Classical-Keynesian Political Economy, not Neoclassical Economics, is the Economic Theory of the Future

ABSTRACT This article implies that the time is ripe for a new paradigm in economic theory comprising classical (Ricardian) and Keynesian elements of analysis. The central Section Five presents the basic equations of classical-Keynesian political economy, the price and the quantity equation, based on three constitutive principles: the classical labour value and surplus principles and the Keynesian principle of effective demand. Subsequently, two employment mechanisms implied in the super-multiplier relation, the classical-Keynesian quantity equation, are mentioned, the internal and the external employment mechanism. Section Seven provides an analysis of the actual situation on the basis of the external employment mechanism, associated with cumulative processes of increasing disequilibria and inequalities. Given this, it ought to be replaced by the internal employment mechanism, allowing for Keynesian employment and distribution policies (Section Eight). However, the internal mechanism can only be implemented if a new world economic order is brought about, based upon a supranational currency, that is, Keynes's bancor, to ensure balance of current account equilibria worldwide. Section Ten sets forth Keynes's social liberalism, the social philosophy underlying classical-Keynesian political economy, the fundamental social ethical value of which is the Common Good. Social Liberalism thus emerges as the alternative to Capitalism and Socialism.

Chapter I of Keynes (1891) reviews the ongoing methodological debates. Section two is about 'the conception of political economy as a positive, abstract and deductive science', section three on 'the conception of political economy as an ethical, realistic and inductive science'. He then goes on to elaborate a synthesis by 'distinguishing three types of economic inquiry': first, 'a positive science', that is, 'a body of systematized knowledge concerning what is'; second, 'a normative or regulative science', that is, 'an art as systematized knowledge relating to criteria of what ought to be and concerned therefore with the ideal as distinguished from the actual'; and third 'an art as a system of rules for the attainment of a given end'. This classification scheme permitted the economic theorist to insulate fundamental theorems from accusations of ideological bias, or ethical judgements, or relativity, as well as from failures in economic policies derived from these theorems. In effect, the normative science and the art of political economy provided a protective belt for the hard core of neoclassical theory that emerged from the marginal revolution. According to Keynes (1891, p. 52): If political economy regarded from the theoretical standpoint is to make good progress it is essential that all extrinsic or premature sources of controversy should be eliminated; and we may be sure that the more its principles are discussed independently of ethical and practical considerations, the sooner will the science emerge from the controversial stage. (Deane 2001, pp. 139-140). [This is crucial and Neville Keynes] was entirely in line with Alfred Marshall who claimed in his inaugural lecture: 'that part of economic doctrine which alone can claim universality, the principles to wit, has no dogmas. It is not a body of concrete truth but an engine for the discovery of concrete truth' (Keynes 1933a(Keynes [1972. Hence, in the view of Marshall and Neville Keynes pure theory, based upon fundamental principles, must be universal and independent from space and time, that is, of historical realisations which give rise to applied theory, and policy doctrines. With Marshall the fundamental principles are the marginal principle and the principle of supply and demand, embodied in his new economics, which still dominates the theoretical scene at the outset of the twenty-first century.
Thus, principles and pure theories are crucial and very difficult to refute because of the protection provided by two huge defence walls. First, there is the protective belt supplied by the normative science and the art of political economy mentioned above. Second, neoclassical principles and pure theories are safeguarded by the values of liberalism, making up its social philosophy. There is the primacy of the individual over society -Margaret Thatcher even suggesting that there is no society, only individuals; other liberal values are freedom, the right to private property and democracy as a political value. The idea of the self-regulating market associated with a minimum state is crucial; sometimes, it is even claimed that the magic properties of the self-regulating market economy have become a kind of secular religion. These liberal values constitute a second huge defence wall protecting the neoclassical pure theory fortress.
