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Abstract: This article looks critically at the Post Keynesian theory of price. It is argued that underlying this theory is a view of the economy from the perspective of the entrepreneur, and it is this perspective that causes Post Keynesians to have a flawed understanding of prices. Specifically, it causes Post Keynesians to have an essentially circuitous and, in the final instance, vacuous explanation of prices. In a nutshell, Post Keynesians end up explaining prices by prices and, in the final instance, the value of money.
Key words: price; money; costs of production; credit; markup; profits; wage rate
1. Introduction
With criticisms of mainstream Neoclassical Economics growing, and policy makers at the highest levels in many countries opting for increasingly non-orthodox solutions in dealing with the fallout from the recent and ongoing global economic turmoil, Post Keynesian economics appears to be experiencing something of a (re-)revival, albeit mostly in academic circles.1 Although the focus of most Post Keynesians remains squarely on explanations of the aforementioned global economic turmoil and policy implications thereof, it is quite likely that in the not too distant future, greater attention will once again be paid to certain of its core theoretical foundations. One of these will no doubt be the theory of price, and it is this that is the concern of the article.
As the title of this article suggests, my purpose in what follows is to critically review what I understand to be the Post Keynesian price theory, taking as my point of departure the work of Karl Marx, especially his theory of price in Capital. There have certainly been other reviews of Post Keynesian price theory, most notably by the highly respected Sraffian economist, Ian Steedman (1992), in his provocatively titled article "Questions for Kaleckians," but there have been relatively few, if any, from a Marxist perspective. Such a review is therefore long overdue, especially since it can also help clear up certain misconceptions regarding the supposed commonality of the Post Keynesian and Marxist price theories.
Of course, pivotally important to a review of this type is how one interprets the theory which is to be assessed. The obvious danger is one of setting up straw-persons. With this in mind, I will begin in the next...