Introduction to Post-Keynesian Economics
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Introduction to Post-Keynesian Economics. By Marc Lavoie. Palgrave Macmillan, Basingstoke, UK and New York, USA, 2006. 168pp., $85.00. ISBN: 0-230-00780-5. Giuseppe Fontana University of Leeds, Leeds, UK University of Sannio, Italy
Marc Lavoie is one of the most well-known and prolific Post Keynesian economists. His Foundations of Post-Keynesian Economic Analysis [Lavoie 1992] is the most advanced and well-written textbook on the economics of Keynes, Kalecki, and their modern followers. The little book under review is an easy-to-read and updated synthesis of the most important topics discussed in the Foundations. It is balanced and extremely well done, a must-read for anyone interested in knowing what Post Keynesian economics is all about. The book consists of five main chapters, to which are added an insightful introduction about the origin of the book, and some brief conclusions to highlight the modern relevance of ‘‘pro state intervention’’ Post Keynesian economics vis-a`-vis ‘‘pro free market’’ mainstream economics. All chapters are enriched by clear pictures, and very useful boxes presenting ancillary material. These boxes enhance the accessibility of the book, clarify difficult concepts, and provide additional information about key issues discussed in the text. The first chapter mainly deals with definitional issues. What are the characteristics of heterodox economics? Who are the so-called Post Keynesians? How do they differ from other heterodox schools? The chapter ends with a controversial issue. As Post Keynesian economics is made up of several strands, shall we exclude some approaches (e.g., the Sraffian strand) or emphasize others (e.g., the New Keynesian approach)? To his credit, Lavoie remains consistent. He is a fervent eclectic Post Keynesian scholar, particularly appreciative of the work of Kalecki and his modern followers. This means that under the label of Post Keynesian economics, this book discusses themes that are of interest to a variety of Post Keynesian economists, including Fundamentalists like Paul Davidson, and Sraffians like Edward Nell. The second and the third chapters deal with the microeconomic and macroeconomic components of Post Keynesian theory. Microeconomics is still an underdeveloped area in Post Keynesian theory; yet, in the last decades, great strides have been made. Starting with consumer choice theory, Post Keynesians have replaced the principle of decreasing marginal utility, and the marginalism concept more generally, with the principles of separability and subordination of needs. According to the former, consumers divide needs and related expenditures into many categories, only loosely tied one to another, where the latter principle maintains that needs and related expenditures are organized in a hierarchical order. This means that the notion of gross substitution no longer holds, and hence goods cannot be treated in an identical fashion. Similarly, in the Post Keynesian theory of the firm, the perfectly competitive environment has been replaced with oligopolistic
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