However, historical events and theoretical critiques have heavily damaged the neoclassical-Marshallian fortress. On the historical side are the Great Depression of the 1930s, the financial crises of 2007-08, heavy involuntary unemployment worldwide and increasing inequalities in income and wealth distribution on a world level; on the theoretical are the devastating capital-theoretic critique and, very importantly, the heavy internal critique of neoclassical-Walrasian economics recently put forward by the eminent MIT economist Ricardo Caballero (2010). On the constructive side, there are a great number of very useful pieces of economic theory to be found in Keynesian, post-Keynesian and neo-Ricardian-cum-Sraffian economic theory; moreover, a fundamental allencompassing framework based on principles is gradually emerging in the shape of classical-Keynesian political economy (Bortis 2012, on Luigi Pasinetti). This is crucial: empirical-historical evidence and theoretical critique are not sufficient to displace neoclassical economics. A comprehensive and coherent system of economic theory, based on a vision of man and society, that is, a social philosophy, must be erected on solid principles. Looking at classical and Keynesian political economy, three principles are emerging: two of classical originthe labour-value principle and the surplus principleand a third, the principle of effective demand, which is Keynesian. Given all this, neoclassical economics now seems à bout de souffle and, as a consequence, the future belongs, as is very likely, to classical-Keynesian political economy, not to neoclassical, Marshallian-Walrasian economics. This article aims to substantiate this proposition through setting forth a brief sketch of classical-Keynesian political economy, including some implications of this theoretical system. Possible extensions are also alluded to.
We start, in Section Two, with some conceptual remarks on economics and political economy, largely taken from Bortis (2019bBortis ( , 2021. Section Three is about fundamental methodological issues in economic theory. Subsequently, in Section Four, a most intricate problem is dealt with: the significance of Piero Sraffa within classical-Keynesian political economy. Section Five offers some remarks on the foundations of classical-Keynesian political economy on the basis of Bortis (1997Bortis ( , 2003Bortis ( , 2013a. In Section Six, we mention possible implications and extensions of classical-Keynesian political economy, which is, in fact, an open system of economic theory. Section Seven is devoted to an analysis of the actual prevailing socio-economic situation on the basis of the external employment mechanism. In Section Eight, the desirable situation is sketched by making use of the internal output and employment mechanism. Subsequently, in Section Nine, we hint at a new world economic order required to implement the internal output and employment mechanism on the institutional and policy levels. Finally, in Section Ten, some socio-economic, political and social philosophical implications of classical-Keynesian political economy are alluded to. In the concluding remarks in Section Eleven, we argue that, following up Karl Polanyi's First Great Transformation (1750-1830), a second great transformation is presently required to transform neoliberal capitalism into a Keynesian social liberal economy, whereby social liberalism, Keynes's social philosophy augmented by Aristotelian elements, underlies classical-Keynesian political economy (Bortis 1997, chapters 2, 7).

II. Neoclassical Economics and Classical-Keynesian Political Economy
Economic theory consists of two broad strands: economics and political economy (Bortis 2021). The basic model of neoclassical economics is Walras's general equilibrium model, popularised by Marshall's partial equilibrium model based upon the principle of supply and demand, refined by Arrow and Debreu and extended through the introduction of stochastic and dynamic elements. In neoclassical economics, the rationalprofit and utility maximisingbehaviour of economic agents in the marketplace is supposed to be coordinated by markets such that all resources, labour most importantly, are, in principle, fully employed. However, in the real world, a natural rate of unemployment is supposed to exist, made up of structural and voluntary unemployment; involuntary unemployment is absent. Economic activity is presumed to be governed by supply factors, that is, available resources. Saving governs investment, and money is neutral. Distribution is supposed to be regulated by market forces. Institutions, trade unions and entrepreneurial associations, as a rule, modify distributional outcomes. Thus, in principle, there is no room for state intervention. The market is almighty. Potentially, the general market equilibrium also implies a social -Paretooptimum. In the real world, the market system is surrounded by the institutional framework made up of political, social, legal and cultural institutions, which, ideally, have to be market-compatible. This implies that the basic aim of economic policy is to bring about all-prevailing competitive conditions. Finally, a fundamental characteristic of neoclassical economics is given by Sraffa's one-way avenue that leads from factors of production to final products.
This contrasts with classical-Keynesian political economy (Bortis 1997(Bortis , 2003 where the social and circular process of production is put to the fore, not the market. The social productgross domestic productresults from a common effort within all industries. Firms can produce only because they receive goods from other firms; for example, the shoe factory receives leather and specific machines. On the other hand, firms producing primary goods (such as iron, steel, electricity and machine tools) deliver their commodities to firms producing intermediate goods and final goods. Hence, the social process of production is a complex system of deliveries and receipts, which is represented by the so-called Leontief quantity system. Given the social nature of production, all the great problems of economic theoryvalue and price, distribution, employment, money and financeare social and macroeconomic issues (cf Bortis 2021, p. 92).
