This article revisits the role of the state in a monetary production economy through the methodological contributions of Victoria Chick. The climate transition intensifies this debate by raising new questions about how public expenditure should be evaluated and coordinated over time. Keynes identified structural features of market economies-particularly uncertainty and coordination failures-that justify proactive state intervention not merely to correct market imperfections but to guide investment and economic development. His proposal to distinguish between current and capital expenditure within the fiscal budget was one attempt to capture the long-term effects of public spending. Yet contemporary fiscal frameworks still classify expenditures primarily according to their transactional form. Building on Chick's open-system methodology, the paper introduces the concept of productive transfers as an analytical category for fiscal expenditures recorded as current transfers that nevertheless mobilize investment and expand productive capacity. Reinterpreting such expenditures functionally helps reveal economic effects often obscured within conventional accounting classifications.
I examine why canonical conflicting-claims inflation models cannot generate partial or unilateral closure of aspiration gaps without money illusion-a property I call the conflict-closure paradox. Embedding goods-market equilibrium into the aspiration-gap framework resolves this paradox and produces a unique, inflation-free equilibrium real wage. A more detailed distributional-conflict model that incorporates three institutional regimes (pro-labor, pro-capital, and pro-conflict) and endogenous technical change shows that wage-led demand regimes are dynamically more robust across institutional settings than profit-led ones, because their stronger demand-productivity feedbacks more reliably prevent prolonged wage-price spirals, especially in pro-conflict environments with full nominal flexibility.
This article recasts the canonical three-equation inflation-targeting architecture in a Post-Kaleckian-Rowthornian small open economy. Effective demand determines capacity utilization via class-based consumption, a Bhaduri-Marglin investment function with an interest-rate effect, fiscal spending, and net exports driven by the real exchange rate. Inflation follows conflict inflation rooted in markup pricing and wage claims, with open-economy cost pressures through exchange-rate pass-through. Monetary policy is a flexible rule that reacts to deviations of inflation from target and utilization from its benchmark, while the exchange rate is determined under imperfect capital mobility with a risk premium. The model collapses to a two-dimensional system in the real policy rate and the real exchange rate. The central result is critical: stability is not inherent to the three-equation scaffold. Local asymptotic stability requires a sufficiently strong expenditure-switching channel, consistent with a Marshall-Lerner-type restriction, so that the exchange rate absorbs rather than amplifies shocks. When this condition fails, external disturbances and financial pressures can generate nonconvergence, making inflation targeting destabilizing in structurally fragile economies. Step-shock simulations-credibility loss, higher markups, and adverse external shocks-highlight the distributive origins of inflation, the employment cost of re-anchoring expectations, and the tension of pursuing two long-run targets with one instrument.
This study empirically examines the economic and environmental factors affecting investment dynamics in Brazil from 1990 to 2021. Using data from IPEADATA, IBGE, and SEEG, we analyze key indicators including investment, capacity utilization, profit share, and CO2 emissions. Unit root tests indicate the series are integrated of order one, supporting the use of a five-lag Vector Autoregression (VAR) model after confirming stationarity in first differences. While the VAR residuals are non-normal, homoscedasticity and structural stability validate dynamic inferences. Impulse response analysis shows that positive shocks to profit share have a lagged, transitory effect on investment, reflecting structural constraints and climate-related financial risks. CO2 emission shocks initially reduce investment, followed by recovery, highlighting sectoral adjustments and regulatory uncertainty. Capacity utilization shocks provoke an immediate investment increase, followed by oscillations, indicating intertemporal adjustments and financial frictions. These findings reveal the intricate interplay between economic performance and environmental pressures, emphasizing the importance of public policies that combine profitability incentives with coordinated green investments. The research contributes to understanding investment behavior under environmental constraints, offering insights aligned with Post-Kaleckian perspectives and the transition to a low-carbon economy.
This paper focuses on the fundamentalist Keynesian aspects of Chick's Macroeconomics After Keynes and seeks to investigate the extent to which subsequent developments in fundamentalist Keynesian scholarship have progressed Chick's insights. Chick's arguments on the importance of Keynes's method of analysis and his use of equilibrium as a theoretical tool are summarised. Two broad strands of Keynesian fundamentalism are identified - the exegesis of A Treatise on Probability, and the ontological turn associated with critical realism and the Cambridge social ontology project. The relevance of this new phase of Keynesian fundamentalism and its applicability to the development of post-Keynesian economic analysis as envisaged by Chick is questioned. Concern is expressed that Keynesian fundamentalism has concentrated on the history of economic thought and the search for the real meaning of Keynes with little direct relevance to the economic analysis of current problems. It is argued that pragmatism may provide a more suitable philosophical basis for developing Chick's insights on Keynes's methods of analysis to provide a better way of doing economics relevant to current problems.
