Monetary Theory of Production: Revolutionary or Not Microfounded?

The paper questions the thesis that Keynes's theoretical contributions lacked ‘solid microfoundations'. First, it contributes to the perception that Keynes's theory does not equal Keynesian theory by emphasising the role of money and arguing that: (i) (Neo)Classical economics is not a special case of the General Theory and (ii) when dealing with Keynes's theory, we should use the term Monetary Theory of Production. The article then provides a brief historical overview of what Denis (2016, ‘Microfoundations.' Review of Political Economy 28 (1): 134-152) called the ‘microfoundation project'. It seeks its definition in the New Classical Macroeconomics literature of the 1970s and, more importantly, presents its core components: optimisation, market clearing, the representative agent and the rational expectations hypothesis. In light of the overall inadequacy of this project, the article proposes new (and tentative) criteria based on which we ought to identify new microfoundations: agents' abilities and behaviours, as well as the institutional environment in which they act. Based on the new criteria advanced and a critique of the core components of the microfoundation project, the article proceeds to investigate whether Keynes's MTP lacks solid microfoundations and explores the role played by money and time in Keynes’s conceptions of micro-behaviour.