a tool to inform policy and make the world a better place, with better being defined by an overriding concern with social justice. Volume I analyses the contributions of Keynes, Harrod and Kalecki Provided by publisher. Contents: Machine generated contents note: List of Figures List of Tables Acknowledgements Keynes 1. The enduring importance of the General Theory; Harcourt and Kriesler 2. The General Theory after sixty years: history or economic laws?; Halevi 3. Notes on Keynes aggregate supply curve; Nevile 4. What Keynes would have thought of the development of IS-LM; Nevile 5. IS-LM in macroeconomics after Keynes; Kriesler and Nevile 6. Keynes, Kalecki and the General Theory; Kriesler 7. Michał Kalecki on capitalism; Kriesler and Bruce McFarlane 8. Kalecki and modern capitalism; Halevi 9. Kalecki s pricing theory revisited; Kriesler 10. Microfoundations: a Kaleckian perspective; Kriesler 11. Kalecki, classical economics and the surplus approach; Halevi and Kriesler 12. Kalecki s conception of the economic cycle and state intervention; Halevi 13. Was Kalecki an imperfectionist? Davidson on Kalecki; Kriesler 14. Answers for Steedman; Kriesler 15. Reply to Steedman; Kriesler 16. On the limitations of fiscal policy: a radical Kaleckian view; Halevi and Kriesler 17. The influence of Michał Kalecki on Joan Robinson s approach to economics; Harcourt and Kriesler 18. Michał Kalecki and Rosa Luxemburg on Marx s schemes of reproduction: two incisive interpreters of capitalism; Harcourt and Kriesler 19. The contemporary significance of Baran and Sweezy s notion of monopolistic capitalism; Halevi 20. Dynamic Keynesian economics: cycling forward with Harrod and Kalecki; Kriesler and Nevile 21. The mathematical formulation of Harrod s growth model; Nevile 22. The stability of warranted growth; Nevile 23. A reply to Dr. Inada; Nevile 24. Expectations, lags and particular parameter values in Harrod s dynamics; Nevile 25. Accumulation and structural disequilibrium; Halevi. 1. Economic history. 2. Keynesian economics. I. Halevi, Joseph, editor. II. Harcourt, G. C. (Geoffrey Colin), 1931 editor. III. Kriesler, Peter, editor. IV. Nevile, J. W. (John Warwick), editor HC21.P667 2015 330.15'6 dc23 2015030007 Typeset by MPS Limited, Chennai, India.
Contents List of Figures and Tables Preface Acknowledgements About the Authors vii viii x xii Introduction 1 Part I Keynes 1 The Enduring Importance of The General Theory 15 G. C. Harcourt and 2 The General Theory after Sixty Years: History or Economic Laws? 34 Joseph Halevi 3 Notes on Keynes Aggregate Supply Curve 44 4 What Keynes Would Have Thought of the Development of IS-LM 50 5 IS-LM and Macroeconomics after Keynes 69 and 6 Keynes, Kalecki and The General Theory 81 Part II Kalecki 7 Michał Kalecki on Capitalism 107 and Bruce McFarlane 8 Kalecki and Modern Capitalism 133 Joseph Halevi 9 Kalecki s Pricing Theory Revisited 141 10 Microfoundations: A Kaleckian Perspective 161 v
vi Contents 11 Kalecki, Classical Economics and the Surplus Approach 177 Joseph Halevi and 12 Kalecki s Conception of the Economic Cycle and State Intervention 191 Joseph Halevi 13 Was Kalecki an Imperfectionist? Davidson on Kalecki 209 14 Answers for Steedman 216 15 Reply to Steedman 224 16 On the Limitations of Fiscal Policy: A Radical Kaleckian View 226 Joseph Halevi and 17 The Influence of Michał Kalecki on Joan Robinson s Approach to Economics 239 G. C. Harcourt and 18 Michał Kalecki and Rosa Luxemburg on Marx s Schemes of Reproduction: Two Incisive Interpreters of Capitalism 254 G. C. Harcourt and 19 The Contemporary Significance of Baran and Sweezy s Notion of Monopolistic Capitalism 265 Joseph Halevi 20 Dynamic Keynesian Economics: Cycling Forward with Harrod and Kalecki 287 and Part III Harrod 21 The Mathematical Formulation of Harrod s Growth Model 305 22 The Stability of Warranted Growth 309 23 A Reply to Dr. Inada 319 24 Expectations, Lags and Particular Parameter Values in Harrod s Dynamics 321 25 Accumulation and Structural Disequilibrium 331 Joseph Halevi Index 352
List of Figures and Tables Figures 3.1 Short run cost curves 46 6.1 Relation between monetary and real sectors in neoclassical economics 84 6.2 Relation between monetary and real sectors for Keynes 88 6.3 Relation between monetary and real sectors for Kalecki 94 9.1 Cost curves of an enterprise in an imperfectly competitive market 143 Tables 6.1 Comparison of economic systems 97 10.1 National Income 167 vii
