Economic Growth and Financial Instability: The Ideas of Hayek and Keynes
DOI:
https://doi.org/10.6000/1929-7092.2015.04.20Keywords:
Economic Theory, Financial Instability, Hayek and KeynesAbstract
Complex monetary systems in capitalist economies, whose financial markets can cause financial instabilities and economic downturns is an accepted argument by both John M. Keynes and Friedrich A. Hayek, disagreeing in terms of the factors generating financial instability, the mechanism in which financial variables affect the real sector, and more importantly how to generate economic growth.
In this paper we discuss Hayek and the Austrian monetary school innovative ideas in terms of money in capitalist economies (i.e., liquidity provisions and credit devaluations) from where the monetarism and later the New Classical framework developed; and revise Keynes and Post Keynesian views that recognized the full effects of money in productions arguing that debts precede money, which is non neutral, thereby can expand economic activity but also unfold financial instability.
We concentrate in the dissenting views over financial instability and argue that the main way to overcome economic activity is through expansive fiscal policies, opposing wages cuts, along financial market regulation.References
Bellofiore Riccardo and Pierro Ferri. 2001. “Things fall apart, the center cannot hold. Introduction, Pp. 1-30 in Financial Keynesianism and Market Instability The Economic Legacy of Hyman Minsky, Volume 1, The economic Legacy of Hyman Minsky, edited by R. Bellofiore and P. Fierro, Cheltenham, UK • Northampton, MA, USA, Edward Elgar.
Bellofiore, Ricccardo and Mario Seccareccia. 1999. “Monetary Circuit” Pp. 753-56. In Encyclopedia of Political Economy, Volume 2 Economic Policy, edited by P.A. O‘Hara, London: Routledge
Caldwell Bruce. 1996. “Introduccion” in Obras de Friedrich A. Hayek, Volumen IX. Contra Keynes y Cambridge. Ensayos y Correspondencia, edited by Bruce Cadwell, Unión Editorial, Colombia.
Hayek, Friedrich A. 1931. Prices and Production, Augusts M. Kelley, Publishers, New York
Hayek, Friedrich A. 1933 Monetary Theory and the Trade Cycle, Alden Press
Graziani, Augusto A. 2003 The monetary theory production, Cambridge, United Kindgom: Cambridge University Press
Kaldor, Nicholas. 1970 “The New Monetarism”, accessed November, 2014 http://public.econ.duke.edu/~kdh9/Courses/Graduate%20Macro%20History/Readings-1/Kaldor.pdf
Kalecki M [939](1954) “The determinants of investment”, reprinted in Selected Essays on the Dynamics of the capitalist economy, 1933-1970”, Cambridge, United Kingdom: Cambridge University Press, 1971, pp. 110-123.
Keynes, John M. [1930](1935). A Treatise on Money, Book 1 The pure theory of Money, London, United Kingdom, Macmillan and Co, Limited.
Keynes, J.M. [1930](1935). “A Treatise on Money, Book 2, The applied theory of money, London, United Kingdom, Macmillan and Co, Limited.
Keynes, John M. 1936. The General Theory of Employment, Interest, and Money, Harvest/Harcourt, Inc. 1964.
Keynes John, M. 1937. “Alternative theories of the rate of interest”, The Economic Journal, 47(186) (June), pp. 241-252, http://www.jstor.org/stable/2225525 Accessed: 13/07/2010
Keynes, John M. 1937b. “The 'ex ante' theory of the rate of interest”, The Economic Journal, 47(188): 663-669, http://www.jstor.org/stable/2225323 Accessed: 13/07/2010
Le-Bourva John. 1992. “Money creation and credit multipliers”, Review of Political Economy, 4(4): 447-446.
http://dx.doi.org/10.1080/09538259200000029
Lenin, Vladimir. [1916](1963). “Imperialism, the Highest Stage of Capitalism” in Lenin’s Selected Works, Volume 1, Moscow, Soviet Union, Progress Publishers, 1963, Moscow.
Minsky, Hyman. 1964. “Financial Crises, Financial System, and the Performance of the Economy” Pp. 173-380 in Private Capital Markets, Research Study Two, New York, United States, Prentice Hall, Inc, Englewood Cliffs.
Minsky, Hyman. 1975. John Maynard Keynes, New York, United States, Macmillan.
Minsky, Hyman.1986. Stabilizing an Unstable Economy, New York, Twenty Century Fund.
Minsky, Hyman. 1991. “The Endogeneity of Money’’ Pp. 207-220, in Nickolas Kaldor and Mainstream Economics, E. Nell & W. Semmler, editors, St. Martin’s Press.
Michell, Jo and Jan Toporowski. 2013-2014 “Critical Observations on financialization and the financial process”, International Journal of Political economy, 42 (4), Winter, pp. 67–82.
Moore, Basil. 1988. Horizontalists and Verticalists: The Macroeconomics of Credit Money”, Cambridge, United Kingdom, Press
Parguez, Alain and Mario Seccareccia. 2000. “The Credit Theory of Money: the Monetary Circuit Approach”. Pp- 101-123 in in What is Money? J, Smithin editor, Routledge, Canada and the USA.
Rochon Louis P. 1999. Credit, Money and Production. An alternative Post –Keynesian Approach, Edward Elgar, Cheltemham UK.
Rochon, Louis P. 2006. “Endogenous Money, Central Banks and the Banking System: Basil Moore and the Supply of Credits’’ Pp. 170-186, in Complexity, Endogenous Money and Macroeconomic Theory, Essays in Honour of Basil J. Moore, M. Setterfield, editor, Cheltenham, UK. Edward Elgar.
