Keynes’ work on methodology was not insignificant. In fact, Keynes’ methodological contribution has been neglected generally, being overshadowed by his other work on economic theory and policy analysis. Post Keynesian economics arose out of the failures of neoclassical theory and its insufficient depiction of economic activity. Although Post-Keynesian economists do have many different ideas about the theoretical approach and assumptions compared to neoclassicists, they nevertheless all criticize the same points of the orthodox theory. On the following pages I will talk about the main methodological issues of the Post-Keynesian theory and work out the main differences to the neoclassical approach.
Table of Contents
1. Introduction
2. Background
2.1 The main motive for the Keynesian theory
2.2 The development of Post-Keynesian thinking
2.3 Philosophical foundation
2.3.1 Different approaches of Post-Keynesianism - Critical Realism vs. Babylonian approach
3. Post Keynesianism as a Political Economy
4. Post Keynesian methodology
4.1 Main features of Post-Keynesian methodology
4.2 A closer look to the definition of uncertainty and the long-run non-neutrality of money
5. Post Keynesianism in comparison to the neoclassical approach
5.1 An overview of the most important differences between the neoclassical theory and the Post Keynesian theory
6. Conclusion
Objectives and Key Themes
This work aims to provide a comprehensive analysis of the methodological foundations of Post-Keynesian economics, contrasting them with the prevailing neoclassical orthodoxy. The primary research objective is to elucidate how Post-Keynesianism conceptualizes economic activity, particularly by addressing the inherent instability of free-market processes, the crucial role of historical time, and the significance of uncertainty in decision-making.
- The historical and theoretical development of Post-Keynesian thought from Keynes to modern contributors.
- Methodological debates, specifically focusing on Critical Realism versus the Babylonian approach.
- The characterization of Post-Keynesianism as a "political economy" that rejects static equilibrium models.
- The central role of uncertainty and non-neutral money in shaping dynamic economic behavior.
Excerpt from the Book
4.2 A closer look to the definition of uncertainty and the long-run non-neutrality of money
To give a definition of uncertainty it first needs to be clarified what is meant by ergodicity as it is only in a nonergodic environment possible to define the difference between uncertainty and risk.
In an ergodic system, “future events are always reliably predictable by using a probability analysis of past and current outcomes.” In reverse it means for a nonergodic environment that ‘there is no basis to form calculable probabilities’ so that future probabilities are ‘numerically indeterminate and non-comparable’ to express it in Lawson’s terminology. “If economic observations are generated in nonergodic circumstances, then the calculation of either time and/or space averages based on past data can not be expected to provide a statistically reliable estimate of either (1) the current space average or (2) any time or space averages that will be observed over future calendar time.”
‘One must assume that the people in one’s models do not know what is going to happen, and know that they do not know just what is going to happen. As in history.’
That is how Hicks succinctly described uncertainty in a nonergodic world. In other words, if the real world is nonergodic, “past observations do not produce knowledge regarding current and/or future events, while current observations of events provides no statistically credible estimate of future time and/or space averages.” From that it follows that in a nonergodic economic environment the future is uncertain because it is not possible to calculate any probabilities about the certainty of future outcomes on the basis of knowledge of historical or current events.
Summary of Chapters
1. Introduction: Outlines the neglect of Keynes's methodological work and sets the goal to examine Post-Keynesian critiques of orthodox theory.
2. Background: Reviews the historical triggers for Keynesian theory and the evolution of Post-Keynesian thought through various influential economists.
3. Post Keynesianism as a Political Economy: Defines the school as a political economy, emphasizing interdisciplinarity and the rejection of static equilibrium analysis.
4. Post Keynesian methodology: Details core methodological tenets, focusing on historical time, uncertainty, and the rejection of neoclassical axioms.
5. Post Keynesianism in comparison to the neoclassical approach: Directly contrasts the two schools, highlighting differences in modeling individuals, money, and time.
6. Conclusion: Summarizes the current state of Post-Keynesianism as a fertile, albeit incomplete, theoretical field of high contemporary relevance.
Keywords
Post-Keynesianism, Neoclassical Theory, Methodology, Historical Time, Uncertainty, Critical Realism, Babylonian Approach, Political Economy, Non-neutrality of Money, Interdisciplinarity, Nonergodic System, Economic Instability, Cambridge Controversy, Marginal Efficiency of Capital.
Frequently Asked Questions
What is the primary focus of this work?
This work examines the methodological underpinnings of Post-Keynesian economics and highlights its fundamental differences from the neoclassical school of thought.
What are the central themes discussed?
The central themes include the nature of historical time, the importance of uncertainty, the role of money in the economy, and the rejection of atomistic, static equilibrium models.
What is the primary objective of this research?
The objective is to explain how Post-Keynesianism attempts to represent real-world economic activity more accurately than orthodox theories by acknowledging social and institutional constraints.
Which scientific methods are analyzed?
The work explores methodologies such as Critical Realism and the Babylonian approach, which emphasize complex, open systems rather than closed mathematical models.
What is covered in the main section of the document?
The main section covers the background of Keynesian theory, the philosophical foundations, the characterization as a political economy, and a detailed critique of neoclassical axioms like the ergodic axiom.
Which keywords best characterize this publication?
Keywords include Post-Keynesianism, Uncertainty, Non-neutrality of Money, Historical Time, Critical Realism, and Political Economy.
How does Post-Keynesianism define "uncertainty"?
It defines uncertainty in a nonergodic environment where future events are unpredictable because past outcomes do not reliably inform future probabilities.
Why is money considered "non-neutral" in this context?
Money is seen as a link between the past, present, and future, serving as a refuge from uncertainty and directly influencing actual economic processes, unlike in neoclassical theory where it is seen as a neutral veil.
How do Post-Keynesians view the individual compared to neoclassicists?
Post-Keynesians view individuals as social beings defined by class and institutional contexts, rather than as atomistic, self-interested maximizers operating in a vacuum.
- Quote paper
- Kant Tatjana (Author), 2009, Post Keynesian Methodology, Munich, GRIN Verlag, https://www.grin.com/document/150435
