Victoria Chick

The Evolution of the Banking System and the Theory of Saving, Investment and Interest

Book description: The editors of this important collection bring together a selection of previously published articles which outline the role of the money supply in the economic process from a Post Keynesian perspective, paying particular attention to the writings of Kaldor. The volume begins with literature which evolved since the Radcliffe Report, whilst the remaining chapters are divided into sections on the Post Keynesian Critique of the Monetarist Positions, Reactions to the ‘Monetarist Experiment’ and The Recent Post Keynesian Debate.

The meaning of open systems

There has been considerable discussion lately of the concept of open systems, which has revealed that different participants are using the terms ‘openness’ and ‘closure’ in different ways. The purpose of this paper is to address issues of meaning that arise in this particular discourse, with a view to clarifying both conflicts in usage and the underlying issues involved. We explore the different meanings of openness and closure extant in the literature, as applied at the ontological and epistemological levels, focusing on our own use of the terms in relation to that which prevails in neoclassical economics on the one hand and to the use made of them by Tony Lawson and other critical realists on the other.

Monetary Policy with Endogenous Money and Liquidity Preference: A Nondualistic Treatment

Abstract: This paper builds on a synthesis of endogenous money and liquidity preference theory to address the mechanisms by which monetary policy takes effect. We focus on the United Kingdom, under a range of institutional arrangements. Rather than operating solely by means of “the” exogenous interest rate, we consider the real process by which the central bank exerts its influence on the banking system, and how that is transmitted to the credit market and the money market. The focus is on process rather than equilibrium, and on the state of expectations, departing from the usual dualism between the interest rate and the money supply.

On money, method and Keynes

In these twelve essays, spanning fifteen years, Victoria Chick develops a distinctive view of macroeconomics (especially the economics of Keynes) and monetary theory. By careful and rigorous analysis in which nothing is taken for granted, she uncovers the implicit assumptions of economic theory and argues, in a variety of contexts, that differences of economic method and the influence of the stylised facts are decisive forces, both in the construction of theories and in appraising their contemporary relevance.

Theory, Method and Mode of Thought in Keynes’s General Theory

In my 1983 book, Macroeconomics after Keynes, I claimed that much that was original in Keynes was to be found not at the level of theory but in his method. Shortly afterwards, Sheila Dows book Macroeconomic Thought (1985) introduced those of us who are not specialist methodologists to what she called the ‘mode of thought’. In that book, and subsequently, it has become clear that differences in approach between those who take their inspiration from Keynes and Kalecki and those I shall loosely describe as neoclassicists lie at the level of mode of thought. Almost all post‐Keynesians say that Keyness General Theory is founded on a concern with time, uncertainty and organicism – features of Keyness mode of thought. Yet, as far as I know, no one has shown precisely what the relationships are between the identifiable aspects of Keyness mode of thought and his method and theory. This is the task that this paper sets itself. I identify four key theoretical contributions and their corollaries, and show how they are related to the deeper levels of method and mode of thought. This exercise is contrasted with the three‐level structure of typical neoclassical macroeconomic theory. The underlying purpose is to help modern theory develop in a fruitful way.

Recent developments in post-Keynesian economics

This book presents new work by leading post-Keynesian economists in the areas of methodology, pricing, distribution and policy. Philip Arestis and Victoria Chick have selected innovative new papers which illustrate the vitality of the post-Keynesian tradition. Written by leading specialists in their respective fields of research, it will be required reading for all economists with an interest in non-neoclassical economics.

Competition and the future of the European banking and financial system

European banking and financial services face the increased competition of the single market, which would be accelerated by monetary union. Competition will force these institutions to re-shape and re-group. We try to assess who might gain and who lose in this re-shaping, in terms of the price and availability of financial services and the effects on national and regional economies, and on firms.

Regulation and differences in financial institutions

Some regulation of financial markets is accepted even in these dirigiste times and even by those neoclassical economists who find it a struggle to explain why the market for money is different from the market for peanuts. Monetary regulation as defined in this paper has three parts: the legal framework, monetary policy, and the supervision of banking and financial markets. Historically, these roles have developed alongside the systems they regulated, new measures being created by the monetary authorities-or even by large private banksas specific problems presented themselves. Within this evolutionary framework, policies were tailored to the institutions as they existed at the time. Thus, when banks provided only a minor proportion of monetary instruments, prudential regulation was left to the banks themselves and caveat depositor. When bank-issued notes began to create what we would now describe as macroeconomic instability, the government/monetary authority took over the issue of notes. When bank credit and deposits became a force to reckon with, the authorities devised such instruments as reserve or liquid asset requirements and, where the development of securities markets allowed it, open market operations to keep the banks on a short lead. Each of these episodes marks a shift in the power to provide money, first away from the state to the private sector, then back again as the state regains control. The current situation, almost everywhere in the developed world, is that the power to create money lies almost entirely with the private sector. The current situation in the European Union (EU) bears some similarities to the situation at the time of the institution of the Federal Reserve System, which, of

A Comment on "IS-LM: An Explanation"

Sir John Hicks has performed an invaluable service in delving into the history of the creation of IS-LM analysis and in providing an integration of his view of the analysis at the time of its conception with his later work on method in Capital and Growth. From these elements, I believe, the view expressed in The Crisis in Keynesian Economics is derived, and now we know more of the foundations of that view.

