A spotlight was directed by Laidler and Sandilands (2002) on the neglected 1932 Harvard memorandum (by Lauchlin Currie, Paul Theodore Ellsworth and Harry Dexter White). They interpret the memorandum as advocating fiscal inflationism as opposed to Keynesian fiscalism in tackling the Great Depression. While the former involves the creation of new money, the latter can operate independently of new money. This paper goes beyond this interpretation of the memorandum and argues the following: (i) the memorandum emphasises recovery in a manner which does not lose sight of secular growth; (ii) it does not take an isolationist position on the US depression but views it as a part of the broader international calamity; (iii) the memorandum appears at odds with the post-1936 notion of the liquidity trap and the consequent ineffectiveness of monetary policy and (iv) is aware of the various intricacies involved in expanding the money supply. In brief, the memorandum is an elegant piece of writing which displays a good understanding of the nuts and bolts of the money-supply process.
{"title":"Monetary Keynesianism before Keynes? The January 1932 Harvard memorandum on anti-depression policies","authors":"R. Chandra","doi":"10.4337/roke.2022.01.05","DOIUrl":"https://doi.org/10.4337/roke.2022.01.05","url":null,"abstract":"A spotlight was directed by Laidler and Sandilands (2002) on the neglected 1932 Harvard memorandum (by Lauchlin Currie, Paul Theodore Ellsworth and Harry Dexter White). They interpret the memorandum as advocating fiscal inflationism as opposed to Keynesian fiscalism in tackling the Great Depression. While the former involves the creation of new money, the latter can operate independently of new money. This paper goes beyond this interpretation of the memorandum and argues the following: (i) the memorandum emphasises recovery in a manner which does not lose sight of secular growth; (ii) it does not take an isolationist position on the US depression but views it as a part of the broader international calamity; (iii) the memorandum appears at odds with the post-1936 notion of the liquidity trap and the consequent ineffectiveness of monetary policy and (iv) is aware of the various intricacies involved in expanding the money supply. In brief, the memorandum is an elegant piece of writing which displays a good understanding of the nuts and bolts of the money-supply process.","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2022-01-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42412004","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study attempts to identify uncertainty in the long-term rate of interest based on the controversial interest-rate theories of Keynes and Kalecki. While Keynes stated that the future of the rate of interest is uncertain because it is numerically incalculable, Kalecki was convinced that it could be predicted. The theories are empirically tested using GARCH-in-mean (MGARCH) models without and with restrictions assigned to six globally leading financial markets. The obtained results support Keynes’s case: the long-term rate of interest is a non-ergodic financial phenomenon. Analyses of the relation between the interest rate and macroeconomic variables without interest uncertainty are thus seriously incomplete.
{"title":"Keynes vs Kalecki: risk and uncertainty in their theories of the rate of interest","authors":"Hubert Gabrisch","doi":"10.4337/roke.2022.01.03","DOIUrl":"https://doi.org/10.4337/roke.2022.01.03","url":null,"abstract":"This study attempts to identify uncertainty in the long-term rate of interest based on the controversial interest-rate theories of Keynes and Kalecki. While Keynes stated that the future of the rate of interest is uncertain because it is numerically incalculable, Kalecki was convinced that it could be predicted. The theories are empirically tested using GARCH-in-mean (MGARCH) models without and with restrictions assigned to six globally leading financial markets. The obtained results support Keynes’s case: the long-term rate of interest is a non-ergodic financial phenomenon. Analyses of the relation between the interest rate and macroeconomic variables without interest uncertainty are thus seriously incomplete.","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2022-01-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48784470","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper offers a comparison of the macroeconomic views held by Wynne Godley and James Tobin. Both authors were more concerned than their contemporaries with monetary matters. Both authors contributed, in different ways, to the stock–flow consistent approach, with Tobin providing to Godley the portfolio analysis he was missing. Both authors held Keynesian policy positions, but both were accused at times of not being Keynesian enough. While Tobin stuck with Neoclassical theory, Godley rejected it as he could never make any sense of it. The differences between these two authors are particularly evident when dealing with the traverse of economic activity from the short run to the long run. The biggest difference has to do with their conceptions of banking: Tobin argued that banks are barely different from other financial intermediaries, essentially providing a portfolio choice, and ultimately he relies on a variable multiplier view tied to the fractional-reserve theory of banking; by contrast, Godley emphasized the credit-creating ability of banks and their essential role in an economy where production takes time and where inventories are needed, with central banks providing reserves on demand, at the interest rate of their choice, as argued by central bankers today.
{"title":"The Godley-Tobin Memorial Lecture","authors":"M. Lavoie","doi":"10.4337/roke.2022.01.01","DOIUrl":"https://doi.org/10.4337/roke.2022.01.01","url":null,"abstract":"This paper offers a comparison of the macroeconomic views held by Wynne Godley and James Tobin. Both authors were more concerned than their contemporaries with monetary matters. Both authors contributed, in different ways, to the stock–flow consistent approach, with Tobin providing to Godley the portfolio analysis he was missing. Both authors held Keynesian policy positions, but both were accused at times of not being Keynesian enough. While Tobin stuck with Neoclassical theory, Godley rejected it as he could never make any sense of it. The differences between these two authors are particularly evident when dealing with the traverse of economic activity from the short run to the long run. The biggest difference has to do with their conceptions of banking: Tobin argued that banks are barely different from other financial intermediaries, essentially providing a portfolio choice, and ultimately he relies on a variable multiplier view tied to the fractional-reserve theory of banking; by contrast, Godley emphasized the credit-creating ability of banks and their essential role in an economy where production takes time and where inventories are needed, with central banks providing reserves on demand, at the interest rate of their choice, as argued by central bankers today.","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2022-01-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46359324","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Economists and economic policymakers believe that households’ and firms’ expectations of future inflation are a key determinant of actual inflation. A review of the relevant theoretical and empirical literature suggests that this belief rests on extremely shaky foundations, and a case is made that adhering to it uncritically could easily lead to serious policy errors.
