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"money must be introduced as part of the production process. Such a process is inherently dynamic, as entrepreneurs in each period must produce a new flow of commodities.” and households have no role to play in the creation of credit. Is this view the Post-Keynesian view or the neoclassical view?

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    $\begingroup$ Hi @emma. Could you provide a reference? $\endgroup$
    – EB3112
    Oct 17 '21 at 16:33
  • $\begingroup$ @EB3112 Quoted text is from Lavoie 1984. $\endgroup$
    – Giskard
    Oct 17 '21 at 17:19
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This possible answer is from a 2004 Working Paper by Gennaro Zezza, Some Simple, Consistent Models of the Monetary Circuit.

http://www.levyinstitute.org/pubs/wp405.pdf

The Theory of the Monetary Circuit (TMC) has received a growing interest among post-Keynesians in the last two decades. New developments have recently appeared from contributors to the two conferences in honor of Augusto Graziani,1 and a detailed analysis has recently appeared in Graziani (2003), where this approach is compared both to the classical and neoclassical tradition, and to other post-Keynesian approaches.

TMC, Say’s Law And The Keynesian Approach At a first look, the TMC outlined here may resemble the neoclassical approach, where it is savings decision to determine investment, rather than the Keynesian approach of effective demand, where investment decisions determine the level of output. As shown in our accounting in Tables 1 and 2, investment needs to be financed by issuing equities, and demand for equities ultimately arises from savings, so it may seem that saving decisions ultimately determine investment. Even though we consistently used the assumption that supply equals demand, we believe TMC to be compatible with a Keynesian approach: assuming that firms have excess capacity, an increase in investment will stimulate an equal increase in the production of capital goods. This will in turn require an increase in the wage bill for the capital goods sector, and an equivalent increase in loans demanded by this sector. The increase in the wage bill will stimulate production in the consumption goods sector, following the standard multiplier effect. TMC is thus entirely Keynesian in spirit, but stresses that increases in production, generated by a rise in effective demand, may be constrained by credit rationing, if firms pay real wages in advance.

Note: I have removed my original comments which are tangential to the question.

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    $\begingroup$ This does not seem to answer the question? Am I missing something? $\endgroup$
    – Giskard
    Oct 17 '21 at 20:30
  • $\begingroup$ As an engineer I am more interested in the assumptions and model dynamics. I leave it to the economists to put labels on their models such as Post Keynesian or neoclassical. But in my opinion it is Post-Keynesian derived from the Italian banking circuit theory. $\endgroup$ Oct 17 '21 at 20:38

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