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Microfoundations, Minsky and Classical Political Economy

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  • Jan Toporowski

Abstract

The microfoundations discourse originated as a critique of modelling abstracted from theory, in the sense of an explanation of the economic decisions that are supposed to give rise to particular economic outcomes. However, reduction of theory to individual choices and optimisation, integrated by prices and markets, overlooks the key role played by the circular flow of income in integrating individual choices, noted by Schumpeter and Marx, and the key distinction between households and firms that underlies Keynesian macroeconomics and the theories of Minsky, because the expenditure decisions of firms determine aggregate incomes.

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  • Jan Toporowski, 2016. "Microfoundations, Minsky and Classical Political Economy," Review of Political Economy, Taylor & Francis Journals, vol. 28(1), pages 92-98, January.
    • Handle: RePEc:taf:revpoe:v:28:y:2016:i:1:p:92-98
    DOI: 10.1080/09538259.2016.1108128
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    1. Jan Toporowski, 2005. "Theories of Financial Disturbance," Books, Edward Elgar Publishing, number 3179.
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