Toporowski, Jan. 2000. The end of finance, capital market inflation, financial derivatives and pension fund capitalism, Routledge Frontiers of Political Economy
Toporowski, Jan. 2014. Créditos y Crisis: Desde Marx a Minsky, forthcoming, Mexico, Porrua editors.
Bellofiore, Ricccardo and Mario Seccareccia. 1999. “Monetary Circuit” Pp. 753-56. In Encyclopedia of Political Economy, Volume 2 Economic Policy, edited by P.A. O‘Hara, London: Routledge
Caldwell Bruce. 1996. “Introduccion” in Obras de Friedrich A. Hayek, Volumen IX. Contra Keynes y Cambridge. Ensayos y Correspondencia, edited by Bruce Cadwell, Unión Editorial, Colombia.
Hayek, Friedrich A. 1931. Prices and Production, Augusts M. Kelley, Publishers, New York
Hayek, Friedrich A. 1933 Monetary Theory and the Trade Cycle, Alden Press
Graziani, Augusto A. 2003 The monetary theory production, Cambridge, United Kindgom: Cambridge University Press
Kaldor, Nicholas. 1970 “The New Monetarism”, accessed November, 2014 http://public.econ.duke.edu/~kdh9/Courses/Graduate%20Macro%20History/Readings-1/Kaldor.pdf
Kalecki M [939](1954) “The determinants of investment”, reprinted in Selected Essays on the Dynamics of the capitalist economy, 1933-1970”, Cambridge, United Kingdom: Cambridge University Press, 1971, pp. 110-123.
Keynes, John M. [1930](1935). A Treatise on Money, Book 1 The pure theory of Money, London, United Kingdom, Macmillan and Co, Limited.
Keynes, J.M. [1930](1935). “A Treatise on Money, Book 2, The applied theory of money, London, United Kingdom, Macmillan and Co, Limited.
Keynes, John M. 1936. The General Theory of Employment, Interest, and Money, Harvest/Harcourt, Inc. 1964.
Keynes John, M. 1937. “Alternative theories of the rate of interest”, The Economic Journal, 47(186) (June), pp. 241-252, http://www.jstor.org/stable/2225525 Accessed: 13/07/2010
Keynes, John M. 1937b. “The 'ex ante' theory of the rate of interest”, The Economic Journal, 47(188): 663-669, http://www.jstor.org/stable/2225323 Accessed: 13/07/2010
Le-Bourva John. 1992. “Money creation and credit multipliers”, Review of Political Economy, 4(4): 447-446.
http://dx.doi.org/10.1080/09538259200000029
Lenin, Vladimir. [1916](1963). “Imperialism, the Highest Stage of Capitalism” in Lenin’s Selected Works, Volume 1, Moscow, Soviet Union, Progress Publishers, 1963, Moscow.
Minsky, Hyman. 1964. “Financial Crises, Financial System, and the Performance of the Economy” Pp. 173-380 in Private Capital Markets, Research Study Two, New York, United States, Prentice Hall, Inc, Englewood Cliffs.
Minsky, Hyman. 1975. John Maynard Keynes, New York, United States, Macmillan.
Minsky, Hyman.1986. Stabilizing an Unstable Economy, New York, Twenty Century Fund.
Minsky, Hyman. 1991. “The Endogeneity of Money’’ Pp. 207-220, in Nickolas Kaldor and Mainstream Economics, E. Nell & W. Semmler, editors, St. Martin’s Press.
Michell, Jo and Jan Toporowski. 2013-2014 “Critical Observations on financialization and the financial process”, International Journal of Political economy, 42 (4), Winter, pp. 67–82.
Moore, Basil. 1988. Horizontalists and Verticalists: The Macroeconomics of Credit Money”, Cambridge, United Kingdom, Press
Parguez, Alain and Mario Seccareccia. 2000. “The Credit Theory of Money: the Monetary Circuit Approach”. Pp- 101-123 in in What is Money? J, Smithin editor, Routledge, Canada and the USA.
Rochon Louis P. 1999. Credit, Money and Production. An alternative Post –Keynesian Approach, Edward Elgar, Cheltemham UK.
Rochon, Louis P. 2006. “Endogenous Money, Central Banks and the Banking System: Basil Moore and the Supply of Credits’’ Pp. 170-186, in Complexity, Endogenous Money and Macroeconomic Theory, Essays in Honour of Basil J. Moore, M. Setterfield, editor, Cheltenham, UK. Edward Elgar.
Toporowski, Jan. 2000. The end of finance, capital market inflation, financial derivatives and pension fund capitalism, Routledge Frontiers of Political Economy
Toporowski, Jan. 2014. Créditos y Crisis: Desde Marx a Minsky, forthcoming, Mexico, Porrua editors.
Downloads
Published
2015-12-14
How to Cite
Orlik, N. L. (2015). Economic Growth and Financial Instability: The Ideas of Hayek and Keynes. Journal of Reviews on Global Economics, 4, 192–204. https://doi.org/10.6000/1929-7092.2015.04.20
Issue
Section
Special Issue - Hayek, Keynes and the Crisis: Analyses and Remedies. An Introduction
License
Policy for Journals/Articles with Open Access
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are permitted and encouraged to post links to their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work
Policy for Journals / Manuscript with Paid Access
Authors who publish with this journal agree to the following terms:
- Publisher retain copyright .
- Authors are permitted and encouraged to post links to their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work .
