The policy implications of Post Keynesian monetary theory

Abstract

Any theory in reasonable contact with reality carries with it a plan for action—a policy for changing the world along better lines in keeping with its vision. When a theory is devoid of any contact with reality, it has no policy implications (action in the real world not being possible), or, alternatively, if a theory has but a tenuous contact with reality, its policy implications may be irrelevant or politically impractical. Neoclassical Keynesian theory, by virtue of its reformulation of Keynes along general equilibrium lines, has been moving along the latter trajectory. Post Keynesian theory, on the other hand, represents an attempt, still in the process of being worked out, to restore reality to economic thinking in terms of the power relationships of contemporary society. Whether it has done so effectively, or any better than neoclassical Keynesianism along politically practical lines, is left to the concluding section of this chapter.