The new issue of ROKE (Review of Keynesian Economics) is online with a few articles available free for some time. Marc Lavoie, Thomas Palley and Brett Fiebiger comment on Keen’s notion of aggregate demand.

Marc Lavoie’s article A comment on ‘Endogenous money and effective demand’: a revolution or a step backwards? is available here.

Steve Keen’s own paper Endogenous money and effective demand is available here.

From Marc Lavoie’s introduction and the ending:

Steve Keen argues that post-Keynesians have not sufficiently emphasized the revolutionary character of endogenous money for macroeconomic theory, and that this should be done by recognizing that aggregate demand is equal to current or past income plus the change in debt. This equation, attributed in particular to Hyman Minsky, is discussed and questioned, and it is recalled that a similar equation had been proposed by Alfred Eichner. The consequences of bank credit for firms or households are further analysed within the context of the national accounts, and it is shown that one does not need a redefinition of aggregate demand and aggregate supply, in contrast to what is proposed by Keen…

All post-Keynesians certainly concur with the idea that banks have the capacity to alter the level of aggregate demand, and hence that it would be desirable for banks, debt, and money to be included in models of macroeconomics… There are several examples of post-Keynesian macroeconomic models that incorporate banks, debt, and money – for instance, Godley and Cripps (1983) and Godley and Lavoie (2007), just to mention those that I am most familiar with… But this does not imply, as Keen claims, that we need a redefinition of aggregate demand such that the starting point of macroeconomics is that ‘effective demand is equal to income plus the turnover of new debt’ (Keen 2014a, p. 286). Nor does it mean that aggregate supply needs to be redefined ‘to incorporate the financial markets’ (ibid., p. 290). To provide new definitions of existing terms will only lead to a maze of confusions.

Keen makes the grandiose claim that his approach leads to a ‘new, monetary macroeconomics’ (Keen 2014a, p. 286). While statements of this kind may appeal to an internet audience, I doubt they will convince readers of this journal.

Marc also quotes my blog post Income ≠ Expenditure? which critiqued Keen. (Thanks!).

Tom Palley and Brett Fiebiger’s papers are not available for download by the journal. I will update the post in case ROKE decides to make it available. The permanent links are available in the left column of the papers linked in the post. Palley’s draft version is available here

Also don’t miss the paper by Anthony Thirlwall in the current issue.

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Thomas Palley On The Phillips Curve

by Ramanan on 18 July 2014

Tom Palley has written a short note titled The Phillips Curve: Missing the Obvious and Looking in All the Wrong Places. 

From the introduction:

The Phillips Curve: Missing the Obvious and Looking in All the Wrong Places

There is an old story about a policeman who sees a drunk looking for something under a streetlight and asks what he is looking for. The drunk replies he has lost his car keys and the policeman joins in the search. A few minutes later the policeman asks if he is sure he lost them here and the drunk replies “No, I lost them in the park.” The policeman then asks “So why are you looking here?” to which the drunk replies “Because this is where the light is.”That story has much relevance for the economics profession’s approach to the Phillips curve.

Read more here

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Thomas Palley On Milton Friedman’s Shadow

7 July 2014

Thomas Palley has a new paper critiquing Milton Friedman’s influence on Economics: Milton Friedman’s economics and political economy: an old Keynesian critique Milton Friedman’s influence on the economics profession has been enormous. In part, his success was due to political forces that have made neoliberalism the dominant global ideology, but Friedman also rode those forces […]

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Marc Lavoie’s New Book

30 June 2014

Marc Lavoie is out with his new book Post-Keynesian Economics: New Foundations. (Publisher’s site for the book) As per the book’s website, The book is a considerably extended and fully revamped edition of the highly successful and frequently cited Foundations of Post-Keynesian Economic Analysis, published in 1992. It provides an exhaustive account of post-Keynesian economics and of the […]

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Greg Mankiw And Empirics

24 May 2014

Greg Mankiw wonders if teaching students empirics is feasible and answers in negative: Noah Smith says introductory economics needs to be more empirical. I understand his argument, and have some sympathy with it, but I wonder if the substantial change he seems to be proposing is practical. Economists usually do empirical work with statistical tools […]

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Steve Keen And Sectoral Balances

19 May 2014

Steve Keen has a new article on sectoral balances here. First apologies in advance for sometimes criticizing heterodox economists more but needless to say, such criticisms are of a totally different nature than criticisms of mainstream economists. Anyway, I am surprised at why Keen mixes accounting identities, especially when it involves banks in the analysis. […]

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Thomas Palley — More On The Mainstream (Not Wonkish)

2 May 2014

Thomas Palley replies to Krugman’s blog post from yesterday. Paul Krugman wrote a reply to my two postings (Part 1 and Part 2) on the flimflam of mainstream economics. Below is my response to Paul that was posted as a comment on his Conscience of a Liberal website. I am posting it because I think it sheds more light on […]

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Thomas Palley — Looking For Flimflam: Some Hints On Where To Find It

1 May 2014

Thomas Palley replies to Simon Wren-Lewis: Simon Wren-Lewis has graciously replied to my post on mainstream economics’ flimflam and says he cannot find it (the flimflam). Here are some hints on where to look.  Read More here

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Thomas Palley — The Flimflam Defense of Mainstream Economics

30 April 2014

Thomas Palley has a new op-ed in response to Paul Krugman: The teaching of economics has recently been in the news. One reason is the activities of Manchester University undergraduates who have formed the Post-Crash Economics Society to protest the monopoly of mainstream neoclassical economics in university lecture halls. A second reason is criticism of the neoclassical […]

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Paul Krugman, Gattopardo Economist, Part 2

25 April 2014

As mentioned in my previous blog, Paul Krugman tries his best to put down heterodoxy. His claims that nobody predicted the crisis is deeply unintellectual when someone such as Wynne Godley and other heterodox economists had warned about it. Moreover, Jan Hatzius who uses Wynne Godley’s approach also had made a case for a severe […]

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