This paper examines Morocco's monetary policy response to the 2022-2023 inflation surge and its asymmetric effects on the labor market and financial sector. Although inflation was largely driven by external supply shocks, global commodity prices, drought-related disruptions, and supply-chain bottlenecks, Bank Al-Maghrib raised its policy rate from 1.5 to 3%. The tightening occurred in a context where the Phillips Curve has significantly flattened, both globally and in Morocco, rendering inflation increasingly unresponsive to unemployment or domestic cyclical conditions. Analysis shows a nearly flat relationship between inflation and unemployment, with inflation driven mainly by persistence rather than domestic demand. This disconnect validates the Post-Keynesian view that in modern industrial economies, prices are administered via markup pricing strategies based on cost structures, rather than determined by market-clearing demand forces. Consequently, inflation becomes a result of conflicting claims on income rather than excess liquidity. As a result, higher interest rates proved poorly suited to the underlying sources of inflation, while exacerbating labor-market fragility, contributing to rising unemployment, and weakening job creation. Conversely, Morocco's banking sector registered record profits, supported by wider net interest margins and higher sovereign yields. Since domestic financial institutions hold most Treasury securities, rate hikes effectively transferred income from the public budget to private financial actors. The findings underscore the limits of monetary tightening in a small economy facing supply-driven inflation and highlight the need for employment-sensitive monetary policy alternatives.
The essay reviews Victoria Chick's work of recovering the General Theory from the 'Keynesian' interpretation, and how throughout 'dualism' was used to aid this recovery. On theory, Chick's approach is outlined to (1) the fallacy of composition; (2) microfoundations; (3) formalism; (4) uncertainty/determinacy; (5) equilibrium/disequilibrium; and (6) monetary duals. On policy, Chick warned of the dangers of growthmanship, European monetary initiative and financial deregulation. Sheila Dow's suggestion to go beyond dualism using political economy motivates a fuller account. James Crotty's label 'liberal socialist' captures well Keynes's position. Just as Chick finds of Keynes's theory, Keynes's political economy is paradoxical. Rather than championing the state on the orthodox state/market dual, Keynes wanted power rebalanced to protect the market from too-great-an encroachment by the state. Ultimately Chick was interested in a synthesis of competing economic theories; following Simone Weil, the idea of agency is employed to this end. Rather than Chick's insistence that changes in context require changes in theory, Keynes sought to change the context by theory in combination with agency. A final section discusses why this agency was not applied as he hoped. Orthodox economics has protected the interests of wealth, and the disastrous consequences should be unsurprising.
In the course of the long capital theory dispute known colloquially as the Cambridge capital controversy, the central claim advanced by post-Keynesian critics of the neoclassical theory of production and distribution was that there does not exist a mathematically consistent and usable scalar metric of the real quantity of capital composed of heterogeneous commodities. Their claim was that heterogeneous commodities can only be aggregated on the basis of their values and that this leads to insoluble problems for the neoclassical theory, including circular dependence of the profit rate and capital price/value, reswitching and capital reversing, and lack of convergence to, and uniqueness of, distribution equilibria. I employ a novel parameterization of a two-good model of production-consumption good and capital good-to compose the well-understood scalar value of capital in consumption good as the product of a necessary price of capital, determined independently of value and quantity, and a real scalar quantity-the "integrated labor time of production of the capital," the labor time required for its production with reproduction of capital inputs. If the post-Keynesians were incorrect about their central claim, that would, at the very least, require reconsideration of their critique to place it on a firmer theoretical footing.
This study investigates Ethiopia's persistent labor productivity stagnation despite average GDP growth of 6.8% and foreign direct investment (FDI) inflows of 4.2% of GDP since 2010. We develop an integrated Post Keynesian-feminist structuralist framework that captures the mutually reinforcing constraints linking macroeconomic instability and gendered social reproduction. Using an autoregressive distributed lag model on national data from 1993 to 2023 sourced from the World Development Indicators, the analysis identifies four core mechanisms shaping productivity outcomes. First, FDI enhances long-run productivity only when domestic absorptive capacity is sufficiently strong to internalize spillovers. Second, female labor informality-affecting more than 80% of Ethiopian women-creates short-run productivity losses through occupational segregation and human capital underutilization. Third, inflation suppresses productivity by eroding real wages, weakening effective demand, and reducing incentives for efficiency-enhancing investment. Fourth, debt servicing indirectly constrains growth by crowding out public investment essential for productivity upgrading. The findings demonstrate the co-constitution of macroeconomic and social structures and highlight the need for coordinated policies that strengthen investment readiness, formalize gendered labor markets, stabilize demand, and improve fiscal governance.
