The Structure of Post-Keynesian Economics: The Core Contributions of the Pioneers

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Abstract: This paper summarises the key elements of Geoffrey Harcourt's (2006) book of the same title. Special emphasis is given to the contribution of the Cambridge pioneers, such as John Maynard Keynes, Richard Kahn, Joan Robinson, Nicholas Kaldor, Michal Kalecki, Richard Goodwin, Piero Sraffa, Luigi Pasinetti, and Dennis Robertson. The objective of their approaches is to comprehend the dynamics of an advanced capitalist economy, particularly in the context of a monetary system of production. Here, investment leads and saving follows, while the marginal propensity to save of capitalists is greater than that of workers. The economic surplus is produced in the consumption goods sector, and utilised in the capital goods sector. Mark-up pricing is important for the determination of the surplus, as is the trade off between profit-margins and sales. Kalecki's principle of increasing risk plays a role in the cyclical dynamics, as does the two-sided relationship between profitability and accumulation. The prevailing business climate is important in determining future expectations, while endogenous money and credit help to finance investment. Growth is thus endogenous in these models of finance, accumulation and profit, while potential conflict plays a role in the pricing and investment decisions and in the process of inflation. A general policy vision emanates from these foundations.

1 Introduction

I start, first, by thanking the original inhabitants of the land on which we are now meeting for their courtesy in having us as their guests. Secondly, I must apologise to Peter Groenewegen and John King as they have already heard me talking on the present topic at the ESHET Conference in Porto in April 2006. Also, following John King's comments as discussant of the paper at Porto (I thoughtfully lent him the page proofs of the book on which the paper was based, Harcourt (2006), to read on the day the paper was presented), I feel I should have subtitled the book, The Core Contributions of the Cambridge Pioneers. But, as I quote Dennis Robertson in the Preface to the book as saying, 'it can't be helped now' (Robertson 1957, p. 7).

When writing the book, I had in mind two sets of readers: first, undergraduate and graduate students who may be looking for alternative approaches to thinking about theoretical, applied and policy issues in economics. By presenting a structure of the thought (and its origins) that I have found so helpful over my working life I hope at least to interest and possibly even enthuse this first set. Second, I also hope that what I have written may interest teachers and researchers in economics, not so much perhaps for the details of the analysis, with which many would be familiar, but for the way in which one person at least sees the interconnections and interrelationships that have emerged as our discipline has evolved and developed.

The ideas in the book themselves have evolved and developed for me over the past fifty years, in both lectures and research. My model is not exactly Dennis Robertson's three volumes of Lectures on Economic Principles in Cambridge (1957, 1958, 1959); but I suppose it has something in common with them, even with his admission that 'if it is all wrong, it can't be helped now' (Robertson 1957, p. 7). I trust, though, that I have not written in quite so querulous a tone as that into which Robertson sometimes lapsed, for I remain, as ever, a happy and enthusiastic, even optimistic, person who nevertheless is willing to admit that he may be wrong.

I wrote the first draft of the Preface in April 2005, in the fiftieth year since I first came to Cambridge in September 1955. Half my working life has been spent here (the other half in Adelaide, most happy years) and I count myself most fortunate to have studied and taught in such a stimulating and satisfying, even if sometimes so cantankerous an environment.

Much more than this, though, in 2005 Joan and I celebrated our Golden Wedding anniversary on 30th July. As ever, her love and support made possible the writing of the book, much of which occurred in the study she imaginatively prepared for me in our New Square home when, having had three years' grace over and above the obligatory seventy years' constraint, I no longer had a room at Jesus. I dedicated the book to her with my love.

2 The Cambridge Pioneers

Why post-Keynesian economics and who were its Cambridge pioneers? Maynard Keynes, Richard Kahn, Richard Goodwin, Nicholas Kaldor, Luigi Pasinetti, Joan Robinson and Piero Sraffa all started initially, at least in some degree, within the mainstream of their time. They all moved well and truly outside it, attempting to create either a revolutionary alternative or to rehabilitate the classical Marxian tradition, in most cases in the light of the Keynesian revolution. The one exception is Michal Kalecki, whose personal history and independent mind combined to place him virtually always outside the mainstream. The book, though, is not principally concerned with why and how the discontents that led them to change their minds arose. Rather, its principal object is to set out the structures of their alternative approaches in order to suggest modes of thinking about theoretical and policy issues in political economy. (1)

The structures presented here are based on over forty years of teaching and researching under the rubric of what is now called post-Keynesian economics. I certainly was not aware that it was so called when I started on this track in the 1950s. In fact, I have much sympathy with the stance of my old …