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For example, suppose we replace equation  with: 6. It therefore provides a synthetic framework within which both Keynesian and Classical hypotheses about the income-generating process may be entertained. As Paquette , p. Examples include the Kaldorian process of cumulative causation found in Boyer and Petit and Petit , and the analytical model in Boyer , central to which are the demand-generating properties of wage formation and accelerator effects.
Arguably, it is. Hence note that drawing on its Classical heritage, RT emphasizes that following a major crisis and the consequent breakdown of a previously prevailing mode of regulation, processes of social conflict and struggle are intrinsic to the forging of a new mode of regulation. Indeed, conflict, interpreted as an open, non-deterministic process, can be seen as an important source of the fundamental uncertainty emphasized by PKE. Hence the Classical heritage of RT leads inevitably to an emphasis on recurrent crises as a feature of the growth process.
Meanwhile, although the use of steady-state equilibrium techniques sometimes masks this emphasis, the notion of unsteady growth and the potential for crises is evident in both key methodological Kregel, and theoretical Harrod, ; Minsky, contributions to PKE. Specifically, the analysis of longer term aggregate fluctuations is qualitatively similar in both traditions, in the sense that it involves emphasis on the role of institutions in structuring the accumulation process.
The mode of regulation is typically characterized as comprising five institutional pillars, which give definition to capital-labour relations, the precise form of competition between firms, the relationship between the state and the private economy, the system of money and credit creation, and the international order governing the relationships between national economies. From this observation follows a principle tenet of RT: that the rise and decline of modes of regulation in capitalist history is associated with long swings in the pace of accumulation and growth.
These, moreover, are traditionally viewed as business cycle phenomenon. But many PK economists identify relatively enduring but ultimately transmutable institutions as part-and-parcel of the behavioural response of decision makers to conditions of uncertainty, and these institutions are increasingly seen as contributing to longer phases of growth and retardation. The examples that Crotty provides of institutions that create or have created this conditional stability include relatively long-lived arrangements, such as oligopolistic practices in product markets and the Bretton Woods system governing international finance.
Despite the objections of Cornwall and Cornwall , chpt. The super cycle is a process of transforming business institutions, business conventions, and structures governing the market. These structures are critical for ensuring the stability of capitalist economies Palley, a, p.
Hence while Hodgson , discusses the links between institutionalism and PKE, the same author also acknowledges similarities between institutionalism and RT see Labrousse and Vercueil, As noted earlier, there is no obvious counterpart to the regime of accumulation in PKE, as a result of which little attention is paid in this tradition to the structural impact of technology on the point of production.
Instead, the microfoundations of macroeconomic analysis in PKE focus more on pricing rules and the distribution of income than on technical relations of production. It should be noted, however, that there is a rich emphasis on the dynamics of technical change in the Kaldorian branch of PKE.
This extends to emphasizing the importance of sectoral differences in the capacity of the economy to generate productivity growth Cornwall, ; McCombie and Thirlwall, , pp. Specifically, it is claimed that, while other accounts of contemporary conditions consistent with the basic strictures of either RT or PKE can certainly be entertained, a common theme in both traditions is that the current crisis represents the exhaustion of a financialized growth process.
New Keynesian Economics
This, he argues, is particularly advantageous at a time of rapid technological change, and should therefore be regarded as one of the institutional pillars associated with a nascent long-wave upswing in the US economy dating from the early s. Boyer , meanwhile, develops a theoretical model of a financialized growth regime as a precursor to evaluating the possibility that such a regime has replaced the Fordist regime of accumulation characteristic of the Golden Age. Confronting the model with a variety of statistical indicators, he concludes that the model is best suited to a description of Anglo-Saxon economies, noting that the spread of financialization is less evident in Europe and Japan.
As a result of this norm, firms must focus on distributing dividends at the expense of internally funding investment, the upshot being that their growth is retarded. Both Aglietta and Boyer et al draw attention to the financial fragility inherent in a financialized growth regime. Finally, Guttmann , p. He goes on to question numerous features of this regime — including the combination of previously separate financial activities within single firms, and the suitability of the regulatory framework — before alluding to the propensity of long periods of stability to breed financial fragility citing Minsky in the process.
