Jonathan Catalan responded extensively to "Lord Keynes"* and myself here, and then "Lord Keynes" put up a response back to Jonathan. I wanted to take issue with one thing in his response. "Lord Keynes" writes:
"...it is precisely that notion of a coordination mechanism in the market that Post Keynesians reject... Catalán might care to acknowledge that even some Austrians reject the notion of plan/pattern coordination in free markets, so even his own economic school is divided on that issue. Anyone who rejects the belief that the free market has a coordination mechanism will see that there is bound to be a waste of resources and involuntary unemployment in such a system."
Let's be very careful here, "Lord Keynes". The market does have a coordination mechanism and I don't think even Post Keynesians reject that. You have an effective demand schedule, do you not? You have a supply schedule, do you not? OK - you have market coordination. What you mean is that you don't always have a clearing market or an optimizing market. But you do have coordination. Investments aren't made and prices aren't set by throwing darts at a dart board. Prices coordinate.
This is an important distinction and it gets back to the distinction between central planning and demand management. What coordinates resources for Post Keynesians or any sort of Keynesians? Markets and the price mechanism. What are the aggregate properties of that coordination? Well that's where we Keynesians may depart from Austrians and others. But don't say there's no market coordination. Of course there is.
This bothers me about Joe Stiglitz a lot. He's very casual with phrases like "markets don't work". Well what do you mean by that? Don't work in what sense? Do they really "not work" or do they underperform in some systematic way. To say that market coordination does not guarantee full employment is very, very different from saying that there is no market coordination. The market still guarantees that positive net benefit transactions occur and negative net benefit transactions don't occur. That's coordination. No central planner could guarantee that. Whether that results in full employment is a different question entirely.
* - I don't know about anyone else, but this guy's screen name always strikes me as a little overfamiliar and presumptuous.
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