Neil Hart

Returns to Scale and Marshallian Economics

AbstractHis [Marshall’s] analysis of the Laws of Return brought order and meaning to the theories of Smith, Ricardo and Marx. But his reconciliation of decreasing cost and competitive equilibrium via the notions of external economies, monopolistic competition, and the representative firm,...., raised false problems that took the best efforts of a generation of economists to solve. (Blaug, 1962, p.399).

Discretionary Fiscal Policy and Budget Deficits: An ‘Orthodox’ Critique of Current Policy Debate

A return to discretionary fiscal policy is required in the current economic crisis. Advocacy of deficit spending is consistent with mainstream economic models, whether those relying on traditional textbook analysis or those aligned with the New Neoclassical Synthesis. The notion that deficit budgets are necessarily profligate rests on an outdated theory of public finance that ignores endogenous money. It is the productive capacity of the economy and not the governments extent of taxing its citizens, or borrowing from them, that provides the limit to the use of fiscal policy levers.

Keynes, Kalecki, Sraffa: Coherence?

This paper, in honour of John King, addresses the question raised by him in his A History of Post-Keynesian since 1936, reflected in the title. Initial surveys of post-Keynesian economics defined it in term of the Keynesian, Kaleckian and Sraffian strands. However, subsequently, it has become less clear that the Sraffian stream should be included under the ‘broad church’ known as post-Keynesian economics. Serious and irreconcilable methodological differences exist between Sraffians and post-Keynesians about the validity of comparisons of long-run equilibrium positions, the role of historical time and the importance of uncertainty.

The Traverse, Equilibrium Analysis and Post-Keynesian Economics

The Traverse refers to the movement of the economy outside equilibrium. It requires a consideration of how an economy may achieve equilibrium, and how it may navigate towards a new one if conditions change. Analysis of these themes, from the classical economists onwards, leads to the conclusion that it is difficult to envisage any useful role for equilibrium theory in the absence of some evidence that there are forces in the economy which propel it to equilibrium, without influencing the position to which the economy is gravitating towards. Complicating factors, emphasised in the post-Keynesian literature, include the existence of path-dependency, hysteresis, cumulative causation and the evolutionary nature of economic change.

The Role and Effectiveness of Fiscal Policy

A meaningful discussion of the role and effectiveness of fiscal policy is not possible within the context of the antiquated textbook models, which in their current and likely future form (the ‘New Neo-Classical Synthesis) have been used to endorse the deflationary bias in macroeconomic policy formulation during recent decades. This paper present a critique of the ‘mainstream’ textbook modelling of fiscal policy, and suggests a more meaningful framework in which to consider the role of fiscal policy; a framework which in particular recognises the realities of endogenous money and interest rate targeting by central banks.

Australia's Current Account Deficit, National Savings and Industry Policy

The argument that there exist a causal link between national savings and current account deficits is often simplistically formulated in terms of national income accounting identities. However the validity of formulating national saving-argmenting policies to target current account deficits is open to much debate when the possible theoretical linkages between these aggregates are investigated more closely. In particular; if the adjustment mechanism to external balance is expenditure driven rather than relying on exchange rate induced relative price changes, the alternative case of interventionist policy to promote net exports is strengthened. Theoretical arguments opposing the use of interventionist trade policies are often derived form inappropriately constructed, or simplistically interpreted, economic models.

Alfred Marshall (1842–1924)

Alfred Marshall played the key role in the establishment of economics as a distinct discipline at Cambridge and with the professionalisation of economics in Britain during the latter stages of the nineteenth and early decades of the twentieth centuries. Marshall is also generally placed at the forefront of the development of mainstream economic analysis as it evolved in the Marshallian tradition, with his highly influential Principles of Economics being one of the most viable and durable books in the history of economics. However, while many of his handy analytical tools have survived, very little in fact remains of Marshall’s economics today. To a significant extent, this stems from a failure to understand the nature of the ambiguities and qualifications that characterised his writings. At the same time, Marshall’s reluctance to provide doctrinal assertiveness amounted to an abandonment of leadership in advocating his ideas among his Cambridge disciples and their critics.

Post-Keynesian Economics: A User's Guide

This paper provides a brief introduction to post-Keynesian economics. Post-Keynesians are sceptical of the usefulness of the equilibrium method, and favour an approach based on path-determined models with, due to the influence of uncertainty on economic decisions, an important role assigned to money, institutions and rules of thumb. As there are no forces within capitalist economies which can guarantee full employment, government intervention is important. While monetary policy is seen as a rather blunt instrument, fiscal policy is perceived to be much more potent than it is in the mainstream. However, there are inherent limits to the achievement of sustained full employment in capitalist economies.

Tieben on The Concept of Equilibrium in Different Economic Traditions

Frank Hahn (1984: 43) observed that ‘wherever economics is used or thought about, equilibrium is a central organizing concept’. A similar view was communicated in the 1987 New Palgrave Dictionary of Economics, where it is observed that various notions of ‘equilibrium’ have come to represent the dominant metaphor in economic discourse and analysis, at least within what could be termed ‘mainstream’ economics:

Keynes’ Marshallian Heritage and the Walrasian Eclipse

This chapter extends discussion in the previous chapter to consider the establishment of equilibrium analysis within macroeconomic theory. This discussion also provides an opportunity to reflect on Marshall’s influences on the contributions of his favourite pupil, John Maynard Keynes and on the extent to which subsequent development of macroeconomic theory has diverged from the methodological approach adopted by both Keynes and Marshall.