- 季刊経済理論 (ISSN:18825184)
- vol.46, no.4, pp.15-24, 2010-01-20
J. M. Keynes argued that money is not neutral both in the short-run and in the long-run, therefore it influences on real economic activities such as production and employment. Post Keynesian economists inherit his ideas, and try to develop his original theory. This paper clarifies the essence of Keynesian revolution, and explores the direction of an alternative economic theory and policy by reviewing recent developments in Post Keynesian monetary economics. The core of Keynesian economics lies in its nature of a "monetary theory of production". The theory suggests that money plays a part of it own and affects motives and decisions. Keynes made clear that aggregate demand sufficient to generate full employment is not guaranteed even in a competitive economy with perfectly flexible wages and prices. The cause of unemployment equilibrium in a monetary economy is the existence of money which is a nonproducible asset held for the purpose of liquidity. One of the main themes in Post Keynesian economics is the endogeneity of money supply. Following the pioneer study by N. Kaldor, many Post Keynesian economists have elaborated the theory of endogenous money supply. The theory has been a cornerstone of Post Keynesian economics until now. Although the "horizontalist" approach and the "structuralist" approach are different in their nature each other, together they provide a more general theory of endogenous money. Today, the "new consensus" in macroeconomics also accepts the view that the interest rate is exogenous and money is endogenous. Nevertheless, there are significant differences between Post Keynesian monetary theory and the new consensus. The latter still retains the axiom of the long-run neutrality of money and monetary policy. In contrast, Post Keynesians consider that aggregate demand not only determines the level of production and employment in the short-run, but also influences on the long-run growth path of the economy. Hence, they maintain that monetary policy can have permanent real effects.