Preface Geoff Harcourt intended to put together one more volume of selected essays in order to reach double figures. But then reminded him that since he joined the School of Economics at the University of New South Wales in August 2010 as a Visiting Professorial Fellow, they, sometimes with John Nevile, had published several joint papers. Moreover, Peter and John, and Peter and Joseph Halevi, had also been publishing joint papers for many years. All their works, whether as sole author or jointly, had important common themes. The underlying theoretical framework was essentially post- Keynesian. 1 They all stressed the importance of the underlying institutional framework, of the economy as an historical process and, therefore, of path determinacy. Money and finance were an integral part of the economy, with monetary variables affecting real variables and vice versa at all stages of analysis. In addition, all the works saw the ultimate goal of economics as being a tool to suggest policy even the theoretical works were motivated by the desire to make the world a better place, with better being defined by an overriding concern with social justice. So arose the proposal we made to Taiba Batool that we put together four volumes of selected essays by Post-Keynesian Essays from Down Under, subtitled Theory and Policy in an Historical Context. She enthusiastically accepted the offer, ably assisted by Ania Wronski. We therefore set about putting the selections together. When Taiba left Palgrave Macmillan for pastures new, she passed the project onto Laura Pacey and Rachel Sangster who, just as enthusiastically, oversaw the bringing together and publication of the four volumes. Laura, in particular, has been extremely helpful and patient in our journey from idea to manuscript. Our grateful thanks go to Joan Harcourt for forgiving Geoff for breaking the promise never again to undertake a major research project, witnessing yet again her love and support of over 60 years; to Teresa, Peter s wife, for her continual love and support; and to Fay, John s wife, who, in the absence of a secretary, typed much of his introductions to chapters (and commented that the names had not changed much since the last time she did this when, as a young wife, she typed drafts of John s PhD thesis). We would also like to thank Roni Demirbag for his help in getting Joseph s papers in order, and Jason Antony for his gracious and good-natured multidimensional expert help in assembling the volumes. viii
Preface ix Note 1. For a overview of what we consider to be post-keynesian economics see Harcourt, G. C. and Kriesler, P. 2015 Post-Keynesian Theory and Policy for Modern Capitalism, Journal of Australian Political Economy, No. 75, Winter 2015, 27 41.
Acknowledgements The authors and publishers wish to acknowledge with thanks the following for either previously publishing their articles, or granting permission to reproduce copyright material: Taylor and Francis Online for permission to reprint The enduring importance of The General Theory, Review of Political Economy, Vol. 23, No. 4, 2011, pp. 503 519. http://www.tandfonline.com/doi/full/10.1080/09538259.2011.611616 Journal of the Universidad Autonoma de Ciudad Juarez, Mexico, for publishing The General Theory after sixty years: history or economic laws?, Nóesis, Año VII, Julio/Diciembre, no. 17: La Teoría General de Keynes: Sesenta Años Después, 1996, pp. 15 25. Taylor and Francis LLC for permission to reprint Notes on Keynes s aggregate supply curve, Journal of Post Keynesian Economics, Vol. 15, No. 2, 1992, pp. 255 260. Palgrave Macmillan for permission to reprint What Keynes would have thought of the development of IS-LM in W. Young and B. Zilberfarb (eds) IS-LM and Modern Macroeconomics, 2000, pp. 133 149. Taylor and Francis LLC for permission to reprint IS-LM and macroeconomics after Keynes in P. Arestis, M. Desai and S. Dow (eds) Money, Macroeconomics and Keynes: Essays in Honour of Victoria Chick, Volume 1, 2002, pp. 103 114. Taylor and Francis LLC for permission to reprint Keynes, Kalecki and The General Theory in G.C. Harcourt and P.A. Riach (eds) A Second Edition of The General Theory, Volume 2, 1997, pp. 300 322. Oxford University Press and Bruce McFarlane for permission to reprint Michał Kalecki on capitalism, Cambridge Journal of Economics, Vol. 17, No. 2, 1993, pp. 215 234. The editors of Monthly Review for permission to reprint Kalecki and modern capitalism, Monthly Review, Vol. 44, No. 2, June 1992, pp. 42 52. Taylor and Francis LLC for permission to reprint Kalecki s pricing theory revisited, Journal of Post Keynesian Economics, Vol. 11, No. 1, 1988, pp. 108 130. Palgrave Macmillan for permission to reprint Microfoundations: a Kaleckian perspective in J. King (ed.) An Alternative Macroeconomic Theory: The Kaleckian model and Post-Keynesian Economics, 1996, pp. 55 72. Taylor and Francis Online for permission to reprint Kalecki, classical economics and the surplus approach, Review of Political Economy, Vol. 3, No. 1, 1991, pp. 79 92. http://www.tandfonline.com/doi/abs/10.1080/09538259100000006 John Wiley and Sons for permission to reprint Kalecki s conception of the economic cycle and state intervention, Annals of Public and Cooperative Economy, Vol. 46, No. 3, 1975, pp. 233 249. Taylor and Francis LLC for permission to reprint Was Kalecki an imperfectionist? Davidson on Kalecki, Journal of Post Keynesian Economics, Vol. 24, No. 4, 2002, pp. 623 630. Taylor and Francis Online for permission to reprint Answers for Steedman, Review of Political Economy, Vol. 4, No. 2, 1992, pp. 163 170. http://www.tandfonline.com/ doi/abs/10.1080/09538259200000013 x
