Controversies in Post Keynesian Economics.

• Author: Zannoni, Diane

This book, while focused on controversies in Post Keynesian Economics, provides numerous points of comparison with other schools of thought and thereby allows the reader to acquire a full understanding of the essential differences between the Post Keynesian view of how the economy functions and what the author labels the neoclassical-synthesis-Keynesian and neoclassical views. In addition, the disagreements that have led to variant conclusions for the government's role in public policy are made accessible to the reader with a basic knowledge of economic concepts.

The first three chapters provide the historical background for understanding current-day Post Keynesian theory and policy and set the stage for a central theme of this book: the importance of the non-neutrality of money in Keynes's theory and policy. After presenting an overview of the problems confronting Keynes in the 1930s, the author then shows how economists after Keynes attempted to develop a neoclassical synthesis, bringing together pre-Keynesian classical notions with Keynes's ideas. The synthesis was not really a synthesis at all, the author argues, but rather reflected a basic misunderstanding of Keynes. The model resulting from the neoclassical synthesis led to the conclusion that the economy is stable in the long run and that money is neutral, in that changes in the quantity of money do not effect the level of output. The author views the neutrality of money as a key assumption underlying the neoclassical synthesis, an assumption that the neoclassical-synthesis-Keynesians were unwilling to relinquish even though it was at variance with Keynes's insistence on the non-neutrality of money. These first three chapters are not merely an explanation of the background of the disagreements among the theoretical perspectives; they also provide an interesting example in the sociology of the accumulation of knowledge: how the legacy of past ideas influence the development and acceptance of new ideas.

In the next three chapters the author explains how it is that Post Keynesians can claim that the private sector can become "too desirous of liquidity to promote full employment" and addresses the implications of this claim. It is here that he is able to connect a shortage of liquidity with reductions in output to show the reader the full importance of the non-neutrality of money for Post-Keynesians. In Chapters Four and Five he lays out the difference between the concepts of...