Welcome to PKE Forum

The Post Keynesian Economics Forum is a refereed, open-access venue for brief policy articles by contributors from the global community of post Keynesian economists. The Forum’s editors invite contributions with a maximum 1,500 words, to be reviewed and edited on a real time basis and made available to all interested readers.

Our Mission

Albert Einstein is said to have defined insanity as doing the same thing, expecting different results.  The state of our current policy debate suggests that many economists and politicians may be certifiably insane. The same policies that produced the Great Depression, and then the US recession of 1937, are again on the horizon—or rather, just over the cliff. In the UK, as the economy stagnates, the same 1920s policies that produced rising unemployment and stagnation are proposed as the means to prosperity. The EU imposes stricter austerity policies on economies already experiencing sharp recessions, in the vain hope of improving fiscal balances. The increase in consumption taxes that stifled the recovery from the 1990s collapse of stock and property markets is again being contemplated in Japan.

But there is an antidote to this insanity.  Another Einstein adage notes that we cannot solve our problems with the same thinking we used to create them. Keynes forged a new way of thinking about the economy, creating the basis for new policies that allowed the world to emerge from the Great Depression and achieve sustained global growth with low inflation in the postwar period. More…

Financialization and Crisis Tendencies in Higher Education: What Is College For Anyway?

By Hans G. Despain, Nichols College and Zachary Stein, Harvard University

The popular press (Kraushaar 2014) and national educational leaders (Duncan 2013) give the impression greater investment in and access to higher education will reduce income inequality. We take exception. This perspective misidentifies the most important purposes of education, is based on a misunderstanding of the scientific notion of causation, and results in ill-prescribed policy. More…

Stabilizing Institutions for Financial Capitalism

ROMAR CORREA, Department of Economics, University of Mumbai


The accumulation of capital remains at the center of the Post Keynesian intellectual stage. Thus, Kaleckians constantly refine the propensity to invest in the interest of coherence and empirical accuracy. Scholars continue to wrestle with the concept of profits. Recently, the dynamics of profit-led and wage-led growth have led to a discussion of the taxation of luxuries à la Kalecki. More…

The Effects of Options on Financial Instability

CHIARA OLDANI, University of Viterbo “La Tuscia”

Derivatives and the Finance Theory

Finance theory relies heavily on the perfect market hypothesis which tells us that financial derivatives are powerful tools for investors, banks, and governments to hedge, smooth financial costs, and create opportunities. According to the perfect market hypothesis derivatives are a zero sum game (according to Black-Scholes pricing models) and do not add new risk to the market or modify existing risk. However, these virtues only apply in the real world in the presence of effective regulation, control, and supervision. More…

A Tale of Two Debt Fallacies and a Way Off the Hook

ETELBERTO ORTIZ C., Universidad Autónoma Metropolitana, Unidad Xochimilco, Mexico City

The world continues to watch the ongoing debate on debt and government deficits in the US, with an eye on the impending “sequester”, the conservatives’ equivalent of a “guillotine” on government spending. But, there are two areas of the debate mired in confusion:

1.         While the discussion centers on the continued increase in the stock of debt for all levels of the US government and frames the debate in terms of an obvious “imperative” to reduce the debt, it  ignores how these cuts would be accomplished and their impact on the overall performance and structure of the economy. More…

Argentina´s Debt Saga

LEONARDO E. STANLEY, Researcher at the Centro de Estudios de Estado y Sociedad (CEDES)

During the 1990s, Argentina became one of the most prominent players in the sovereign debt market issuing more than 150 bonds – including the fiscal agency agreement (FAA) bonds now under discussion – in 6 different currencies and incorporating eight different jurisdictions. As was common at the time, most of the bonds did not include a collective action clause (CAC). Bondholders in Germany, Italy, and Japan quickly realized that their lifetime savings were at risk and their collective rights were negligible. In this context, the Kirchner administration launched an ambitious “take it or leave it” offer to the bondholders with a significant discount on the original face value of the FAA bonds. This first swap saw a 76.2 percent level of participation; this percentage grew to nearly 93 percent five years later when the second swap took place. More…

The Effects of Fiscal Policy after the Global Recession: What Should We Know?

Luiz Fernando de Paula, University of the State of Rio de Janeiro (UERJ)
Manoel Carlos de Castro Pires, Institute for Applied Economic Research (IPEA)

Many countries have adopted countercyclical policies in response to the financial crisis. This has reignited the debate among economists as to the efficacy of these policies. The initial discussions of the effectiveness of fiscal stimuli sparked controversy and led highly polarised debate. However, new evidence has emerged pointing to fiscal policy’s efficacy as a counter-cyclical policy tool to address the effects of the 2007-2008 financial crisis.


Pragmatic Employment Policy

By Hans G. Despain, Nichols College, November 2012

James K. Galbraith offered a “short-list” of policy suggestions to be embraced at the Post-Keynesian conference in Kansas City (September 2012):  (1) strengthen social insurance programs (e.g., Social Security), Medicare, Medicaid, and unemployment insurance; (2) offer early retirement (i.e., 58-64 year-olds) to open jobs for younger workers; (3) raise the federal minimum wage to $12 per hour; (4) reformulate tax policy to encourage philanthropy; and (5) implement  housing policy for underwater homeowners. Conspicuously missing from Galbraith’s “short-list” are financial restructuring policy (e.g., Kregel 2012, Papadimitriou 2012, Wray 2010) and a full-employment policy centered on an effort to establish an employer of last resort policy (see Wray 2009).


Households after the Financial Crisis

JOELLE LECLAIRE, Buffalo State, State University of New York

From a macro perspective, the financial position of households has improved dramatically since the early days of the financial crisis. In fact, from an aggregate financial perspective, American households have never been so solid. After 10 years in negative territory, households returned to a net saving position in 2008 due to a massive increase in government spending justified by the financial crisis. So why don’t most households feel wealthy right now? More…

Narrow Banking and Asset-Based Reserve Requirements in a Godley-Lavoie Model

ROMAR CORREA, Department of Economics, University of Mumbai

From the Classics to Keynes

Following the global financial crisis, the Chicago 100 percent banking proposal is back on the table.  We find the origins of this approach in the Two Department scheme associated with Ricardo and Marx and later Kalecki. Following this approach the economy would be divided into two sectors: Basics and Non Basics. The former produces wage-goods consumed by the working class, the latter produces luxury commodities consumed by the capitalist class. Capitalists and workers, in turn, subdivide according to their degree of participation in the two sectors. These distinctions are analytical-functional so the separation of workers and rentiers below does not mean that workers do not hold shares of companies. More…

Can Narrow Banking Solve the Too Big to Fail Problem?

JAN KREGEL, Levy Economics Institute of Bard College

 The return to Glass-Steagall type regulations has been proposed as a more efficient solution to the problem of too big to fail banks than the labyrinthine maze of Dodd-Frank. Hyman Minsky believed that one of the most important aspects of the New Deal regulation  was that “the scope of permissible activities by a depository institution was to be limited to what examiners and supervisors could readily understand. . . . It was not so much the differences and riskiness as it was the ease of understanding the operations that led to the separation of investment and commercial banking” (Minsky 1995a, 5). Recent proposals to limit the asset side of banks’ balance sheets in the form of “narrow banking” meet this requirement of operational simplicity. More…