Not surprisingly, the theme of financial fragility has also been pursued in contributions to the RT literature that have appeared since the onset of the crisis see, for example, Kotz, ; Guttmann and Plihon, This is perhaps not surprising, given the longstanding concern in PKE with the central roles of money and finance in the accumulation process. Hence Palley , chpt. An important theme that emerges from this literature is the potentially ambiguous effects of financialization on growth in steady-state PK models.
Perhaps the most celebrated of these are the Strategic Analyses produced by Wynne Godley and his various co-authors at the Levy Economics Institute of Bard College of which Godley and Izurieta, , is an excellent example. These track external, public sector and private sector balances in the US which, for any given level of income, must conform to the identity: Similar warnings can be found in Palley , who identifies household debt accumulation in the US as an unsustainable offset to a latent aggregate demand deficiency masking but incapable of indefinitely forestalling a severe crisis of demand in the US economy.
The notion that the atrophy or breakdown of these arrangements since has contributed to the current crisis can also be found in both traditions. This, in turn, is necessary for the maintenance of a constant rate of employment and hence for the long-term sustainability of any equilibrium rate of growth. Hence according to Petit, growth since the mids has been characterized by slow but positive productivity growth coupled with stagnant real wages, consistent with a declining wage share of income.
He goes on to connect the failure of this problem to materialize to household debt accumulation, before warning that this latter process may have reached its limit.
In simplified form, the PKE argument runs as follows. Since the late s, real wages have grown at a slower pace than productivity in advanced capitalist economies, thus creating a latent aggregate demand deficiency. The latter did not immediately become manifest, however, because households seeking increases in their standard of living resorted to debt accumulation to finance increasing consumption expenditures that could not be funded by rising real income — thus filling the aggregate demand gap that would have otherwise resulted from real wage growth lagging productivity growth.
In other words, the process was ultimately unsustainable: growth based on the debt-financed expansion of consumption expenditures by households experiencing little or no growth in real incomes must eventually grind to a halt — and according to PKE, it has done just this since And once again, these themes have been echoed in post-crisis PKE analysis see, for example, Setterfield b. The fact that RT and PKE are capable of furnishing such compatible accounts of the events of the last six decades only enhances the claims made in the previous section regarding their broad analytical congruity.
So, too, perhaps, does the answer to the question: are there are more similarities than differences between RT and PKE? Nevertheless, the argument advanced in this paper is that there are real and important analytical similarities between RT and PKE, and that these similarities merit emphasis despite certain genuine differences between the two traditions. It has also been shown that anticipations of the current crisis in both RT and PKE bear out the thesis that there is much in common between these traditions. There are branches of both literatures that identify the same structural flaw in the post growth regime productivity growth in excess of real wage growth as the ultimate progenitor of the crisis, and which explain the emergence of this flaw in similar fashion institutional change that upset a previously existing balance in the dynamics of aggregate wage formation.
Ultimately, then, it seems fitting to close by quoting Foley and Michl , p. Aglietta, M.
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Bhaduri, M. Blecker, R. Cynamon, S. Fazzari and M. Setterfield eds After the Great Recession , forthcoming. Bowles, S. Gordon and T. Boyer, R. Nell and W. Dehove and D. Coriat, B. Orsi, and O. Kaldor, N. The new monetarism. Kalecki, M. Collected works of Michal Kalecki. Volume I: Capitalism: Business cycles and full employment.
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Lawson, T. Reorienting economics. Lee, F.
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Post Keynesian price theory. On the genesis of post Keynesian economics: Alfred S. Eichner, Joan Robinson and the founding of post Keynesian economics. In Research in the history of economic thought and methodology , ed. Samuels, vol. Mata, T.
Edited by G. C. Harcourt and Peter Kriesler
Constructing identity: The post Keynesians and the capital controversies. Journal of the History of Economic Thought — Milberg, W. Minsky, H. Stabilizing an unstable economy. New Haven: Yale University Press. Keynes: Philosophy, politics and economics. Palley, T. Post Keynesian economics.
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