Introduction to Post-Keynesian Economics: New Foundations by Marc Lavoie

As post-Keynesian economics is nearing its 50th anniversary (see Rochon 2023), it is an opportunity to reflect on what Lavoie (2022, p. 34) calls the ‘institutionalization of post-Keynesian economics', that is the state of post-Keynesian conferences, books, journals, summer schools, textbooks and organizations. Inevitably, this leads us into discussions over the future of the institution. Needless to say, there are far more conferences, summer schools, textbooks, and journals today than some 2 decades ago, let alone 5 decades, and the future promises many more.

The number of post-Keynesian books, in particular, has also multiplied, largely the result of post-Keynesian-friendly publishers. Among these books, there are notably, Arestis (1992), Dutt and Amadeo (1990), King (2002) and more recently Blecker and Setterfield (2019) and Hein (2023), but in our opinion, very few have impacted the heterodox community quite in the way Lavoie’s book has. For many, and we hear this all the time from young and older scholars alike, this is the ultimate book of reference on anything related to post-Keynesian economics. According to Google Scholar, this edition of the book has been cited 1602 times — making it one of the most cited post-Keynesian or heterodox books.

The book covers many topics relevant to the growth of post-Keynesian economics, which following Lavoie, we define broadly to include a great many heterodox traditions. As an indication of the influence of this book, in 2022, someone on Twitter stated unequivocally, ‘post-Keynesian economics is whatever Lavoie says it is.’ This book is more than merely informative on post-Keynesian economics; it lays the foundation for future reflection and research.

The first version of the book appeared in 1992 and had a slightly different title, Foundations of Post-Keynesian Economic Analysis. Rochon was an undergraduate student at the University of Ottawa in the mid-1980s, and taking Lavoie’s class (in French) on ‘Post-Keynesian Theory: Money and Effective Demand’, in 1986. The content of that class would eventually become the 1992 book, indicating a long, reflective, gestation period.

But it took some 22 years for a new version of the book to be in print, along with a slightly modified, flipped, title, now Post-Keynesian Economics: New Foundations, albeit with the same publisher, Edward Elgar. The revised title was largely the result of the vast changes to the second version of the book — including a new chapter on ‘Open Economy Macroeconomics’ — reflecting Lavoie’s intellectual journey in those two decades, not to mention having lived through the financial crisis, which inevitably brought us to think deeply about its meaning and implications for both theory and policy, especially in terms of monetary policy. Indeed, whereas the 1992 book had 462 pages, the 2014 version rose to 660 pages.

Finally, the second edition of the post-Keynesian book, or if you like the third edition of the New Foundations book, appeared in 2022, and now contained 744 pages. It is this version that is the focus of this symposium.

While the core of the 2022 edition remains essentially the same as the previous, 2014, edition, some chapters underwent considerable changes, including some with new additions. It is apparent that Lavoie is not content on sitting on the success of the earlier versions of the book, and has undergone an introspection that is very much apparent in this new edition. The arguments are the same, but they are clearer and more nuanced, and in some circumstances, more developed. But one of the core elements common to all three versions of the book remains the same: post-Keynesian economics is a coherent alternative to the mainstream approach, and weaves together the real and financial sides of the economic system. Lavoie does a remarkable job at proposing a true alternative to the mainstream view, and leaves no doubt that the ‘There is No Alternative’ (TINA) notion is misplaced and wrong. While post-Keynesian economics was once defined as being negative and in opposition to the mainstream, Lavoie reassures us convincingly that post-Keynesian economics has morphed into a positive contribution to both economic theory and policy, and that the profession at large is in a desperate state of needing an alternative. This book stands as a testament to this fact: ‘a positive alternative must also be put forward. This is the main purpose of the book: to provide an alternative view and alternative models’ (Lavoie 2022, p. 4).

A second common thread through the three books is Lavoie’s insistence on building bridges between the various heterodox strands. It is clear he has no patience for divisions, and prefers to see the similarities between, say, fundamentalist post-Keynesians, Kaleckians, Kaldorians, ecologists, feminists and Sraffians. Where there are disagreements between the approaches, Lavoie prefers to see them as a matter of emphasis, and not of content. This point is evident in almost all the chapters, and indeed through many of his writings (see Lavoie 1992, for instance). In this sense, this book is about providing an alternative view, but one that unifies various strands of critical economics.