Victoria Chick highlighted a critical gap in Keynes's General Theory of Employment, Interest and Money: the absence of a formal theory of expectations formation, despite its central role in the Principle of Effective Demand (PED). This paper addresses that omission by reconstructing a mechanism of short-run expectation formation. It develops a layered approach in which entrepreneurs' expectations of prices and sales proceeds are conditioned by industry-level price formation and by macro-level spending and income expectations. Within the PED, this framework shows how higher-level structures-including Keynes's consumption function and multiplier-inform the expectations guiding firms' production decisions. The analysis also clarifies the relationship between micro-based and macro-based versions of the PED. These represent alternative closures, with distinct causal properties, of a common value relation that characterizes the PED. The micro version generalizes firms' profit maximization behaviour to the macro level and is reductionist; the macro version imposes aggregate spending and income constraints on micro behaviour, and is emergent. The paper shows how these can be unified within Keynes's open-system methodology to provide a coherent account of expectation formation.
Persistent disputes between labor-centered and preference-centered theories of value obscure a more fundamental problem for monetary political economy: how gains and losses become institutionally comparable across heterogeneous assets, agents and time periods under uncertainty. Drawing on Mirowski's outlines for a social theory of value, Post-Keynesian monetary theory, stock-flow consistent modeling, and recent work on accounting and financial infrastructures, this article develops a modal-institutional theory of value. It conceptualizes valuation as an institutionally stabilized structure of inter-temporal gain-loss measurement that defines feasible action sets through commitment structures and is reproduced through mediated coordination and behavioral orientation under constraint. Formally, value is specified in terms of the comparability conditions generated by accounting and regulatory regimes that govern the assignment and transformation of monetary magnitudes. By integrating balance-sheet coordination, liquidity as the institutional capacity to reconfigure commitments, and the institutional production of valuation orientations, the paper reframes objectivist and subjectivist approaches as partial projections of a deeper problem of measurement, coordination, and reproduction in monetary economies.
This paper explores the impact of sovereign debt on the income share of the top one percent in Germany from 1980 to 2019. Central to this study is the classical political economy argument that public debt is largely owned by the wealthy, who receive interest payments on sovereign bonds, while the tax burden of these payments falls on the entire population. Hence, public indebtedness results in a redistribution of income within the country. However, this study argues that bondholders today typically trade government bonds in secondary markets for capital gains rather than holding them until maturity. This paper examines historically and econometrically how these two mechanisms contribute to rising income inequality in Germany and emphasizes the prevalence of capital gains as the main redistributive apparatus.
This article revisits Victoria Chick's discussion of Keynes's aggregate-demand-aggregate-supply (D/Z) model from chapter 3 of the General Theory in her 1983 book Macroeconomics after Keynes. I argue that, although Chick (1983) failed to decipher Keynes's remarks about the slope of the Z-function and hence erroneously draws Z as a convex curve, Macroeconomics After Keynes was, and still is, an eye-opener for students of Keynes's theory. Against competing interpretations of the D/Z-model, Chick's stands out as being in line with Keynes's original statement of the "principle of effective demand."
Of Victoria Chick's many great contributions, one that is particularly important is her theory of the stages of banking development. The stages progress first as institutional developments enhance banks' credit-creating capacity, and thus the financing of real investment. But subsequent stages of institutional change see this process proceeding at ever-increasing scale in a way that is detached from the real economy. The purpose here is first to provide an account of the theory and then to consider it in relation to critiques from the circuitist and horizontalist perspectives on the issue of money endogeneity. The comparison is pursued in terms of differing frameworks applied to a significant area of common ground. The paper concludes with an analysis and appreciation of the methodological approach which Chick's stages-of-banking-development framework represents. As a framework, the stages are stylized, designed to identify key elements in banking development. The framework provides the basis for understanding specific cases which deviate from the framework and sets out the basis for articulating further stages as banking continues to evolve.
Since World War II, the US dollar (USD) has substantially increased its prominence in international financial systems, culminating in its position as the predominant currency, facilitating approximately 90% of global foreign exchange transactions. The reliance of most nations on the USD for international trade - particularly for oil, commodities, and other goods - has cemented its critical role in global finance and geopolitics. Hence, the usage of the USD supported and forged an economic and geopolitical function for the emitting country, the United States of America. The geopolitical implications and risks related to the USD hegemonic power in trade and financial transactions have become increasingly more striking, especially in recent decades and years. The sanctions imposed on Venezuela, Iran and more recently on Russia via the US dollar-dominated SWIFT payment system highlighted the potential threat posed by the USD hegemonic power in the global monetary system. However, in the new millennium, alternative digital currencies have begun to exert influence and have implicitly and explicitly posed a threat to that hegemony. Bitcoin and other cryptocurrencies, for instance, have enabled international transactions without reliance on USD use. Additionally, the emergence of several multi-currency Central Bank Digital Currencies (CBDCs) would allow nations to conduct cross-border payments using various currencies without passing through the USD as an intermediary. Our paper explores the geopolitical implications of USD use on the international stage and examines the potential opportunities and threats posed by these new digital currencies for countries.
