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Wednesday, September 21, 2016

Whither Post-Keynesian Economics?

I returned from the University of Missouri Kansas City Post-Keynesian Conference, and I have been reflecting on the state of the field. From my external vantage point, it has the defects that are inherent in the institutions in modern academia, but it does have the advantages over the mainstream. The trick is being able to get an understanding of the theory from outside. Modern Monetary Theory (MMT) remains attractive as the project was structured in a fashion to be useful for non-academics.

Academic Conferences Are Academic Conferences

I should note that I did what I expected to do: talk with various academics I had previously only had contact with over the internet. That was very useful, and appreciated.

Like any other academic conference, the problem for an outsider is that one is dumped in amongst a bunch of trees, and trying to discern the forest is difficult. This is partially the result of the dysfunction of modern academia. Administrators have seized upon the bright idea of increasing the quantity of research produced, on the theory that research is akin to piecework on the assembly line. The predictable result is that a smaller number of ideas is spread across a greater number of papers. The situation was bad in the mid-1990s when I walked away from academia, and has accelerated since then. Modern management techniques have managed to cripple an institutional framework that has functioned for centuries, which is a fairly impressive achievement.

One of the ironies of the conference was that one of the big sources of excitement was the prospect of the release of Piero Sraffa's papers as an electronic archive. Piero Sraffa was a somewhat unusual figure, and his academic output (other than his lectures) was two (?) relatively slim books. (The one usually cited is Production of Commodities by Means of Commodities: Prelude to a Critique of Economic Theory.) Modern academics still study the deliberately cryptic theory of an academic who would never have come close to keeping an academic job at present given, his slow rate of output.

The upshot is that an outsider has to use survey articles or textbooks in order to judge the state of the academic art. Going to a conference is a means to gain access to the researchers, but much of the research itself that is presented tends to be cryptic and incremental. (There were some survey discussions, which were helpful.)

No Mathematics - Bah!

The belief that "post-Keynesians" do not do mathematics was proven wrong by the conference. I sat through a number of presentations that consisted of a wave of statistical tests, much like any other economics conference. (Even post-Keynesians use R.) On the theory side, there were presentations of Stock-Flow Consistent models. They might appear less "mathy" than DSGE macro, but I prefer mathematical models where the actual math is solved correctly.

Fragmentation of Theory

The difficulty of discussing post-Keynesianism is the fracturing of theories within the field. (The fact that one can distinguish between "post Keynesianism," "post-Keynesianism," and "Post-Keynesianism" is a bit of clue.) Academic politics were on display throughout the conference.

As an ex-academic, I do find academic politics to be an excellent form of entertainment. Furthermore, the private sector is not any better at creating internal consensus on economic views, as anyone who was involved in creating a "house view" for market economics can attest.

Unfortunately, it makes it difficult to answer simple questions such as: what do post-Keynesians believe to be true about the economy? ( It is easy to find where they disagree with the mainstream; my writings often fall into that trap as well.)

Various disagreements have led to lack of a consensus undergraduate text for post-Keynesian economic (at the level of a first economics course). There are certainly advanced texts; such as the excellent Post-Keynesian Economics: New Foundations by Marc Lavoie. (His argument is that we can extract a relatively coherent school of thought out of the wider post-Keynesian theory.) However, that text is aimed at graduate students, and you would already have to have a good idea of why you are interested in post-Keynesian theory before attempting to read it.

This is not necessarily problematic for academia. However, it makes life difficult for those of us outside academia who want to understand how the economy works. I was initially planning on writing a book with a title like "Business Cycles From The Post-Keynesian Perspective," but I realise it would have to be instead something like "Post-Keynesian Perspectives On The Business Cycle." And I would have to make some fairly arbitrary decisions on what to cover. It would not be a surprise if the factions that I ignored would be unhappy with my summary.

Modern Monetary Theory: A Path Forward

Since the conference was at UKMC, it had a Modern Monetary Theory (MMT) bent. Two of the founders of MMT gave major presentations -- Bill Mitchell, and Randall Wray. (Link to Wray speech.) However, the role of Warren Mosler -- another one of the founders -- came up a lot in conversation. From the perspective of an outsider, the organisational role of Mosler seems to be extremely important. The idea of packaging theory so that it would be targeted at non-academics may have appeared obvious to someone from the private sector, but certainly was not a strategy developed by broad post-Keynesianism. (Various post-Keynesians have written various books aimed at non-academics, such as Hyman Minsky, but the books have largely acted as one-offs. It was not obvious how an interested reader could continue further within the same school.)