Acknowledgements xi Taylor and Francis Online for permission to reprint Reply to Steedman, Review of Political Economy, Vol. 5, No. 1, 1993, pp. 117 118. http://www.tandfonline.com/ doi/abs/10.1080/09538259300000007 Edward Elgar Publishing for permission to reprint On the limitations of fiscal policy: a radical Kaleckian view in J.H. Bougrine (ed.) The Economics of Public Spending: Debts, Deficits and Economic Performance, 2000, pp. 135 149. Palgrave Macmillan for publishing The influence of Michał Kalecki on Joan Robinson s approach to economics in P. Arestis (ed.) Microeconomics, Macroeconomics and Economic Policy: Essays in Honour of Malcolm Sawyer, 2011, pp. 153 169. Palgrave Macmillan for publishing Michał Kalecki and Rosa Luxemburg on Marx s schemes of reproduction: two incisive interpreters of capitalism in R. Bellofiore, E. Karwowska and J. Toporowski (eds) The Legacy of Rosa Luxemburg, Oskar Lange and Michał Kalecki, Volume 1, 2014, pp. 9 18. Palgrave Macmillan for permission to reprint The contemporary significance of Baran and Sweezy s notion of monopolistic capitalism in M. Jarsulic (ed.) Money and Macro Policy, 1985, pp. 109 133. Oxford University Press for permission to reprint Dynamic Keynesian economics: cycling forward with Harrod and Kalecki, Cambridge Journal of Economics, Vol. 36, No. 2, 2012, pp. 405 417. The Economic Journal for publishing The mathematical formulation of Harrod s growth model, The Economic Journal, Vol. 72, No. 286, 1962, pp. 367 370. John Wiley and Sons for permission to reprint The stability of warranted growth, Economic Record, Vol. 36, No. 76, 1960, pp. 479 490. The Economic Journal for publishing The mathematical formulation of Harrod s growth model: A reply to Dr. Inada, The Economic Journal, Vol. 75, No. 299, 1965, pp. 624 625. The History of Economic Thought Society of Australia for permission to reprint Expectations, lags and particular parameter values in Harrod s dynamics, History of Economics Review, Vol. 37, Winter, 2003, pp. 100 108. Palgrave Macmillan for publishing Accumulation and structural disequilibrium, Beyond the Steady State: A Revival of Growth Theory, 1992, pp. 264 288.
About the Authors Joseph Halevi, alma mater University of Rome La Sapienza, began teaching economics at the New School of Social Research in New York and later at Rutgers University. He has a permanent appointment at the University of Sydney. He was Visiting Professor at the University of Connecticut and regularly in France at the Universities of Grenoble, Nice and Amiens. He has authored many books and contributed to the first edition of The New Palgrave Dictionary of Economics in 1987 and co-edited Beyond the Steady State with Macmillan in 1992, among others. G. C. Harcourt is a graduate of the Universities of Melbourne and Cambridge. He has worked mainly at Adelaide (1958 to 1985) and Cambridge (1964 to 1966; 1972 to 1973; 1980; 1982 to 2010). He is now Visiting Professorial Fellow at UNSW Australia. He is Emeritus Reader in the History of Economic Theory at Cambridge University; Emeritus Fellow of Jesus College at Cambridge; and Professor Emeritus at the University of Adelaide. He has authored or edited 29 books and over 380 articles, notes, chapters in books and reviews. His books include Some Cambridge Controversies in the Theory of Capital (1972), The Structure of Post-Keynesian Economics (2006), (with Prue Kerr) Joan Robinson (2009) and (jointly edited with ) The Oxford Handbook of Post-Keynesian Economics, 2 vols (2013). currently teaches in the School of Economics at the University of New South Wales. He organises the Annual Australian Society of Heterodox Economists Conference, which is now in its fourteenth year. Peter s main publications are in the areas of history of economic thought, heterodox economics, the Australian economy, labour economics, and economic perspectives on human rights. is Emeritus Professor at the University of New South Wales in Sydney, Australia. He has published extensively on fiscal policy, macroeconomic policy in general, economics and ethics, and the history of economic thought. He has served on a number of statutory authorities and government enquiries. He was the Recipient of the Economic Society of Australia Distinguished Fellow Award for the year 2000. xii