Keynes and Post-Keynesian Economics

Keynes and Other Economic Schools of Thought

Keynes economic model is different than classical economist and monetarist. However, all these economic models have the basic assumption that market economies can come in to equilibrium at least in the long-term. As well, they believe market economies are dynamic and can grow continuously and adept to economic shocks because of optimizing behavior of individuals and firms, technological progress and competition in all markets. That is, economic choice is done on the basis of rationality and social and political factors do not affect individual choices because humans are basically economic optimizers. 

However, Keynes is the first Macroeconomist theorist who proposed and rejected the claim that market economies can always come in to equilibrium at full-employment level at least in the short-term, even if the markets are flexible.He accepted market failure, which can happen in a market economy. But he accepted the other assumptions of classical and neo-classical economist, the ability of the market to come in to equilibrium simultaneously. As well, Keynes also accepted that the market economies have growth potential, have dynamism and its potential stability at least in the long-term.

But he introduced the concept of uncertainty and questioned the role of non-monetary factors in the decision-making process and other sociological factors particularly in the labor market. As well, he also differed with monetarist the role money plays in the market in determining employment output and employment. However, Keynes essentially is a mainstream economist because he accepted that the market economy can be reformed to achieve the macroeconomic objectives. He also believed market works efficiently and come in to equilibrium with some assistance by government in some economic situations at least in the long-term like other market economic theorists.

Some Post-Keynesians however, have taken some insights of Keynes in to their economic models. 

Similarities and Differences of Keynes’ Economic Model and Post-Keynesian Economic Models

There are many varieties of Post Keynesian models, which use many economic analysis methodologies. They are heterogeneous in nature. However, they are all alternative to mainstream economic analysis because they do not agree with the basic assumptions and methods of classical, neo-classical and Keynes to varying degrees. They all differ in the behavior of economic agents and consumers. They also reject perfect information, the existence of information asymmetry, existence of uncertainty and also question the ability of the market to come in to equilibrium by the mainstream market economist including Keynes. As well, they recognize to varying degrees, power plays in economic decisions and other social and ethical factors in the decision making process of individuals. They differ considerably from the economic rationality assumption of the mainstream economists. In addition, they also  recognize institutional factors in to their economic models in to account ,which is absent in mainstream economic analysis.