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Beyond Markets: Critical Approaches to Economics Post Keynesianism 1. Introduction There has been a mass scale transformation in the global economy in the 21st century. With the collapse in the former Soviet Union and decline in the communist governments in the Eastern Europe, the global economic scenario took a topsy turvy turn…
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Download file to see previous pages John Maynard Keynes, the famous British economist in his book General Theory of Employment, Interest and Money exhibited rigorous manifestation of macroeconomics. He explained the factors that are determinants of the level of output and employment in a particular economy and also explains the causes for which the economies experience lower levels of outputs and escalated levels of unemployment for extended period of time. Keynes believed that aggregate demand in the economy is affected by several important variables like “income distribution, uncertainty, the psychological habits of the consumers, the “animal spirits” of the entrepreneurs as well as the government policies” (Holt & Pressman, 2001, p.3) and mainly based on strong theoretical foundations. The Post Keynesian economics is an extension of Keynesian economics but they stress more on realistic interpretations rather than abstract theories. They state that behavior of the individual agents within the economy is determined by following several rules, developing habits and actions of others and so on. The business executives follow “animal spirit” according to Keynes detaching itself away from rationality. Decisions are crucial parameters in business and they vary from individual to individuals. Post Keynesian economics stresses more on the microeconomic foundations of macroeconomics and applies several techniques depending on various real life situations and circumstances. 2. Theme of the paper The above discussion is just an abstract prelude to post Keynesianism. The paper is fragmented in two main areas. The first section will focus on the understanding of the core of post Keynesianism from Keynesian perspectives. The second part will be discussing a post Keynesian theory which is Milton Friedman’s quantity theory of money demand and the target will be to analyze its connection with Keynesian thought and its deviation from the same. This will help us to understand a facet of post Keynesianism (as scope of discussion is limited). Now, before entering into hardcore mechanics of theory (the second part) a brief discussion regarding the distinction between Keynesianism and post Keynesianism (the first part) is necessary. The subsequent section will be highlighting the same. 3. Dimension of Keynesian economics 3.1 Deviation from laissez-faire The root of Keynesianism originates from the book, “The General Theory of Employment, Interest and Money” published as a potential rejoinder to the great depression of the 1930s (Nunzio, 2011, p.70). The main agenda of Keynesian economics directs towards the establishment of a mixed economy wherein the government (public sector) as well as the private sector play a predominant part. The Keynesian economics deviates from the concept of laissez-faire economics, which states that the private and market dynamics operate in an efficient way devoid of state intervention. From the perspectives of Keynes, the trends of macro level analysis surpass the micro level of the individual behavior and focuses on the aggregate demand for goods in the economy as the prime driving force in escalating the growth of the economy in period of economic crisis. Keynes stated that the policies of the government are highly useful for the promotion of demand at the macro level for fighting social menaces and ...Download file to see next pagesRead More
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