ABSTRACT
In this chapter, we will present the key elements of a Post Keynesian approach to microeconomics. Most of the time, microeconomics doesn’t constitute a core issue in Post Keynesian theory, and it still remains quite underdeveloped compared to mainstream microeconomics. The reason why microeconomics has not retained much attention among Post Keynesian economists is that, initially, developing an alternative microeconomic theory was not necessary to make the Keynesian revolution operative, since Keynes’s goal was to substitute Say’s law by the effective demand principle within the neoclassical citadel and its assumptions.
Post Keynesian economists have, however, developed meaningful elements on the theory of the firm, pricing, competition and consumer behaviour, sometimes even before Keynes’s publication of the General Theory (for example, on imperfect competition with Joan Robinson). Two paths of divergence from mainstream economics can be identified in Post Keynesian microeconomics: a descriptive rupture (PK micro theory thinks that agents do not behave like mainstream economics assumes) and a normative rupture (Post Keynesian microeconomics doesn’t lead to the same political conclusions).
In the first section, we examine why alternative microfoundations was not an issue in Keynes’s General Theory, and why it is an important one for Post Keynesian analysis - as well as for Keynesian economics in general, which historically faced the so-called microfoundations problem. In the second section, we present the elements of a Post Keynesian “producer theory.” We show that the essential contribution of Post Keynesian economists is an inclusion of self-financing into the economic theory of the firm. In the third, we discuss Post Keynesian consumer theory. In the last section, we discuss the implications of adopting Post Keynesian microeconomic tools in terms of economic policy.
