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The Strange Emergence of 
Post Keynesian 
Economics in Finland 
12th International Post Keynesian Conference 
Kansas City,...
Outline 
1. Reflections on the debate about the future of Post 
www.helsinki.fi/yliopisto 
Keynesianism 
2. Absence of Key...
Future of Post Keynesianism: 
The Debate 
• Why Post Keynesianism has failed to achieve a stronger 
www.helsinki.fi/yliopi...
Keynesianism and Finland 
• Finland has a strong Nordic welfare model but fiscal policy 
has traditionally been very conse...
Emergence of Post 
Keynesianism in Finland (1) 
• PK was never mentioned in the Finnish public or 
academic economic polic...
Emergence of Post 
Keynesianism in Finland (2) 
• Rise of Post Keynesianism has happened 
although… 
• there is no PK trad...
Emergence of Post 
Keynesianism in Finland (3) 
• Examples of the rise of Post Keynesianism in Finland 
• PK blog “Raha ja...
Emergence of Post 
Keynesianism in Finland (4) 
• The electoral programme of the current chairman of the Social 
Democrati...
How Was It Possible? (1) 
• How has the rise of Post Keynesianism been 
possible even though the premises have been so 
di...
How Was It Possible? (2) 
• Post Keynesians (and heterodox economists more generally) 
have adhered to Kuhn’s theory of pa...
How Was It Possible? (3) 
• Post Keynesians have waged a scientific war against the 
mainstream and waited for the right c...
How Was It Possible? (4) 
• Neoclassical economics derives its authority, to a great extent, from 
www.helsinki.fi/yliopis...
How Was It Possible? (5) 
• Kuhnian scientific crises are not likely for the neoclassical theory 
because orthodox theory ...
How Was It Possible? (6) 
• PK project in Finland was launched with a visible op-ed piece in the 
country’s biggest newspa...
Conclusions (1) 
• As many Post Keynesians have suggested, it is questionable 
can the neoclassical theory even be seen as...
Conclusions (2) 
• PK is not very well-known in many countries  makes it 
possible to frame it as something new and fresh...
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The Strange Emergence of Post Keynesian Economics in Finland

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Post Keynesian Economic Policy session at 12th International Conference

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The Strange Emergence of Post Keynesian Economics in Finland

  1. 1. The Strange Emergence of Post Keynesian Economics in Finland 12th International Post Keynesian Conference Kansas City, September 25th 2014 Lauri Holappa, University of Helsinki www.helsinki.fi/yliopisto 1
  2. 2. Outline 1. Reflections on the debate about the future of Post www.helsinki.fi/yliopisto Keynesianism 2. Absence of Keynesianism in Finnish economic history 3. Emergence of Post Keynesianism in Finland 4. How was it possible? 5. Conclusions 20.10.2014 2 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  3. 3. Future of Post Keynesianism: The Debate • Why Post Keynesianism has failed to achieve a stronger www.helsinki.fi/yliopisto position? • Two broad explanatory models 1. Post Keynesians should move away from criticising mainstream economics and engage in positive dialogues with the mainstream (Colander et al, Fontana & Gerrard) 2. Post Keynesians have made strategic errors in the academic battle ‒ First generation of Post Keynesians failed to organise the continuation of the school (King) ‒ Post Keynesians make too many citations to orthodox papers and too few to other PK papers (Dobusch & Kapeller, Foley) ‒ Post Keynesian papers are scarcely available (Dobusch & Kapeller) ‒ Post Keynesians do not concentrate enough on the positive development of their theory (Lee) ‒ Post Keynesians do not cooperate with other heterodox schools (Dobusch & Kapeller, Stockhammer & Ramskogler, Lee) 20.10.2014 3 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  4. 4. Keynesianism and Finland • Finland has a strong Nordic welfare model but fiscal policy has traditionally been very conservative • Even orthodox Keynesianism has never gained significant support in Finland (Pekkarinen & Vartiainen) • Even very few visible Old (or dissident New) Keynesian economists in the Finnish policy debate or academia • Debate mostly dominated by supply-siders and orthodox www.helsinki.fi/yliopisto New Keynesians • Post Keynesianism has had virtually no role in Finland before the 2010s 20.10.2014 4 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  5. 