Post-Keynesian Economics: New Foundations by Marc Lavoie
Chapter 2: Theory of Choice

ABSTRACT

This work presents and discusses chapter two of Marc Lavoie’s book Post-Keynesian Economics: New Foundations. It begins by analysing the concepts of uncertainty and rationality which are extremely important for the post Keynesian approach, and for economic theorizing in general. The notions of fundamental uncertainty and the closely related concept of procedural rationality, are employed in order to build the foundations of a theory of household choice. It proceeds by investigating the repercussions of the theory in a lexicographic/hierarchical analytical framework. In this framework, groups consume different goods depending on their respective needs, income effects are more important than substitution effects, and price competition has a secondary role. It is also shown that Lavoie’s approach does not only draw from the work of Keynes and other major post-Keynesian theorists, but also utilizes contributions from other strands of heterodox economics, thus providing an agenda for a possible theoretical synthesis.

KEYWORDS:

• Uncertainty
• rationality
• human needs
• theory of household choice
• post Keynesian microeconomics

JEL CODES:

• D1
• D8
• B4
• B5

Acknowledgements

Many thanks are due to two anonymous referees of this Journal and to the editor Louis-Philippe Rochon for comments and suggestions. The usual disclaimer applies.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1 All page numbers in brackets for the rest of the article refer to Lavoie (2022).