What would a Post Keynesian economist see as being the appropriate macroeconomic policy goals of the state? If we polled macroeconomists of all ideological persuasions, and asked them to outline the major macroeconomic policy objectives then the following consensus would probably emerge:(a) full employment; (b) price stability; (c) a robustly sustainable rate of economic growth; and (d) maintaining an equilibrium balance of payments. While these goals are so general that they lack clarity and are regularly used by different economists in ways that do not permit meaningful dialogue, we can use them to motivate our discussion. In this chapter we support (a) and (b) but contest (c) and (d). We argue that many Post Keynesians have been seduced by orthodox conceptions of a market-based capitalism with commodity currencies and as a consequence have accepted propositions that have no application in a fiat-currency monetary capitalism. Section 11.2 outlines our conception of the desirable macroeconomic policy aims for a progressive government based on the power the state enjoys in a modern monetary economy. Section 11.3 argues that the possibilities available to the state with fiat currency are typically misunderstood by both neoclassical supply-siders and many Post Keynesians alike. A 'progressive' policy approach must use this power to create employment buffer stocks to achieve price stability rather than using unemployment buffers (as in the 'NAIRU' approach).
Advances in Monetary Policy and Macroeconomics p. 192-211