Structure of the Symposium

In wanting to honour Lavoie’s work, we invited a number of scholars to write a review of each of the chapters of the book. This is not an original idea: the French Revue de la Regulation did something similar for the 2014 edition of the book. We thought this was a thoughtful and imaginative way to celebrate both the scholar and the publication itself.

The authors in this symposium offer an extensive review and criticism of each of the chapters of the book, in the spirit of extending the discussion. As such, we would like to thank everyone who participated in this project. The end result, we think, is a thorough discussion of a book that will endure greatly the passage of time, and remain a classic reference for all post-Keynesians.

This symposium covers all eight chapters of the book, but excludes the conclusion, aptly called ‘Concluding remarks’. We are of two minds on having excluded discussion of the conclusion. In a way, this is where Lavoie discusses ecological economics as well as the future of post-Keynesian economics. Both topics are well deserving of a discussion, however, we felt that at only fifteen pages, the conclusion was too short to warrant a full discussion, in addition to the fact that it was not a unified topic.

Needless to say, we very much share Lavoie’s (muted) enthusiasm on the future of post-Keynesian economics. Here, Lavoie sounds a rather optimistic tone, although acknowledges the various challenges that lie ahead, many of which have prevented heterodox economists from adhering to the same journals and institutions enjoyed by our mainstream colleagues. As Rochon (2023) has argued, perhaps a bit sarcastically, in a paper on precisely the future of post-Keynesian economics, ‘In the end, the future is bright and full of promise, as long as we don’t aspire to dominate the economic, political and policy landscape.'

On the topic of the future of post-Keynesians, Lavoie begins by reminding us that post-Keynesian economics is more than a criticism of mainstream or orthodox views, that post-Keynesians have made coherent and positive contributions to economic theory and policy, as alluded to above. This echoes what Dutt (2003, p. 58) wrote two decades ago, that heterodox approaches ‘do not merely have a negative dimension but also have a positive one’; Dequech (2012, p. 89) agrees, arguing: ‘this criticism is unduly severe’ (see also Rochon 2023).

The result is that post-Keynesian economics has evolved considerable over the last few decades. Indeed, according to Lavoie (2013, p. 20): ‘In other words, post-Keynesian economics today is not the same as it was 20 years ago, and it is not always clear that some of its critics are fully aware of this evolution’.

Kerr (2005, p. 475) argues that, ‘Post Keynesian economics has evolved from a loosely associated grouping of dissenting ideas to a body of theories addressing a particular vision of interrelated aspects of the capitalist process.’

In our opinion, the institution of post-Keynesian economics has never looked better. It has expanded in many ways, and the Modern Theory of Money (or MMT) version of post-Keynesian economics has certainly attracted political and media attention, with many elected officials feeling the need to go out of their way to criticize and attach MMT. This is quite an accomplishment (see Lavoie 2023a). MMT also has a popular following the way post-Keynesians do not. In many ways, using many post-Keynesian ideas, they have achieved what post-Keynesian have not (Rochon 2019).

Regarding the concluding chapter’s thoughts on ecological economics, Lavoie is correct to argue that it has not been, until more recently, a major area of study, largely because ecological economics emphasize natural resource scarcity and no-growth and degrowth objectives, which are at odds with post-Keynesian theory, although Lavoie nevertheless expresses surprise as to why it has not been a more relevant topic of research within post-Keynesian economics given a number of overlapping concerns.

In the end, Post-Keynesian Economics: New Foundations remains without a doubt a leading reference text within post-Keynesian economics. This said, since the latest edition, much has happened, especially with respect to the post-pandemic recovery, and with respect to inflation in particular. It is unfortunate that the recent debates over inflation and conflict inflation erupted some months after the new edition’s publication. On the bright side, we can still see Lavoie’s opinion on the Monetary Policy Blog (Lavoie 2023b).

Disclosure Statement

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