1 / 16

Competition and money in Keynes (and Kalecki)

This paper explores the roles of assumptions on competition and the nature of money in Keynes' General Theory, with implications for macroeconomic analysis and comparisons with Kalecki's approach.

mhauck
Download Presentation

Competition and money in Keynes (and Kalecki)

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Competition and money in Keynes (and Kalecki) Malcolm Sawyer

  2. Introduction • The themes of the paper : the roles of assumptions on the structure of competition and the nature of money in Keynes’ General Theory, implications for subsequent macroeconomic analysis and comparisons with Kalecki’s approach.

  3. Introduction • The use of (close to) perfect competition at time when Joan Robinson was writing Imperfect Competition • The use of (close to) exogenous money whereas credit money analysed in Treatise • Two areas where Keynes took a different route from that of Kalecki

  4. Competition • The argument is not that imperfect competition required to provide explanation of unemployment, though helps with explanation of capacity underutilisation. • Kalecki used a form of perfect competition is his initial formulations of roles of investment and aggregate demand.

  5. Competition • Did Keynes use perfect competition in order to ‘take on’ the neoclassicals ? • Imperfect competition and realism.

  6. Competition • Kahn pointed out in 1931 that firms under perfect competition operate when mc rising and mc > avc. • With fall in demand, firms either close down or operate above capacity

  7. Competition • Perfect competition and price formation • Price equals marginal cost in General Theory • Two implications • w/p = marginal product of labour • Firms satisfy demand which they face

  8. Competition • These are important results which are more readily derived under imperfect competition • Firms make pricing decisions which influence wage, (own) price relationship. • Imperfect competition interpreted as firms set price and satisfy demand at that price.

  9. Competition • Households : pQdc + Sa = wLs +  • Firms :  = pQs - wLd • (pQdc + pQdi - pQs) + (wLd - wLs ) + (Sa - pQdi) = 0 • If (pQdc + pQdi - pQs) = 0, then (wLs – wLd) = (Sa - pQdi)

  10. Competition • Demand facing the perfectly competitive firm represented as horizontal : difficulties in distinguishing a price change from an aggregate demand change.

  11. Competition • Is there a demand for labour function ? • Real wages over the business cycle • Real wages and the level of aggregate demand • Structure of competition and the distribution of income

  12. Money • From Treatise to General Theory • Constant stock of money or exogenous money • Money, credit, and the financing of investment in Kalecki and in Keynes • Movements between equilibria

  13. Money • Money and the Pigou effect • Stock of (endogenous) money is demand determined : can the stock of money in ‘real terms’ be changed ?

  14. Money • ‘Nevertheless while a flexible wage policy and a flexible money policy come, analytically, to the same thing, inasmuch as they are alternative means of changing the quantity of money in terms of wage-units, in other respects there is, of course, a world of difference between them’ (GT,p.267)

  15. Money • Endogenous credit money and the working of liquidity preference

  16. Concluding comments • Structure of competition is not a cause of unemployment: but … • Endogenous money a crucial part of the exploring the role of effective demand

More Related