Philip Pilkington’s interview of Marc Lavoie on his textbook Monetary Economics is available to read at Naked Capitalism. New Directions in Monetary Economics: An Interview with Marc Lavoie – Part I

Part 2 appears here: New Directions in Monetary Economics: An Interview with Marc Lavoie – Part II

Wynne Godley used to think that Keynesians were being defeated by Monetarists because they (the Keynesians) simply could not answer how money (in general assets and liabilities) is created and hence wrote the book Macroeconomics with Francis Cripps. After that he wanted to make it even more solid.

Marc Lavoie says:

… it is clear that Wynne wished to depart from neoclassical economics, and start from scratch, which is what he did to some extent already when Wynne and his colleague Francis Cripps wrote a highly original book that was published in 1983, Macroeconomics. This book was written because Wynne got convinced that the Keynesians of all strands were losing their battle against Milton Friedman and the monetarists, because Keynesians could only provide very convoluted answers to simple questions such as: “Where does money come from? Where does it go? How do the income flows link up with the money stocks? How is new production financed?”

Our book Monetary Economics also tries to provide appropriate answers to these questions. We agonized for a while between trying to engage in a constructive dialogue with our mainstream colleagues and targeting a non-mainstream audience, or perhaps trying to achieve both goals. In the end, we figured that it would be very difficult to please both audiences, and we chose to focus on a heterodox audience. In any case, I have spent most of my academic career trying to develop alternative views and alternative models of economics – what is now called heterodox economics; this is the literature we know best. So we took our book as a formal contribution to this heterodox literature and more specifically as a contribution to post-Keynesian economics.

Marc Lavoie at the Levy Institute, May 2011 (Photo Credits: me 😉 )