Could you explain post-Keynesian?

10 pts. for good or detailed answer.

Answer:
Well, I think the story goes like this: there was something called 'Classical Economics' which believes that all markets clear and prices are flexible so the economy is nearly always at equilibrium. Maybe in the short run there is a problem, but the government can do little about it without making things worse.

Then there was the Depression in the 30's, and Keynes wrote that the Classical Economists were wrong, because in the long run, after all, we are all dead, and there is sufficient fixity in people's saving and investment decisions so that income falls quite a bit when the these markets do not clear. Eventually, we would say that Keynesian model thinks prices and nominal wages are fixed, so that changes in aggregate demand determine income.

Then there was the inflation in the 70's and the idea of fixing prices no longer was a serious assumption. People wanted to know why exactly it is that markets don't clear and prices are fixed. What is the mechanism? There were two reactions to the 70's. The first was an explosion in a classical revival, rational expectations and supply side economics. The second was something called Post-Keynesian theory.

The latter took out the fixed price assumption and replaced it with a variety of mechanisms that led to similar results to Keynesian models (but not exactly the same). One of the original theories was to introduce imperfect competition, another is contracting, asynchronous information, unions (which sounds better in the UK than the US), externalities, and other things.

The complexity an inconsistent results of Post-Keynesian economics made many economists ignore it. Instead, it simply justified the use of what we normally call 'Keynesian' economics - although perhaps the short run is made a bit shorter than otherwise.

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