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Post Keynesian Dynamic Stochastic General Equilibrium Theory

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  • Farmer, Roger

Abstract

This paper explains the connection between ideas developed in my recent books and papers and those of economists who self-identify as Post Keynesians. My own work is both neoclassical and ‘old Keynesian’. Much of my published work assumes that people have rational expectations and that ‘animal spirits’ should be modeled as a new fundamental. I adopt a general equilibrium framework to model the macroeconomy. But although I write from a neo-classical tradition the themes I explore in my published writing have much in common with heterodox economics. This paper explains the common elements between these seemingly disparate traditions. I make the case for unity between Post-Keynesian and General Equilibrium Theory under the banner of Post-Keynesian Dynamic Stochastic General Equilibrium Theory.

Suggested Citation

  • Farmer, Roger, 2017. "Post Keynesian Dynamic Stochastic General Equilibrium Theory," CEPR Discussion Papers 11807, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11807
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    2. Jean-Pascal Benassy, 1975. "Neo-Keynesian Disequilibrium Theory in a Monetary Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(4), pages 503-523.
    3. Roger E.A. Farmer (ed.), 2008. "Macroeconomics in the Small and the Large," Books, Edward Elgar Publishing, number 13236.
    4. Michel De Vroey, 2006. "The temporary equilibrium method: Hicks against Hicks," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 13(2), pages 259-278.
    5. Kerry A. Pearce & Kevin D. Hoover, 1995. "After the Revolution: Paul Samuelson and the Textbook Keynesian Model," History of Political Economy, Duke University Press, vol. 27(5), pages 183-216, Supplemen.
    6. Farmer, Roger E A, 1991. "Sticky Prices," Economic Journal, Royal Economic Society, vol. 101(409), pages 1369-1379, November.
    7. Roger E. A. Farmer, 2008. "Aggregate demand and supply," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(1), pages 77-93, March.
    8. Roger E.A. Farmer, 2013. "Animal Spirits, Financial Crises and Persistent Unemployment-super-," Economic Journal, Royal Economic Society, vol. 0, pages 317-340, May.
    9. Franco Modigliani, 1977. "The monetarist controversy; or, should we forsake stabilization policies?," Economic Review, Federal Reserve Bank of San Francisco, issue Spr suppl, pages 27-46.
    10. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
    11. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(2), pages 217-227.
    12. Farmer, Roger E. A., 2014. "How the Economy Works: Confidence, Crashes and Self-Fulfilling Prophecies," OUP Catalogue, Oxford University Press, number 9780199360307.
    13. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    14. Barro, Robert J & Grossman, Herschel I, 1971. "A General Disequilibrium Model of Income and Employment," American Economic Review, American Economic Association, vol. 61(1), pages 82-93, March.
    15. repec:bla:econom:v:43:y:1976:i:169:p:33-49 is not listed on IDEAS
    16. Farmer, Roger, 2010. "Expectations, Employment and Prices," OUP Catalogue, Oxford University Press, number 9780195397901.
    17. K. J. Arrow, 1964. "The Role of Securities in the Optimal Allocation of Risk-bearing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 31(2), pages 91-96.
    18. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    19. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    20. Farmer, Roger E.A. & Woodford, Michael, 1997. "Self-Fulfilling Prophecies And The Business Cycle," Macroeconomic Dynamics, Cambridge University Press, vol. 1(4), pages 740-769, December.
    21. Farmer, Roger E.A., 2016. "Prosperity for All: How to Prevent Financial Crises," OUP Catalogue, Oxford University Press, number 9780190621438.
    22. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
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    Cited by:

    1. Heise, Arne, 2018. "Postkeynesianismus: Ein heterodoxer Ansatz auf der Suche nach einer Fundierung," ZÖSS-Discussion Papers 69, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).
    2. Olkhov, Victor, 2019. "New Essentials of Economic Theory," MPRA Paper 95065, University Library of Munich, Germany.
    3. Christian Schoder, 2017. "An estimated Dynamic Stochastic Disequilibrium model of Euro-Area unemployment," Working Papers 1725, New School for Social Research, Department of Economics.
    4. Olkhov, Victor, 2019. "New Essentials of Economic Theory I. Assumptions, Economic Space and Variables," MPRA Paper 94874, University Library of Munich, Germany.
    5. Teodoro Dario Togati, 2021. "General Theorizing and Historical Specificity in the ‘Keynes Versus the Classics’ Dispute," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 47(2), pages 273-294, April.
    6. Olkhov, Victor, 2019. "Methods of Economic Theory: Variables, Transactions and Expectations as Functions of Risks," MPRA Paper 95628, University Library of Munich, Germany.
    7. Victor Olkhov, 2019. "Financial Variables, Market Transactions, and Expectations as Functions of Risk," IJFS, MDPI, vol. 7(4), pages 1-27, November.
    8. Phil Armstrong, 2020. "Can Heterodox Economics Make a Difference?," Books, Edward Elgar Publishing, number 19964.
    9. Heise, Arne, 2019. "Post-Keynesian Economics - Challenging the Neo-Classical Mainstream," MPRA Paper 99280, University Library of Munich, Germany.

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    More about this item

    Keywords

    Dynamic stochastic general equilibrium theory; Post keynesian economics;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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