<p>This possible answer is from a 2004 Working Paper by Gennaro Zezza, Some Simple, Consistent Models of the Monetary Circuit.</p>
<p><a href="http://www.levyinstitute.org/pubs/wp405.pdf" rel="nofollow noreferrer">http://www.levyinstitute.org/pubs/wp405.pdf</a></p>
<blockquote>
<p>The  Theory  of  the  Monetary  Circuit  (TMC)  has  received  a  growing  interest  among  post-Keynesians  in  the  last  two  decades.  New  developments  have  recently  appeared  from
contributors to the two conferences in honor of Augusto Graziani,1 and a detailed analysis has recently appeared in Graziani (2003), where this approach is compared both to the classical
and neoclassical tradition, and to other post-Keynesian approaches.</p>
</blockquote>
<blockquote>
<p><strong>TMC, Say’s Law And The Keynesian Approach</strong>
At a first look, the TMC outlined here may resemble the neoclassical approach, where it is
savings  decision  to  determine  investment,  rather  than  the  Keynesian  approach  of  effective
demand,  where  investment  decisions  determine  the  level  of  output.  As  shown  in  our
accounting  in  Tables  1  and  2,  investment  needs  to  be  financed  by  issuing  equities,  and
demand  for  equities  ultimately  arises  from  savings,  so  it  may  seem  that  saving  decisions
ultimately determine investment.
Even  though  we  consistently  used  the  assumption  that  supply  equals  demand,  we
believe TMC to be compatible with a Keynesian approach: assuming that firms have excess
capacity,  an  increase  in  investment  will  stimulate  an  equal  increase  in  the  production  of
capital  goods.  This  will  in  turn  require  an  increase  in  the  wage  bill  for  the  capital  goods
sector, and an equivalent increase in loans demanded by this sector. The increase in the wage
bill  will  stimulate  production  in  the  consumption  goods  sector,  following  the  standard
multiplier  effect.  TMC  is  thus  entirely  Keynesian  in  spirit,  but  stresses  that  increases  in
production, generated by a rise in effective demand, may be constrained by credit rationing, if
firms pay real wages in advance.</p>
</blockquote>
<p>Note: I have removed my original comments which are tangential to the question.</p>

CC BY-SA 4.0
2021-10-17T20:30:16.890Z
This does not seem to answer the question? Am I missing something?
Giskard
CC BY-SA 4.0
2021-10-17T20:38:21.193Z
As an engineer I am more interested in the assumptions and model dynamics. I leave it to the economists to put labels on their models such as Post Keynesian or neoclassical. But in my opinion it is Post-Keynesian derived from the Italian banking circuit theory.
SystemTheory
CC BY-SA 4.0
2021-10-17T20:20:21.333Z
2021-10-18T01:44:57.283Z
2021-10-18T01:44:57.283Z
SystemTheory
<p><strong>&quot;money must be introduced as part of the production process. Such a process is inherently dynamic, as entrepreneurs in each period must produce a new flow of commodities.” and households have no role to play in the creation of credit.</strong> Is this view the Post-Keynesian view or the neoclassical view?</p>

CC BY-SA 4.0
2021-10-17T16:33:23.327Z
Hi @emma. Could you provide a reference?
EB3112
CC BY-SA 4.0
2021-10-17T17:19:58.557Z
@EB3112 Quoted text is from [Lavoie 1984](https://www.jstor.org/stable/4225471).
Giskard
<money><keynesian-economics><classical-economics>
Post-Keynesian theory and households?
emma
# Post-Keynesian theory and households?

(Asked by: username_0 on 2021-10-17)

**"money must be introduced as part of the production process. Such a process is inherently dynamic, as entrepreneurs in each period must produce a new flow of commodities.” and households have no role to play in the creation of credit.** Is this view the Post-Keynesian view or the neoclassical view?

**Tags:** money, keynesian-economics, classical-economics

> **Comments:**
> **username_1**: Hi @username_0. Could you provide a reference?  
> **username_2**: @username_1 Quoted text is from [Lavoie 1984](https://www.jstor.org/stable/4225471).  

---

## 1 answers

### Answer by username_3 on 2021-10-17. Score: -1

This possible answer is from a 2004 Working Paper by Gennaro Zezza, Some Simple, Consistent Models of the Monetary Circuit.

<http://www.levyinstitute.org/pubs/wp405.pdf>

> The Theory of the Monetary Circuit (TMC) has received a growing interest among post-Keynesians in the last two decades. New developments have recently appeared from
> contributors to the two conferences in honor of Augusto Graziani,1 and a detailed analysis has recently appeared in Graziani (2003), where this approach is compared both to the classical
> and neoclassical tradition, and to other post-Keynesian approaches.

> **TMC, Say’s Law And The Keynesian Approach**
> At a first look, the TMC outlined here may resemble the neoclassical approach, where it is
> savings decision to determine investment, rather than the Keynesian approach of effective
> demand, where investment decisions determine the level of output. As shown in our
> accounting in Tables 1 and 2, investment needs to be financed by issuing equities, and
> demand for equities ultimately arises from savings, so it may seem that saving decisions
> ultimately determine investment.
> Even though we consistently used the assumption that supply equals demand, we
> believe TMC to be compatible with a Keynesian approach: assuming that firms have excess
> capacity, an increase in investment will stimulate an equal increase in the production of
> capital goods. This will in turn require an increase in the wage bill for the capital goods
> sector, and an equivalent increase in loans demanded by this sector. The increase in the wage
> bill will stimulate production in the consumption goods sector, following the standard
> multiplier effect. TMC is thus entirely Keynesian in spirit, but stresses that increases in
> production, generated by a rise in effective demand, may be constrained by credit rationing, if
> firms pay real wages in advance.

Note: I have removed my original comments which are tangential to the question.

> **Comments:**
> **username_2**: This does not seem to answer the question? Am I missing something?  
> **username_3**: As an engineer I am more interested in the assumptions and model dynamics. I leave it to the economists to put labels on their models such as Post Keynesian or neoclassical. But in my opinion it is Post-Keynesian derived from the Italian banking circuit theory.  

---