Political economy also rests on a specific vision of society. The heart of the economy is the social process of production and monetary and financial institutions (the central bank and the banking system). Given this, the economy is a monetary production economy, which forms the material basis of a society and produces the social surplus, that is, the social product (or GDP) minus the socially necessary consumption of producers, workers and employees in the productive (surplus-producing) sectors of an economy.
The social surplus is used to maintain and expand the production system through gross investments and, most importantly, to build up and maintain the material basis of political, social, legal and cultural institutions, including the educational system. These institutions form the institutional superstructure and, together with economic institutions (enterprises in the social process of production, making use of a specific technology, and the banking system), they form a complementary set of institutions, associated with the technology in use. Given the complementarity of institutions, the material basis of a society and its institutional superstructure form a system or a structured entity, which may be called the socio-economic system, or society for short. In political economy, society is primary and the starting point of analysis. Given this, political economy is, essentially, about the functioning of the socio-economic system, not about the rational behaviour of individuals, which is supposed to be co-ordinated in a socially meaningful sense by competitive markets (cf Bortis 2021, pp. 92-93).
While neoclassical economics rests on a single principle, the marginal principle to wit (Schumpeter), as is embodied in the principle of supply and demand, classical-Keynesian political economy is based on three principles (Bortis 2021, p. 103). Two principles are of classical origin: the labour-value principle summarises the essential features of the immensely complex social process of production to provide the essence of the prices of production, which are the fundamental prices in a monetary production economy (Bortis 2003, pp. 433-445); the surplus principle of distribution implies that the distribution of income is, positively, a social issue, with power relations, eventually resulting in mutual agreements, coming into play, and, normatively, a matter of distributive justice situated at the heart of social ethics (Bortis 1997, pp. 158-175). Keynes provided a third principle, namely, the principle of effective demand, related to determining the scale of economic activity (Bortis 2003, pp. 460-467). These three principles imply that money, intimately associated with the financial sector, plays a fundamental role. Indeed, the processes of production and circulation could not go on without money, since production takes time, outlays and receipts are not synchronised, and goods are never exchanged against other goods (as is the case in a neoclassical-Walrasian framework) but always against money, which also acts as a store of value and is, as such, intimately connected to the financial sector, which interacts with the real sector (Bortis 2015). Finally, the Common Good is the fundamental social ethical value of classical-Keynesian political economy; since, in an Aristotelian vein, ethically correct action requires knowledge, classical-Keynesian political economy is needed to realise the Common Good as perfectly as is possible for fallible human beings.

III. Methodological Remarks: Two Kinds of Abstraction in Economics and in Political Economy
Political economy and economics both represent grand systems of economic theory, based upon specific principles and systems of pure theory. The method used to obtain conclusions regarding the great problems of economic theorythe determination of the level of employment, the formation of prices and the regulation of income distributionis, however, entirely different in political economy and economics. This is evident from comparing two great works of political economy, Karl Marx's Kapital and Keynes's General Theory, with two important theoretical pieces in the field of economics, Alfred Marshall's Principles of Economics and Léon Walras's General Equilibrium Model.
The political economists consider the object under investigation, the economy, society and the state as an interrelated entity. This implies a specific vision of society: the economy with the social process of production at the centre constitutes the material basis that produces the social surplus used to build social, political and cultural institutions. Particular phenomena, for instance employment levels, income distribution and prices, are seen in terms of the economy as a whole; they are macroeconomic issues. The task of the political economist is to uncover the causal forces that govern the phenomena in question. This necessarily leads on to looking for the essential elements governing value, distribution and employment. Marx (and Ricardo) concluded that labour values represent the essence of prices. Marx argued further that distribution is regulated by the surplus principle. Moreover, Keynes stated that the level of employment is governed by effective demand; given this, unemployment is mainly involuntary. These principles lead on to very simple macroeconomic causal relations, that is, a macroeconomic price relation embodying the labour value and the surplus principles and a quantity equation, exhibiting the principle of effective demand. These pieces of pure theory imply considering essential elements. For instance, in the price equation, specific conditions of production and the vagaries of the market are not considered and, hence, abstracted from. This type of abstraction, abstracting from accidental or not essential elements, is denoted Aristotelian abstractionthe type of abstraction put to use in traditional philosophy.
