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The Economist Who Mistook His Model for a Market

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If you have a question about this talk, please contact Akanksha Bhat.

If ever there were a compelling case for Post Keynesian economics in both theory and policy it would be now in light of the anaemic recovery in the global recession of 2007-2009 and the levels of high unemployment that have persisted long after we passed out of that recession.

Interventionist policies during that recession were, however, too late and too little hampered by an antipathy among policy makers toward such policies. At one level removed there was also a corresponding economic mainstream view based on closed system thinking—predicated on the impossibility of economic fluctuations for the economy as a whole—that admitted to no theoretical basis for lending support to these policies.

In the place of expansionary fiscal and monetary policies that were put into force we are now seeing a call for the return to economic growth by the traditional policies of fiscal austerity and monetary restraint. The persistently high and prolonged unemployment world-wide is deemed to be structural, not remediable by interventionist monetary or fiscal policies.

Post Keynesian concerns about failures of effective demand in an open-system framework, involuntary unemployment (beyond the control of the atomistic individual of the mainstream), large and growing inequalities in income and wealth (abhorrent in their own right and a significant cause of the paucity of aggregate demand), and a preponderance of speculation and financial circulation over enterprise and industrial circulation are no longer taken seriously (if they ever were).

In his latest paper Professor Rotheim focuses on points that address why mainstream economics has built an impenetrable wall around itself such that they cannot envision, let alone take seriously, any alternative economic perspective beyond their own. He takes these conceptualisations to focus on the question of unemployment as it is perceived by the mainstream.

This talk is part of the The Marshall Society series.

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