This paper assesses the usefulness and limitations of the notion of bounded rationality for a theory of economic behavior and institutions under uncertainty, in particular if this theory emphasizes institutions. The paper distinguishes the lack of knowledge caused by complexity from fundamental uncertainty, as well as from less strong notions of uncertainty. Next, the relation between bounded rationality and institutions is discussed. With qualifications, the paper criticizes Simon’s theory for focusing on rules of thumb that may be strictly individual and for not paying enough attention to the social context, to habits and to the tacit aspects of institutions. A theory of bounded rationality revised in the light of these criticisms would still be inadequate to study behavior under fundamental uncertainty. The paper then incorporates this type of uncertainty into a discussion of rationality and institutions. It argues against neglecting the connection between innovation and rationality or implying that innovation is not rational. People may use their knowledge to be partly unconventional. Animal spirits and creativity determine whether behavior breaks with the usual way of doing things or not.

Post Keynesians advocate two distinct approaches to monetary and interest rate policy. The activist approach sees interest rates moved counter cyclically to ensure strong growth and low employment. The parking-it approach, however, favors setting real or nominal rates at specific levels and changing them only sparingly. In this paper, the authors evaluate the impact on macroeconomic performance of three variants of this latter approach – the Smithin Rule, the Kansas City Rule and the Pasinetti Rule.

Cette etude est consacree au rapport entre les analyses keynesienne (post-keynesienne, kaleckienne) et classique, considerees du point de vue de deux horizons temporels, court terme et long terme. On y presente un modele dans lequel la traverse vers un equilibre de long terme classique, avec des prix de production, est decrite comme une sequence d'equilibres keynesiens de court terme (dans lesquels les productions sont ajustees aux demandes). Dans le court terme, les prix et les stocks de capitaux sont constants; ils ne sont ajustes que dans le long terme. Les prix repondent aux desequilibres des taux d'utilisation du capital. L'investissement est soumis a une contrainte de nancement, dans laquelle est implique l'octroi de credits par le systeme bancaire. Les pr^ets sont modi es au regard de l'in ation (politique monetaire).

Abstract not found

Pricing Behaviour and the Cost-Push Channel of Monetary Policy This paper examines the empirical and theoretical status of the cost-push channel of monetary policy, according to which interest rates affect the costs of production and hence pricing behaviour. Particular attention is paid to modelling the cost-push channel in a manner consistent with cost-plus pricing theory, which is identified as the canonical model of pricing behaviour in heterodox economics. It is shown that different variants of cost-plus pricing behaviour give rise to qualitatively different specifications of the costpush channel, with important consequences for macrodynamics and the conduct of monetary policy.

“We have all of us become used to finding ourselves sometimes on the one side of the moon and sometimes on the other, without knowing what route or journey connects them, related, apparently, after the fashion of our waking and our dreaming lives.”

main aim of the present paper is to advocate a methodology that Wynne Godley first proposed in Godley and Cripps (1983) and then clearly formulated in recent papers (1996, 1999). Godley's methodology was itself inspired by the reading of a series of papers by Tobin and some of his associates (Tobin 1969,

Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals. The Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic research it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad.

Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals. The Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic research it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad.

Kenneth Hannsgen for helpful comments on an earlier draft. Two anonymous referees