Kantian abstraction, the type of abstraction of modern philosophy, is of an entirely different nature. Selected areas of the object (the economy, interrelated with society and the state) are chosen for investigation. The neoclassical economists consider the economic sphere, represented by the market, in a vacuum, so to speak: the market is at the centre surrounded by an institutional framework, which, ideally, should be market compatible, that is, not influencing the market mechanism.
The crucial point is that Kant denies that essentials can be identified. Given this, thinking about the properties of the objects seen as complex entities, for example considering the economy, society and the state as a complex integrated whole, governed by laws of its own, the paradox of thrift being an instance, is no longer possible. The traditional essences of Aristotle and Aquinas become dogmas that may be wrong: Galileo Galilei disproved the dogmatically held geocentric view through the heliocentric view. This mistrust concerning dogmas leads to modern non-dogmatic, scientific philosophy, of which Kant is one of the main representatives. Kant proposed that the subject himself thinks in an undogmatic way about the selected spheres of the real world; this is of paramount importance: the subject, the individual, now determines what the object is; to know how the object really is, indicated through essentials, is out of reach for the individual. Neoclassical economic theory provides an excellent example of thinking along Kantian (-cum-Cartesian) lines. In the main, there is Walras's General Equilibrium Model, which is a product of reason shaped by the liberal view: individuals are primary and society is derived from the actions of individuals. Hence, since objective truth, objective principles and pure theories, are out of reach for the individual scientist, the subject, through his thinking, determines what the object is. As a consequence, neoclassical principles and pure theories (Walras and Marshall) result from thinking in terms of what is directly observable, that is, the behaviour of the economic agents, not in terms of the economy as a whole, as is the case with Marx and Keynes. Given this, the analysis becomes positivistic and purely scientific. There are prices and quantities, and there is no essence of prices, no metaphysics. Economic agents behave rationally, they maximise utility and profits. And the market co-ordinates the optimising behaviour in such a way that a social optimum obtains: the general equilibrium is also a Paretooptimum. Hence, in economics the rational behaviour of individuals, that is, microeconomics, is fundamental and neo-classical micro-founded macroeconomics is given by Walras's general equilibrium model, considered the Magna Carta of economic theory by Joseph Schumpeter. In fact, Walras's general equilibrium model represents the pure theory of neoclassical economics, which provides the foundation of theoretical and applied work along neoclassical lines.
In general, truth becomes relative with the anti-metaphysical Kantian approach: theories are established and may eventually be falsified. In any case, science without metaphysics, that is, looking for essentials, leads to confusion, even to chaotic situations, illustrated by the intellectual scenery in the domain of economics prevailing presently; this is due to considering the various spheres of investigationeconomic, social, politicalas separated from each other; this is normal if, in a Kantian vein, the individualistic point of view is taken: the individuals simply become active in the various spheres; and since the various spheres are interrelated in the real world, so-called interdisciplinary work adds to the confusion. In any case, the holistic viewpoint, taken by Marx and Keynes, which ultimately results in very simple causal relations, for instance the classical-Keynesian super-multiplier, is pushed into the background. Nevertheless, neoclassical economics, based on Walras's general equilibrium model, still dominates because it has become an ideology serving the interest of powerful capitalist forces, huge corporations in the industrial, service and financial sectors, and, more importantly, a convincing alternative is lacking.
However, Keynes, putting to use his macroeconomic principle of effective demand, has ruthlessly unveiled the character of neoclassical theory: it is simply wishful thinking (Keynes 1936, pp. 33-34): The celebrated optimism of traditional economic theory, which has led to economists being looked upon as Candides, who, having left this world for the cultivation of their gardens, teach that all is for the best in the best of all possible worlds provided we will let well alone, is also to be traced, I think, to their having neglected to take account of the drag on prosperity which can be exercised by an insufficiency of effective demand. For there would obviously be a natural tendency towards the optimum employment of resources in a society which was functioning after the manner of the [neo-]classical postulates. It may well be that the [neo-]classical theory represents the way in which we should like our economy to behave. But to assume that it actually does so is to assume our difficulties away.