{"title":"Why do we think that inflation expectations matter for inflation? (And should we?)","authors":"Jeremy B. Rudd","doi":"10.4337/roke.2022.01.02","DOIUrl":"https://doi.org/10.4337/roke.2022.01.02","url":null,"abstract":"Economists and economic policymakers believe that households’ and firms’ expectations of future inflation are a key determinant of actual inflation. A review of the relevant theoretical and empirical literature suggests that this belief rests on extremely shaky foundations, and a case is made that adhering to it uncritically could easily lead to serious policy errors.","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2022-01-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138524376","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Book review: Marc Lavoie, Post-Keynesian Monetary Theory: Selected Essays (Edward Elgar Publishing, Cheltenham, UK and Northampton, MA, USA 2020, ISBN 978-1-83910-008-6) 416 pp.","authors":"P. Bortz","doi":"10.4337/roke.2022.01.07","DOIUrl":"https://doi.org/10.4337/roke.2022.01.07","url":null,"abstract":"","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2022-01-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49264486","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Book review: Alex M. Thomas, Macroeconomics: An Introduction (Cambridge University Press, Cambridge, UK 2021) 254 pp.","authors":"Alex M. Thomas","doi":"10.4337/roke.2022.01.08","DOIUrl":"https://doi.org/10.4337/roke.2022.01.08","url":null,"abstract":"","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2022-01-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42368101","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The author proposes an updated theory of animal spirits that builds on Keynes’s insights and extends them by incorporating recent developments in neuroscience and psychology. He places animal spirits in a broader perspective of two systems of reasoning, each pertaining to different degrees of uncertainty. He examines how animal spirits form beliefs by way of analogical reasoning, the mental shortcuts they use, and the role of emotions. He outlines how confidence is biased and distorts business forecasts. The brain seems to seek to achieve the highest level of confidence, and maintains this level by distorting subsequent cognitions so that they substantiate the initial view. Animal spirits are ambivalent. Emotions signal whether we under- or overachieve. Animal spirits push us to take greater or fewer risks in order to reach and secure our objectives. At the same time, they provide incentives to update or change our beliefs and goals, so that they may be more sensible. However, animal spirits also conclude hastily and seek confirmation of their beliefs; they elaborate patterns out of nothing and rely on stereotypes; and emotions may distort judgment. Interestingly, so long as confidence remains high, animal spirits continue to rule the roost; when confidence plummets, logic and calculation enter the fray.
{"title":"Towards a general, modern theory of animal spirits","authors":"Michael Lainé","doi":"10.4337/roke.2022.01.04","DOIUrl":"https://doi.org/10.4337/roke.2022.01.04","url":null,"abstract":"The author proposes an updated theory of animal spirits that builds on Keynes’s insights and extends them by incorporating recent developments in neuroscience and psychology. He places animal spirits in a broader perspective of two systems of reasoning, each pertaining to different degrees of uncertainty. He examines how animal spirits form beliefs by way of analogical reasoning, the mental shortcuts they use, and the role of emotions. He outlines how confidence is biased and distorts business forecasts. The brain seems to seek to achieve the highest level of confidence, and maintains this level by distorting subsequent cognitions so that they substantiate the initial view. Animal spirits are ambivalent. Emotions signal whether we under- or overachieve. Animal spirits push us to take greater or fewer risks in order to reach and secure our objectives. At the same time, they provide incentives to update or change our beliefs and goals, so that they may be more sensible. However, animal spirits also conclude hastily and seek confirmation of their beliefs; they elaborate patterns out of nothing and rely on stereotypes; and emotions may distort judgment. Interestingly, so long as confidence remains high, animal spirits continue to rule the roost; when confidence plummets, logic and calculation enter the fray.","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2022-01-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48938761","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The relation between Keynesian monetary theory and demand-led growth: a Sraffian exploration","authors":"","doi":"10.4337/roke.2022.03.01","DOIUrl":"https://doi.org/10.4337/roke.2022.03.01","url":null,"abstract":"","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70742288","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Theorizing dollar hegemony: the political economic foundations of exorbitant privilege","authors":"","doi":"10.4337/roke.2022.04.02","DOIUrl":"https://doi.org/10.4337/roke.2022.04.02","url":null,"abstract":"","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70742843","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Book review: Yanis Varoufakis, Another Now: Dispatches from an Alternative Present (The Bodley Head, London, UK 2020) 240 pp.","authors":"","doi":"10.4337/roke.2022.03.08","DOIUrl":"https://doi.org/10.4337/roke.2022.03.08","url":null,"abstract":"","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2022-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"70742886","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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