Microeconomics: Is There A Post Keynesian Alternative?

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 still remain quite underdeveloped as compared to mainstream microeconomics. The reason why microeconomics does not retain 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' goal was to substitute Say's law by the effective demand principle within neoclassical citadel and its assumptions. Post Keynesian economists have however developed meaningful elements on the theory of the firm, pricing, competition, and consumer behavior, sometimes even before the publication of the General Theory by Keynes (for example on imperfect competition with Joan Robinson). Two ways of divergence from mainstream economics can be identified in Post Keynesian microeconomics : a descriptive rupture (PK micro theory does think that agents do not behave like mainstream economics assume) and a normative rupture (Post Keynesian microeconomics doesn't lead to the same political conclusions). In the first section, we examine why alternative micro-foundations was not an issue in Keynes' General Theory, and why it is an important one for Post Keynesian analysis, as well as it is 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 the essential contribution of Post Keynesian economists is an inclusion of self-financing into the economic theory of the firm. In the third one, we discuss about Post Keynesian consumer theory. In the last section we discuss the implications of adopting Post Keynesian microeconomic tools in terms of economic policy.