Marx and Sraffa are less polite with neoclassical theory, and its precursors. Marx speaks of vulgar economics because the exchange-oriented followers of Adam Smith only consider surface phenomena, prices of final goods, wages, profits and rents, without asking about the essence of these phenomena, that is, labour values, socially necessary wages and the social surplus. Piero Sraffa considers neoclassical economics an aberration, mainly because of the one-way avenue leading from factors of production to final goods, leaving the social process of production out of the picture.
However, we know that the modern neoclassicals counter criticism by arguing that competition is not perfect. There is monopolistic competition, there are oligopolies and monopolies; moreover, some trade unions still exist. Given this, globalisation is considered necessary to bring about more competition, also among huge multi-and transnational enterprises. Hence with increased competition, the (Walrasian) price or market mechanism would be capable of solving the great problems of economics: employment, value and distribution. However, if the price mechanism can solve the great problems of economics, then social and political issues can be easily solved, too. The links between the economic sphere, considered by the Kantian economists, and the social, political and cultural spheres can be easily established. To simplify things, it is postulated that individuals behave rationally in these spheres, too. This is demonstrated by the application of optimising techniques, put to use in the economic domain, to the social, political and cultural domain. The economics of crime is just one example. Given this, economics has become the master-science of modernity! At this stage, a crucial question arises: Can the price mechanism bring about a tendency towards full employment of resources, specifically labour, in principle, that is, in ideal conditions with perfect competition prevailing? The outcome of the capital-theoretic debate (Harcourt 1972) has shown that this is not the case (Samuelson 1966, p. 250). The neoclassical principle of supply and demand, implying the marginal principle, is not robust enough to determine prices and quantities at a fundamental level. Given this, the way is open to move from economics to political economy, that is, to the labour value and surplus principles and to the principle of effective demand.
To conclude, it is necessary to take a look at the work done by great economists and political economists. Marshall was a brilliant mathematician, who, as a master of persuasion, popularised economics, that is, the immensely complex Walrasian general equilibrium model. Given this, the main text of his Principles contains no mathematics; rather, these are presented as appendices. Walras was an engineer and, as such, a good mathematician, who, however, became a poet when discussing the question about the tendency towards a general equilibrium, which, in his view, was given by the flat lake of Geneva; storms produce waves, hence disequilibria. Once the storm ceases, the waves flatten out until equilibrium is reached! Hence, the scientifically rigorous basic model of neoclassical economics has to be complemented by analogies taken from nature to answer crucially important questions! In fact, Walras thought, in a Kantian-cum-Cartesian vein, of the competitive market as a kind of natural institution taking the tendency towards an equilibrium for granted.
The great political economists, Ricardo, Marx and Keynes, wrote their important works after a long period of preparation, around the age of fifty. Most importantly they were in-depth students of the history of economic theories, which, in Keynes words, leads on to the 'emancipation of the mind' through considering differences and contradictions between theories. Moreover, our political economists all did outstanding practical work putting to use the dictum 'nothing is more practical than good and solid pure theory': Ricardo was a highly successful stockbroker and a very influential member of the British parliament; Marx dealt intensively with social and political problems, as a co-organiser of the First International for example; and Keynes was a high-ranking civil servant, a writer on economic, political and cultural affairs, and a very influential government adviser. And, most importantly, Marx and Keynes were traditional (Aristotelian) philosophers who knew about the fundamental concepts of essence and existence, which with Keynes became pure and applied theory. And Ricardo was an amateur philosopher, as all human beings potentially are, with a highly developed common sense, enabling him to distinguish between what is really important for the entire economy, that is, labour, and what is not important or accidental, that is, the conditions of production.
Hence, the great political economists attempted to understand what is going on within the objectively given real economy through very hard theoretical and practical work; the theoretical work consisting of an in-depth study of the history of economic theories leading to Keynes's emancipation of the mind. This enabled Ricardo, Marx and Keynes to rationalise their vision of the working mechanism of a modern monetary production economy through distilling principles: the labour value and the surplus principles and the principle of effective demand. On the basis of these principles, a coherent body of classical-Keynesian political economy may be set up.