5. Emergence of Post Keynesianism in Finland (1) • PK was never mentioned in the Finnish public or academic economic policy debate before 2010 • Most economists, let alone journalists, had never even www.helsinki.fi/yliopisto heard about PK • Everything has changed in four years • Currently Post Keynesians play a significant role in Finnish public economic policy debate • PK is now a widely discussed topic even in mainstream Finnish media • PK has gained quite significant interest also in the Finnish academic world • Political parties, NGOs and social movements have shown great interest in PK 20.10.2014 5 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  6. 6. Emergence of Post Keynesianism in Finland (2) • Rise of Post Keynesianism has happened although… • there is no PK tradition in Finland • there are only a handful of Post Keynesians in Finland • the rare Finnish Post Keynesians are all very young researchers and do not have prestigious academic positions ‒ Best-known Finnish Post Keynesians are still writing their www.helsinki.fi/yliopisto dissertations! ‒ None of Finnish Post Keynesians are connected to economics departments 20.10.2014 6 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  7. 7. Emergence of Post Keynesianism in Finland (3) • Examples of the rise of Post Keynesianism in Finland • PK blog “Raha ja talous” (Money and the economy) is now the most popular economics blog in Finland (Cision 2014) • PK textbook Rahatalous haltuun (Ahokas & Holappa 2014) (Understanding the Monetary Economy) was one of the most sold non-fiction books in the spring of 2014 ‒ Reviewed very positively in the biggest Finnish orthodox economics journal Kansantaloudellinen aikakauskirja (Finnish Journal of Economics) ‒ Even the Bank of Finland reacted to the book in its own website • Post Keynesians are now frequently interviewed in mainstream media • Major television channels have run feature stories about PK www.helsinki.fi/yliopisto economics • Post Keynesians have been called to give expert statements on economic policy in the Finnish parliament • Post Keynesianism has become the semi-official economic theory of the Left Party (see Patomäki 2014) 20.10.2014 7 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  8. 8. Emergence of Post Keynesianism in Finland (4) • The electoral programme of the current chairman of the Social Democratic Party also included many PK elements and was written, to a large extent, by self-proclaimed Post Keynesians • Numerous academic (and non-academic) seminars that discuss www.helsinki.fi/yliopisto Post Keynesianism • Special issue on PK theory in general social sciences journal Tiede & Edistys • Biggest Finnish newspaper Helsingin Sanomat (HS) has published several op-eds from PK researchers • HS has also hired an openly Post Keynesian economics analyst  themes such as uncertainty, endogenous money and sectoral balance analyses now frequently discussed in HS • Many altermondialiste and environmental groups now endorse Post Keynesianism (Attac, degrowth movement) • Best-known Finnish economists have reacted strongly and publicly against the rise of Post Keynesianism 20.10.2014 8 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  9. 9. How Was It Possible? (1) • How has the rise of Post Keynesianism been possible even though the premises have been so difficult? • The fact that Finland is a rather small country may explain part of the phenomenon • Post Keynesians have, however, had more favourable circumstances in many other countries  yet PK has remained marginal www.helsinki.fi/yliopisto 20.10.2014 9 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  10. 10. How Was It Possible? (2) • Post Keynesians (and heterodox economists more generally) have adhered to Kuhn’s theory of paradigm shifts from the 1960s onwards (King 2002) • Kuhn suggested that scientists are not usually willing to overturn the bases of the accepted scientific truth • Popperian view of an open-minded scientist constantly trying to www.helsinki.fi/yliopisto falsify hypotheses refuted • Most scientists work within an established framework of ideas and methods (normal science, hegemonic paradigm) • Scientific changes can occur only whenever there is a scientific crisis • Every theoretical perspective includes some anomalies • Anomalies of any theory may become embarrassing or otherwise indefensible in right circumstances  scientific crisis and possible paradigm shift 20.10.2014 10 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  11. 11. How Was It Possible? (3) • Post Keynesians have waged a scientific war against the mainstream and waited for the right circumstances for a paradigm shift to emerge • Kuhn’s theory is not, however, applicable to (neoclassical) www.helsinki.fi/yliopisto economics • In Kuhnian theory, paradigm shifts are possible to occur only because anomalies are always considered to be burdens for all theories  in right circumstances these anomalies become unbearable • The problem with Kuhn’s theory is that, although it rejects the Popperian view of an ideal scientist, it analyses the academic community as somewhat isolated and autonomous society • It especially overlooks social power relations 20.10.2014 11 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  12. 