Kaleckianism vs. “New” Keynesianism

The economics of Kalecki and of the New Keynesianism exhibit remarkable parallels. The major doctrine they have in common is that of business net worth, or equity, as the major determinant of business expansion. The New Keynesians arrive at their understanding of this point by reasoning from rational behavior in the face of informational imperfections. Kalecki’s view derives from a perspective on the capitalist system coming ultimately from Marx which starts with asking how the economic system produces and reproduces itself. The New Keynesians develop arguments that make Kaleckian ideas intelligible to economists educated in the neoclassical tradition. In their eyes perhaps Kalecki was a forerunner of their views with a somewhat ad hoc presentation of the story.

Why Kalecki, starting from Marx, rather than Keynes himself, should present “Keynesian” economics in ways that seemingly “anticipate” the New Keynesians is already suggestive. When we look closer, we see that this is no accident but a consequence of starting from methodological foundations concerned with the accumulation and reproduction of wealth. In fact it is the New Keynesians who have not seen fully the foundations and implications of their views.

Greenwald and Stiglitz (1987, 1988c) imply that their work is an alternative to neoclassical ways of thinking. One should be clear, though, about what one means by the term “neoclassical.” If it means economics based on rational maximizing behavior, then the New Keynesian theory is neoclassical. But if rational maximizing behavior just means that everyone does the best he or she can with what he or she has, then we are all neoclassicals. Greenwald and Stiglitz seem rather to identify non-neoclassical analysis with market imperfections. From the Marxian-Kaleckian perspective,26 however, these are not imperfections. The economy is not seen as the equivalent of a “swap meet,” in which the economic problem is the allocation of actual and potential resources among competing uses given exogenous preferences and the initial distribution of endowments, so that any interference with this process of allocation is an “imperfection.” In a swap meet participants can be indifferent to sources of finance and preservation of the value of their capital and labor. Once one is dependent for one’s livelihood on the swaps, though, these matters do become of concern. Trading also then becomes a vehicle for the extension of the division of labor and the growth of the wealth of nations. The accumulation and reproduction of capital which thus occurs produces and reproduces wealth, and it also creates barriers to the production of wealth which do not permit individual rationality to exploit all the gains from trade. The New Keynesian theory is both dependent upon and pointing the way to this perspective on the economy.

Working Paper No. 25(1.33 MB)