Comparing post-Keynesian and New Keynesian macroeconomics in intermediate and senior undergraduate classes

Peter Docherty
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Advances in Economics Education, 2025, vol. 4, issue 2, 132-151

Abstract: This paper develops a post-Keynesian AD/AS model in inflation-output space that can be compared with the Romer–Taylor New Keynesian model in the teaching of undergraduate macroeconomics. This model has some similarities with and differences to the New Keynesian approach. Similarities include a downward–sloping AD curve and both short- and long-run AS curves, where the short-run curve is dependent upon inflation expectations. Expectations adjust in the long run so that the short-run curve shifts the economy to a point of long-run equilibrium. But there are also some important differences. The post-Keynesian model includes a treatment of income distribution, a role for industrial politics in the wage-bargaining process that has implications for inflation, long-run money endogeneity and the possibility that unemployment characterises the long-run position of the economy as opposed to gravitating to full employment. This model not only allows a post-Keynesian perspective to be outlined for students in simple terms, but also comparison with the standard New Keynesian model is straightforward and students’ critical skills are enhanced by the exercise of comparing the alternative approaches.

Keywords: Economic fluctuations; Inflation; AD/AS models; Heterodox economics (search for similar items in EconPapers)
JEL-codes: A20 A22 B50 E30 (search for similar items in EconPapers)
Date: 2025
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