By Douglas Alencar (Federal University of Para)
Post-Keynesian economics is based on a set of principles that guide the studies within this school of thought. One of the pillars of this perspective is the conception of a monetary production economy, in which firms play a central role in determining production levels, employment, and savings.
The principle of production establishes that firms seek to maximize their profits, defined in monetary terms, rather than simply aiming for the efficient allocation of resources, as postulated by orthodox economics. This business behavior is reinforced by the principle of the dominant strategy, which highlights a fundamental asymmetry between economic agents: it is firms that make the fundamental decisions about production and investment, not consumers or savers.
The temporality of economic processes is also a crucial element of the Post-Keynesian approach. Since production takes place over time, firms must form expectations about future demand, introducing uncertainty into the decision-making process. This uncertainty is exacerbated by the non-ergodicity of economic processes: the future is radically uncertain, and agents cannot infer probability distributions from past data.
Another essential principle is that of coordination, which emphasizes the absence of a central planning mechanism in a capitalist economy. Agents’ plans are not pre-coordinated, which can lead to imbalances and macroeconomic instability. Money also plays a fundamental role, defined by its specific properties, such as null or negligible production and substitution elasticities, ensuring its viability as a means of contract and settlement of obligations.
Within this theoretical framework, the climate crisis represents a significant challenge. The belief that markets, without coordination, can solve environmental problems ignores essential aspects of the capitalist economy. Firms have incentives to maximize their short-term profits, often resulting in the unsustainable exploitation of natural resources. Furthermore, the inherent uncertainty of the economic system and its non-ergodicity make it difficult to develop well-founded expectations about future environmental impacts.
The transition to a low-carbon economy requires substantial investments in green infrastructure, clean technology, and climate adaptation. However, the principle of coordination warns us that there is no spontaneous mechanism ensuring that these investments will occur at the necessary scale and speed. Additionally, the properties of money and the financial system limit the private sector’s ability to finance such investments without structured support.
Given this scenario, state intervention becomes indispensable. Climate finance cannot rely solely on firms’ individual decisions, as private rationality often conflicts with public needs for environmental sustainability and macroeconomic stability. Public policies must ensure the allocation of resources to strategic sectors by offering long-term financing mechanisms, subsidies, and appropriate regulations to drive the transition toward a sustainable economy.
Therefore, in light of Post-Keynesian principles, it is evident that solving the climate crisis requires the active presence of the state in coordinating investments and financing the transition to a green economy. Unrestricted faith in the self-regulating capacity of markets ignores the structural limitations of capitalism and the urgency of addressing environmental challenges in a planned and coordinated manner.
