Re: endogenous money and inflation- again

[Paul Davidson <pdavidson@xxxxxxx>]

Ric please post this on the pktnet

At 02:54 PM 12/25/00 +0900, you wrote:
> Hello Everyone
>
> I have a question again, though I have asked you on the relation between
> endogenous money and inflation.
> In the mainstream view, money is regarded only as a transaction and
> portfolio assets, and its quantity is fixed. So the
> prices is derived from the following equation, if the liquidity function
> is known;
>
> P=M/L(r, L).
>
> Almost Post-Keynesian appear, however, to disagree with this.At first,
> Post-Keynesian never regard the quantity of money
> as fixed. Second is that because money isn't regarded just as transaction
> and portfolio assets, almost Post-Keynesian
> don't emphasize liquidity function so much. So the price level can't
> derived from this equation from the perspective of
> Post-Keynesian.


Your equation is nothing more than the quantity theory of money equation
(that permits the possibility of a variable velocity of money). It has
nothing to do with Keynes or Post Keynesianism  or whether the money supply
is exogenously fixed or endogenously variable.

The price equation in Keynes is derived from Marshall's micro supply
function where  p is a function of marginal costs (i.e., the ratio of money
wages to labor productivity) and a mark-up function depending on Lerner's
measure of the degree of monopoly. (All of this is spelled out in detail in
my POST KEYNESIAN MACROECONOMIC THEORY  book or in my article on aggregate
supply in the NEW PALGRAVE.)


In other words
 P = m(w/mp)

where w= money wage rate (or wage unit in the GT), mp is the marginal
product of labor, and m is Lerner's measure of the degree of monopoly power

paul