Macroeconomic Policy for the Real World: A Post-Keynesian Perspective

Nevile Jw, Geoffrey Harcourt and Peter Kriesler

Economic Papers, 2015, vol. 34, issue 3, 108-117

Abstract: type="main" xml:id="ecpa12107-abs-0001">

The current mainstream neoclassical economic analysis of growth in a “Western” economy holds that in anything but the relatively short run, defined as the length of a business cycle, the economy reaches an equilibrium growth rate determined entirely by supply side factors and unaffected by measures taken to increase aggregate demand during a slump. In addition, the process of transformation to this long-run equilibrium position is never explained. As a result of these views, the finance sector, both domestically and internationally, has obtained undue influence and behaved in a manner that caused the crisis which started in 2007. This paper considers these propositions, focussing on neoclassical growth theory. After establishing these claims, the policy implications are discussed.

Date: 2015
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