1. Competition and money in Keynes (and Kalecki) Malcolm Sawyer

2. Introduction • The themes of the paper : the roles of assumptions on the structure of competition and the nature of money in Keynes’ General Theory, implications for subsequent macroeconomic analysis and comparisons with Kalecki’s approach.

3. Introduction • The use of (close to) perfect competition at time when Joan Robinson was writing Imperfect Competition • The use of (close to) exogenous money whereas credit money analysed in Treatise • Two areas where Keynes took a different route from that of Kalecki

4. Competition • The argument is not that imperfect competition required to provide explanation of unemployment, though helps with explanation of capacity underutilisation. • Kalecki used a form of perfect competition is his initial formulations of roles of investment and aggregate demand.

5. Competition • Did Keynes use perfect competition in order to ‘take on’ the neoclassicals ? • Imperfect competition and realism.

6. Competition • Kahn pointed out in 1931 that firms under perfect competition operate when mc rising and mc > avc. • With fall in demand, firms either close down or operate above capacity

7. Competition • Perfect competition and price formation • Price equals marginal cost in General Theory • Two implications • w/p = marginal product of labour • Firms satisfy demand which they face

8. Competition • These are important results which are more readily derived under imperfect competition • Firms make pricing decisions which influence wage, (own) price relationship. • Imperfect competition interpreted as firms set price and satisfy demand at that price.

9. Competition • Households : pQdc + Sa = wLs +  • Firms :  = pQs - wLd • (pQdc + pQdi - pQs) + (wLd - wLs ) + (Sa - pQdi) = 0 • If (pQdc + pQdi - pQs) = 0, then (wLs – wLd) = (Sa - pQdi)

10. Competition • Demand facing the perfectly competitive firm represented as horizontal : difficulties in distinguishing a price change from an aggregate demand change.

11. Competition • Is there a demand for labour function ? • Real wages over the business cycle • Real wages and the level of aggregate demand • Structure of competition and the distribution of income

12. Money • From Treatise to General Theory • Constant stock of money or exogenous money • Money, credit, and the financing of investment in Kalecki and in Keynes • Movements between equilibria

13. Money • Money and the Pigou effect • Stock of (endogenous) money is demand determined : can the stock of money in ‘real terms’ be changed ?

14. Money • ‘Nevertheless while a flexible wage policy and a flexible money policy come, analytically, to the same thing, inasmuch as they are alternative means of changing the quantity of money in terms of wage-units, in other respects there is, of course, a world of difference between them’ (GT,p.267)

15. Money • Endogenous credit money and the working of liquidity preference

16. Concluding comments • Structure of competition is not a cause of unemployment: but … • Endogenous money a crucial part of the exploring the role of effective demand