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Market Constellation Research

A Modern Governance Approach to Macroeconomic Policy

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Edited By Arne Heise

The objective of this reader is manifold: On the one hand, it intends to establish a new perspective at the policy level named ‘market constellations’: institutionally embedded systems of macroeconomic governance which are able to explain differences in growth and employment developments. At the polity level, the question raised is whether or not market constellations can be governed and, thus, whether institutions can be created which will provide the incentives necessary for favourable market constellations. Finally, at the politics level, the immediate question is whether (distributional) vested interests can be bared in order to explain the motivations to create certain market constellations. A promising approach to tackle this task needs to take into account different cultural backgrounds and must provide political transmission mechanisms for turning vested interests into policy.

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Part I: General Conceptions

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Part 1: General Concepts 21 1 A Post Keynesian Theory of Economic Policy – Filling a Void* Arne Heise 1. Introduction If a brief characterization of Keynesianism were requested, it is highly likely that reference would be made to certain policy orientations that may be dubbed ‘easy money’ and ‘discretionary fiscal policy’, as they are the most prominent ones. These policies do follow from hydraulic IS-LM Keynesianism. This has, however, lost a lot of its appeal over the past three decades and has never been accepted by Post Keynesians as an appropriate interpretation of Keynes’ magnum opus. Despite this, most Post Keynesians would probably willingly subscribe to the above-mentioned policy tools as instruments, perhaps still the most important instruments, of macroeconomic fine-tuning of an otherwise unstable economy (see, for example, Arestis and Sawyer 1998 and the articles in Gnos and Rochon 2006).1 This is an important and interesting realization as, on the one hand, Post Keynesians are far from being united over theoretical issues explaining the laws of motion of the unstable economy (see, for example, Dunn 2000; Holt and Pressman 2001a; Davidson 2005; Lavoie 2005) and, on the other hand, neither in Keynes’ General Theory nor in most Post Keynesian textbooks can a distinct chapter on ‘economic policy’ be found.2 This would appear to suggest that, despite all of the theoretical differences among Post Keynesians and between Post and standard Keynesians – that is, however the ‘Keynesian results’ of lasting unemployment and the instability of capitalist economies are derived – ‘Keynesian’...

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