Tuesday, August 25, 2020

Reflections after a Post Keynesian Workshop

Jessica Finnamore (Guest blogger)

Heterodox economics refers to any school of thought which is not accepted by the economic mainstream, or neoclassical economics. Post-Keynesian economics is a heterodox school of thought which believes (amongst other things) in high levels of government intervention, fundamental uncertainty, and that the economy is demand-driven rather than supply-constrained (as neoclassical economics says). Keynes himself was concerned with creating theories which were realistic and was even willing to reject theories he had previously supported if empirical evidence disproved them.

Some Post-Keynesian ideas have been adopted into the mainstream; following the 2008 financial crisis, the mainstream had little to no explanation for what had caused the housing market crash and so they adopted the post-Keynesian idea of speculative bubbles, a phrase which is now frequent in mainstream literature. Post-Keynesian ideas are also relevant in the current pandemic, with the UK government pursuing expansionary fiscal policy such as furlough payments to stimulate the economy, something which Keynes believed in strongly.

Fortunately, I have a module on schools of thought in economics at my university (the University of Leeds), which explores heterodox ideas including post-Keynesianism, feminist economics, Austrian economics and Marxism, as well as discussing why pluralism is important in economics. However, I had already been studying economics for 2 years at school before I got to university, and we had never been taught that the graphs and theories we were learning came from mainstream economics. We were never shown the issues of neoclassical economics such as its failure to apply to the real world and the vast oversimplifications of its models. Furthermore, even at university, we have just one module on heterodox economics and the rest of the modules have a clear undertone of neoclassical theory.

Personally, I was driven to search for heterodox alternatives because I began to realise how unrealistic mainstream economics is and that means that neoclassical economics has led to many (if not all) of the issues in our society such as inequality and environmental damage. Heterodox schools such as post-Keynesianism are concerned with creating more realistic models and I believe this is where we have a greater need for pluralism in economics.

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