In short, economists are rigorous scientists, making sometimes heroic assumptions and arriving at clear-cut conclusions. But, when asked what they really want to say, their answers are not always satisfactory. However, political economists are artists for whom intuition, Keynes's first form of knowledge, is important. But, as Keynes said repeatedly, intuitive knowledge about the functioning of a monetary production economy is hard won. The object, the monetary production economy, has to be examined thoroughly and, perhaps even more importantly, the history of economic theories has to be studied in depth, such that the 'emancipation of the mind' results. This, Ricardo, Marx and Keynes did very seriously. And the conclusions reached are rational, but not conclusive. Keynes thought that the conclusions resulting from a very complex argument about the real world, the great Depression of the 1930s, set out in his General Theory cannot be proved. All the political economist can do is to convince his readers. (Incidentally, this is the reason why Keynes wrote his Essays in Persuasion.) And, finally, and perhaps most importantly, one should not forget that both Marx and Keynes were originally philosophers; in fact, they were traditional philosophers, admiring Aristotle who coined the terms essence and existence, which, in Keynes's hands, became pure and applied theory. This theoretical techniquepure-cum-applied theorywas put to use by Keynes in his Treatise on Money (1930Money ( [1971, vol. I, The Pure Theory of Money and vol. II, The Applied Theory of Money) and in his General Theory (1936 [1973]), where he distinguishes between 'the logical theory of the multiplier, which holds good continuously, without time-lag, at all moments of time [the multiplier principle is prior to its historical realizations in space and time], and the consequences of an expansion in the capital-goods industries which take gradual effect [in space], subject to time-lag and only after an interval [hence in historical time]' (p. 122; see also pp. 122-125); on this, see also Bortis (2021, pp. 105-107). Given this, principles and their associated pure theories, the super-multiplier grounded on the principle of effective demand for instance, are crucial since they provide the tools for empirical and historical investigation: The notion of principles [and their associated pure theories] is closely associated with Aristotle's essentialist theory of knowledge: the human mind does not remain at the surface of phenomena but tries to understand the essential or constitutive forces behind, perhaps better, inside, the phenomena. Here, the distinction between essentials and accidentals is crucial as is the comprehensive point of view implying that all the relevant information with the history of economic thought perhaps being most importanthas to be taken into account if a complex problem is investigated (for example, the formation of prices or the determination of involuntary unemployment). Only what is considered to be essential or constitutive to a phenomenon is included in the model, which is a picture, in fact a reconstruction or recreation of what probably constitutes a phenomenon (for example, prices, quantities and employment levels in political economy). This recreation is performed by reason interacting with intuition and is analogous to the recreation of constitutive aspects of nature by the late Cézanne by the means of colour or to the representation of essential information for the user of the underground through a map. Consequently, metatheories or sets of principles [and their associated pure theories] have not to be realistic in the scientific sense, since they are not [simplified] reflections or copies (Abbilder) of certain spheres of the real world that can eventually be associated with testable propositions. (Bortis 2003, p. 413) Keynes's philosophy is set forth in his Treatise on Probability (1921 [1973]), his first major work, originally submitted as a King's College fellowship thesis in 1908. This crucial work makes Aristotle fruitful for modernity. Given this, the Philosopher Keynes is perhaps even greater than Keynes the Political Economist. This proposition is enhanced by important books on Keynes's method that take account of unpublished work by him to be found in the Keynes archives at King's College, Cambridge: Anna Carabelli (1988), Athol Fitzgibbons (1988) and R.M. O'Donnell (1989, specifically pp. 36-40). Very importantly, probability refers to a relation between two parts of an argument [and] is always concerned with rational belief [resulting from Keynes's] theory of rational inference [which] takes the whole of human thought as its domain, ranging across areas as diverse as actuarial studies, legal disputation, moral reasoning, metaphysical speculation, psychical research and mathematical argument, not to mention daily life and all branches of the natural and social sciences [our emphasis]. Its aim is to express a unity within superficial diversity. (O'Donnell 1989, pp. 36-38) Given this, 'probabilities are always objective and never subjective. This is because they are essentially connected to logic and not to psychology. Logical relations are viewed as objective because they are grounded in an external immutable realm which timelessly transcends mere individual opinion' (pp. 37-38).

