Wednesday, June 14, 2017

Heiner Flassbeck — Are Keynesianism and Neoclassical economics antipodes?

Over time, it has become abundantly clear that Keynesians made a major strategic mistake to consider neoclassical economics as a scientific counterpart that has to be opposed. Instead of characterizing neoclassical economics had from the very outset as a normative structure, which serves no scientific purpose, they took it on as a science. But no science can ever win the confrontation with an ideological superstructure. The neoclassical attempt is not directed to make genuine scientific progress, but to defend its own position at all costs and even if this cost comes with the high price of inconsistency no one cares. The “general theory,” which Keynes attempted to write, was not ‚general‘ because neoclassicism was not a special brand of economic theory, but a normative structure.
Flassbeck argues that neoclassical economics has an ideological bias toward a government-free market based economy and creates a narrative that pictures a "natural" economy based on supply and demand in markets as one without government. Their solution to market failure is therefore to blame government intrusion and to seek to reduce the role of government. Flassbeck observes that this has no empirical basis and is completely ideological.

A problem with many "Keynesians, " e.g., New Keynesians, is that they have acknowledged the scientific basis of neoclassical economics, where there is none, and tried to shape their views in reaction but within the same flawed framework. This, too, results in pseudoscience.

flassbeck economics international
Are Keynesianism and Neoclassical economics antipodes?
Heiner Flassbeck | Director of Flassbeck-Economics


Neil Wilson said...

Another one who wants to resurrect Bretton Woods.

Exactly how many more fixed exchange rate systems have to collapse before somebody bites the bullet and works out what is required to manage floating rate in a Keynesian manner?

I can't understand this constant desire for a big hug club when all the evidence is against such a thing in human society.

Tom Hickey said...

@ Neil

Is there a simple explainer on this?

If not, you would be the person to write one, if you have time.

Neil Wilson said...

It's not a simple issue. But it is the main bone of contention between the Post Keynesians and MMT. From their point of view MMT uses 'neoliberal' floating exchange rate ideas.

The discussions in words never go well because the situation is highly dynamic with multiple feedback loops. It will need a simulation to put the issue to bed.

TofuNFiatRGood4U said...

I would really like a simple summary of the issues between MMT and Post Keynesians--others might also as well.