The Post-Keynesian Approach

Abstract

In this chapter we shall discuss some of the post-Keynesian theories that have been put forward to explain investment. The element which is common to all of them is the stress laid on demand factors as represented by output or sales and de-emphasis on the rate of interest. Another feature is the recognition of the importance of expectations and these theories attempt to incorporate expectations with varying degrees of sophistication. These theories attempt to explain net investment on the assumption that firms are cost minimisers rather than profit maximisers, and a supplementary hypothesis is required to explain replacement investment. Some authors, notably Eisner [12], argue that the determinants of replacement investment are the same as those of net investment.