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Loanable Funds vs. Endogenous Money: Krugman is Wrong, Keen is Right

17 Pages Posted: 3 Feb 2014 Last revised: 25 Apr 2014

Egmont Kakarot-Handtke

University of Stuttgart - Institute of Economics and Law

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Date Written: February 1, 2014

Abstract

In his recent article, Keen resumes the debate with Krugman about the effects of debt upon the economy. It is hard to see how the question can be settled as long as all participants apply their idiosyncratic models. Hence the issue boils down, as Krugman rightly put it, to the deeper question: “how should one do economics.” Sketched with a broad brush, the consensus is that Orthodoxy has failed and that Heterodoxy has no convincing alternative to offer. The conceptual consequence of the present paper is to restart from a firm common formal ground. This relocation makes the debate solvable.

Keywords: new framework of concepts, structure-centric, axiom set, consumption economy, debt, Profit Law, simulation, market clearing, budget balancing

JEL Classification: B59, E21, G00

Suggested Citation

Kakarot-Handtke, Egmont, Loanable Funds vs. Endogenous Money: Krugman is Wrong, Keen is Right (February 1, 2014). Available at SSRN: https://ssrn.com/abstract=2389341 or http://dx.doi.org/10.2139/ssrn.2389341

Egmont Kakarot-Handtke (Contact Author)

University of Stuttgart - Institute of Economics and Law ( email )

Keplerstrasse 17
Stuttgart
Germany

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