Kalecki, Minsky, and “Old Keynesianism” Vs. “New Keynesianism” on the Effect of Monetary Policy


Naked Capitalism has a reprint of the article Kalecki, Minsky, and “Old Keynesianism” Vs. “New Keynesianism” on the Effect of Monetary Policy. The original (with better typography) is from the Institute For New Economic Thinking.

In a post co-authored with Anna Stansbury, Larry Summers repudiates economic orthodoxy in regard to whether interest rate cuts suffice to restore full employment and looks at a more “original” Keynesianism to find adequate responses to secular stagnation. Tracy Mott walks us through answers many careful readers of Kalecki, Keynes, Steindl, and Minsky knew all along.

In the original publication of this article, there was a criticism for lack of any reference to Modern Monetary Theory (called by one of they key authors of that theory as Modern Money Theory). As a reader of Modern Money Theory, I find the criticism is misplaced. My question to the authoer of the criticism was:

Can you give me examples of writings on MMT that reference the insufficiency of demand as a hindrance to the effectiveness of monetary policy? I think this article adds the emphasis that is missing from most MMT writings.

I learned “Old Keynesianism” when I took an economics course back in the early 1960s. I avoided the taint of “New Keynesianism” in all of what I read since I took that initial course. As the article says, Larry Summers is now revealing what I knew all along. Also, some of the authors of Modern Money Theory were heavily influenced by studying under Minsky. Talk of Minsky is going back to original sources for much of MMT.

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