Financial counterparts of saving and investment and inconsistency in some simple macro models

ZusammenfassungDie finanziellen Aspekte von Sparen und Investieren und die Inkonsistenz einiger einfacher Makro-Modelle. — Ein System, in dem die finanziellen Aspekte der effektiven Nachfrage explizit gemacht werden, wird entwickelt und als Grundlage für die Kritik einiger gebrÄuchlicher statischer MakroModelle verwendet: des IS-LM-Modells, des Modells, das die permanente Einkommenshypothese benutzt, und eines Modells, das eine Ersparnis-Vermögensrelation enthÄlt. Diese kritische Würdigung zeigt, da\, wenn die Finanzen ausdrücklich in die Betrachtung einbezogen werden, die Modelle dynamisch sind und die »Gleichgewichtslösung« nur für einen Zeitpunkt gilt. Au\erdem führen die Interdependenzen, die durch die Einbeziehung der finanziellen Aspekte geschaffen werden, zu unannehmbaren Nachfragefunktionen auf dem Markt, der unter Berufung auf das Walrassche Gesetz au\er Betracht blieb. Es wird gezeigt, da\ diese Probleme nicht bei solchen Modellen auftreten, die nur die Anteile der verschiedenen Formen der Vermögenshaltung am Gesamtvermögen bestimmen wollen und nicht sein absolutes Niveau. Sie fehlen auch bei einem Modell, das auf dem Prinzip der Bestandsanpassung basiert, in dem also Stromgrö\en direkt auf Bestandsungleichgewichte zurückgeführt werden.RésuméLes contreparties financières de l’épargne et de l’investissement et l’incontinence dans quelques modèles macro-économiques. — Un système qui éclaircit bien l’aspect financier de la demande effective est développé et employé comme fondament de quelques modèles statiques et macro-économiques en usage commun: les modèles SI-LM et de revenu permanent et, en outre, un modèle qui incorpore la relation entre l’épargne et la fortune. L’appréciation critique montre que les modèles sont dynamiques et que la solution d’équilibre n’est valable que pour un moment si les finances sont considérées expressément. En outre, les interdépendances créées par l’inclusion des finances conduisent aux fonctions de la demande inacceptables sur le marché qui fut omi en se référant à la loi de Walras. Il est montré que ces problèmes n’apparaissent pas aux modèles qui déterminent seulement la relation entre les actifs différents et pas leurs niveaux absolus. Ils manquent aussi dans un modèle dérivé du principe d’ajustement des stocks, dans lequel les flux sont rapportés directement aux déséquilibres des stocks.ResumenLa concordancia financiera del ahorro y la inversión y su divergencia en modelos macroeconómicos simples. — El autor elabora un sistema que incluye la parte financiera de la demanda efectiva y que se utiliza como base para algunos modelos macroeconómicos estáticos y comunes, como lo son por ejemplo los modelos IS-LM, los modelos del ingreso permanente y un modelo que incluye la relación entre ahorros y patrimonio. La evaluación crftica demuestra que los modelos son dinámicos y que la «solución de equilibrio» sólo vale para un breve momento, si se tienen en cuenta explicitamente los aspectos financieros. Además, las interdependencias que resultan de la inclusión de las finanzas originan funciones de demanda inadmisibles en el mercado, del cual se hizo caso omiso invocando la ley walrasiana. El autor demuestra que estos problemas no surgen en modelos que Únicamente determinan la relación entre las distintas formas en que se tiene el partimonio, y no sus valores absolutos. Tampoco surgen en un modelo que se deriva del «stock adjustment principle» y en el que ingresos se aplican directamente a los desequilibrios de existencias.RiassuntoCorrispondenze finanziarie di risparmio ed investimenti e la loro non concordanza in alcuni macro-modelli semplici. — Viene sviluppato un sistema che chiarisce in pieno l’aspetto fmanziario della domanda effettiva e viene impiegato come base per un macro-modello statico di uso generale, cioè per i modelli IS-LM, per permanenti modelli di reddito e per un modello che includa il rapporto risparmiopatrimonio. Questo apprezzamento critico mostra che i modelli sono dinamici e che la «soluzione di equilibrio» è valida solo per un breve momento, se le finanze sono espressamente comprese nella considerazione. Inoltre le interdipendenze, che sono create mediante le inclusioni delle finanze, conducono, a causa dell’inosservanza della legge di Walras, ad inaccettabili funzioni di domanda sul mercato. Viene mostrato che questi problemi non compaiono in modelli che determinano soltanto il rapporto del patrimonio tenuto in diverse forme e non i suoi livelli assoluti. Essi mancano anche in un modello che è derivato dal principio di «adattamento delle scorte» («stock adjustment»-principle) in cui gli afflussi vengono riferiti direttamente agli squilibri di scorte.