Post-Keynesian Institutionalism and the ‘Common Man’: Philip Klein, Business Cycles, and the Public Sector
AbstractJohn R. Commons, whose career was motivated by “whatever helped the common man,” saw the business cycle as the most important of all labor problems. More recently, Philip Klein devoted his career to analyzing business cycles for much the same reason (Beyond Dissent, p. 301). Klein’s work focused on the development of cycle indicators, explicitly building on the pioneering efforts of Mitchell and the nascent NBER, and was supplemented by essays critical of mainstream macroeconomics and others on the role of the public sector.
Klein’s research led to an eclectic theory of cycles that remains useful as a way to synthesize a broad literature, even though the less comprehensive analyses of Sherman and Minsky have proven more useful in shedding light on recent cyclical developments. His essays on mainstream theory were timely when published, and contain enduring discussions of the malleability of the “natural” rate of unemployment and the value of a behavioral approach to expectations.
Klein’s attention to the public sector centered on introducing four concepts to explain how policy is made and plays a role in economic life—higher efficiency, collective ought, the value floor, and emergent values; he also addressed fiscal policy, emphasizing its role in moderating business cycles. In the end, his discussions of the public sector provide only part of a foundation for making and assessing economic policy from a post-Keynesian institutionalist perspective, but they also challenge us to think about the most fundamental issues in economics (and this paper proposes an initial step forward).