The creation of a new school of thought within post-Keynesian economics is not a big deal. What set MMT apart was the organisational focus -- make the theory accessible to non-academics. In order to that, they had to go through the existing theory and see what was compatible with the MMT world view, and what was not.

The full version of the MMT textbook by Wray and Mitchell has been sent to the publishers, and is expected to appear in early in 2017. (An earlier version has been published; I will hold off reviewing the book until the full version comes out.) The existence of this textbook will also help cement the ease of entry advantage of MMT.

Absent a similar repackaging effort by other post-Keynesians, MMT is going to be the easiest entry point for post-Keynesian economics. (For the mathematically inclined, the SFC model literature would be an alternative.) That is, the easy way to approach macro is start off with MMT, and then look at various side topics. The significance of those side topics are only going to be understood only after one gets a broad understanding of the field.

Concluding Remarks

Most people outside of academia who are interested in economics follow what is usually called "market macro," a grab bag of theoretical ideas, supported by basic econometrics. (My writings largely fall under that category as well.) However, we need to be able to decide what ideas to put into that bag of analytical tricks, and for that we need a coherent theoretical view. Given that mainstream macro has retreated into a shell of non-falsifiability, some variant of post-Keynesian economics is one of the few viable alternatives.

(c) Brian Romanchuk 2016


  1. Two questions:

    (1) What was the reaction among the academic attendants to Prof. Mitchell's keynote address?

    (2) Didn't anybody explain the reason for all the fuss about the release of Sraffa's papers? Did you ask why the academic attendants were excited?

  2. 1) "Mixed" would be my polite summary. (Since this is the first time I met most of them, and they rapidly went into fairly old debates, I am not in a great position to judge the reaction.) There were a lot of responses about who said what first, and who said what about the Phillips curve. And we were missing some of the big MMT skeptics (Palley...).

    Jamie Galbraith argued that the focus should not be on novelty, rather what is correct (my view). I cannot say how universal that reaction was.

    2) The source of the excitement was that instead of working with just a couple hundred pages of his published work, the scholars now had the source material. Sraffa's finished output was written in a minimalist style, with no explanation of why he was writing what he was writing. The notes finally provide context from Sraffa himself. (Previously, they only had parts of his explanation, and what others said.)

    From a "knowledge for the sake of knowledge" perspective, this is cool. That said, from what I know about Sraffa's work, I doubt that this would be enough to cause me to try to work it into my upcoming book on business cycles.

  3. Yes, academia is desperately broken. Having to write in that ghastly citational style is almost not worth the bother. None of the old core texts would be produceable today. It's very sad.

    I think that working papers and blogs are the future. Outside of the STEM subjects, universities are only really there now to mop up youth unemployment and give rubber stamps to get hired in certain fields.

    1. Macro is not alone. As a field, it really came into existence around WWII (General Theory and all that). The field was initially vibrant, until it turned into its present state.

      Control systems came into existence during WWII, and it has followed almost exactly the same trajectory. The papers from the 1960s were easy to read, and covered big topics. The modern literature is extremely incremental, hard to follow for non-mathematicians, although it is more rigorous than earlier decades. That is pretty much exactly the same trajectory as econ; the only point of dispute is the level of mathematical rigour. (According to DSGE macro people, the rigour is there; from my vantage, not so much.)

      I do not have any delusions of grandeur about what I am doing; I am trying to write popularisations of existing theory. However, someone with the right background and skills who also finds themself in a similar position would be in a much better position to do blue skies research than an academic.

      Based on some conversations I had with experts of the history of the universities, for a good portion of the lifespan of Oxbridge, the only good sources of independent thinking were outside of the University system. The Universities were a playground for layabout aristocrats, and for training people to fit into the clergy or "bureaucratic" positions. (Although "bureaucracy" is an anachronism.) The academic system is reverting back to its past form (although the relative importance of training the clergy is less...).

    2. I'm even more pessimistic. I think that many of the disciplines using large-scale models and econometric-like estimation procedures are probably just 'flat earth' theories. The proliferation of statistical testing and large-scale modelling amongst the methodologically unsophisticated, the politically interested and the generally credulous has given rise to a giant step back in humankind's understanding of the world in the past 40 years. It is genuinely frightening in some ways.

    3. I am optimistic about the welfare state; it will continue to exist in some form, and it is so inherently stable that it can survive dimwittery amongst our ruling elites.

      This may reflect my parochial view of politics. The sociopaths in Europe did dismantle the welfare states in the periphery - leading to a depression - but I believe that the Canadian populace would have revolted if they tried similar stunts here. Luckily, most of the regions here have buried separatist sentiments, so the Federal Government cannot afford to act *too* stupid.


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