12. How Was It Possible? (4) • Neoclassical economics derives its authority, to a great extent, from www.helsinki.fi/yliopisto extra-academic factors • Orhtodoxy offers legitimation and reification for a particular political and social order (neoliberalism) • Passive protection of this order guarantees the special status of neoclassical economics and economists (job offers, access to visible and powerful positions, consultant fees etc.) • Theoretically weakest points of the neoclassical narrative, its anomalies, are foundations of the special social status of the orthodoxy • Say’s law • Long-run neutrality of money • Ergodic axiom • Anomalies of the neoclassical theory are not burdens for the orhodoxy but factors, which help the orthodoxy to maintain its hegemony  Kuhnian paradigm shift may not be possible in the case of neoclassical economics 20.10.2014 12 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  13. 13. How Was It Possible? (5) • Kuhnian scientific crises are not likely for the neoclassical theory because orthodox theory gains its status largely from outside the academia  anomalies do not cause autonomous scientific crises • Neoclassical theory must be challenged directly in the public www.helsinki.fi/yliopisto discussion • Political nature of neoclassicism must be explicitly stated and the theoretical debate in economics connected to real-world economic problems • Rise of Post Keynesianism in Finland was possible because the battle was fought right from the beginning in the public eye  orthodox community had to react: they could not just ignore Post Keynesians • Finnish Post Keynesians were forced to operate through the public sphere because their academic position was so weak  public visibility has also increased the academic status of Post Keynesianism in Finland 20.10.2014 13 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  14. 14. How Was It Possible? (6) • PK project in Finland was launched with a visible op-ed piece in the country’s biggest newspaper  blog launched at the same time • The piece was essentially a neo-chartalist argument stating that the “sustainability deficit” of the Finnish economy is a consequence of Finland joining the EMU • In the beginning of the project, Post Keynesians dealt with very concrete policy problems and gave numerous unorthodox policy problems • “Be politically relevant”, the first suggestion of Stockhammer and www.helsinki.fi/yliopisto Ramskogler (2012) • This gave significant media attention, which allowed the Post Keynesians to move the debate into a more theoretical area • Finnish Post Keynesians were also right from the beginning co-operating with sympathetic think tanks, NGOs, civil society movements, trade unions and political parties • Post Keynesians also dominate the economic debate in the social media • Similar features can also be seen in the rise of the MMT in the USA 20.10.2014 14 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  15. 15. Conclusions (1) • As many Post Keynesians have suggested, it is questionable can the neoclassical theory even be seen as scientific or academic  if neoclassical economics is not academic, it cannot be beaten in an academic debate  Kuhnian theories of academic paradigm shifts do not apply • Social scientists have to focus on the realism of their theories but they must keep in mind that factors relating to the sociology of science and knowledge very often determine the success of a particular theory • Post Keynesians should be a lot more active in the public debate and social media because the gatekeeping of neoclassical economists can thus be overcome • Stockhammer’s and Ramskogler’s advice extremely www.helsinki.fi/yliopisto important: Be politically relevant! 20.10.2014 15 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi
  16. 16. Conclusions (2) • PK is not very well-known in many countries  makes it possible to frame it as something new and fresh • Post Keynesians might have more academic possibilities and freedom within other disciplines than Economics (Political Economy, International Political Economy, Economic Geography, Economic Sociology) • Post Keynesians should avoid unnecessary and overly aggressive internal debates and appear as uniform as possible • PK is a more promising and coherent basis for a revolution in economics than obscure concepts like ‘heterodox economics’ • However, PK must be inclusive  big tent interpretation www.helsinki.fi/yliopisto necessary 20.10.2014 16 Valtiotieteellinen tiedekunta / Henkilön nimi / Esityksen nimi

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