IV. The Significance of Piero Sraffa in Classical-Keynesian Political Economy
In Section Two it was suggested that the labour-value principle is, together with the principle of effective demand and the surplus principle, a constituting principle of classical-Keynesian political economy, which is essentially of a macroeconomic nature (Bortis 1997(Bortis , 2003. This seems to clash with the fact that Sraffa's prices of production differ from labour values if the conditions of production, given by capital-labour ratios, differ between industries while the rate of profits has, in principle, to be uniform in all industries.
In a Ricardian vein, one can reasonably argue that differing conditions of production are of secondary importance since they only modify values. In this view, labour values constitute the essence of the prices of production, implying that the conditions of production are accidentals in metaphysical terms. This proposition is true for classical-Keynesian macroeconomics, as set out in Bortis (1997Bortis ( , 2003Bortis ( , 2012. Indeed, classical-Keynesian macroeconomics must be based upon the labour-value principle, associated with the surplus principle of distribution and with Keynes's principle of effective demand. This goes together with the fact that the labour theory of value is wrong if the conditions of production vary between industries while the rate of profits is uniform (Bortis 2003, pp. 411-415). To ground classical-Keynesian macroeconomics in the labour-value principle is a simplifying assumption that renders macroeconomic analysis very simple, clear-cut and ready for socio-economic policy making (Bortis 1997(Bortis , 2003(Bortis , 2012. Introducing the prices of production on a macro-level would render macroeconomic analysis immensely complicated and useless for policy purposes. Hence, the labour-value principle enables the linking of Sraffa with classical-Keynesian macroeconomic theory in a sensible way. And, indeed, Sraffa's prices of production emerge from a labour value basis. This is evident from writing his equations for the prices of production (Sraffa 1960, p. 11) in a slightly different form. The first equation can be written as: Here, the expression: [(A a p a + . . . + K a p a )(1 + r)]/L a w] = P is but an indicator of the conditions of production, that is, the capital-labour ratio, which is different from the concept of the conditions of production Sraffa uses in Chapter III of his 1960 book. This expression suggests, first, that the conditions of production are not important on the macroeconomic level because they only modify labour values and, second, that the prices of production emerge from a labour value basis, which, incidentally, implies that the title of Sraffa (1960) should read: Production of Commodities by Means of Commodities and Labour. Indeed, if P were equal for all basic goods, then, obviously, the prices of production (p) would be proportional to labour values (L/A) in all equations of production: In equation (2), P is a scalar, that is, the ratio of two monetary magnitudes. Now to abstract from the conditions of production, the P-values of all the other equationsthe 2, the 3 and so onhave to be multiplied by appropriate scalars so as to make them equal to the P-value of the first equation. This is to abstract from the conditions of production that are accidentals and, as such, not relevant for macroeconomic purposes. Indeed, if the conditions of production are abstracted from, the prices of production (p) will be proportional to labour values (L/A) in all equations of production with the same structure as equation (3), and the labour values appear as the essence of the prices of production. In this context, one has to recall that pure theory is of a metaphysical character dealing with essentials only, and material reality and historical time are both abstracted from. Given this, '[p]rinciples and pure theories are intellectual constructs or products of the mind; they recreate or reconstruct by means of reason what is considered to be constitutive or essential of a phenomenon; for example, prices, quantities and output and employment levels' (Bortis 2021, p. 105). On metaphysical reasoning, see also the introduction to Bortis (2003, pp. 411-415, specifically pp. 412-413) and what has been said on the distinction between principles and pure theory, on the one hand, and applied theory on the other in Section Three above. To avoid misunderstandings, the proposition that labour values constitute the essence of the prices of production must be further explained. In fact, this proposition makes full sense only in a monetary theory of production and, hence, in a macroeconomic context. Here, prices are absolute prices. Indeed, Keynes, just after publishing his Treatise on Money, realised that he was not able to deal with the Great Depression and involuntary mass unemployment with his Treatise model, which implied full employment situations from which deviations could occur because of the credit cycle. Given this, Keynes immediately set out to write a new book that would become the General Theory. In the course of struggling to elaborate the General Theory, he wrote a very small paper for the Festschrift für Arthur Spiethoff (Keynes 1933b, pp. 123-125 (Keynes 1933b, p. 12), a statement which is fully true for the basic model of neoclassical economics, that is, Walras's general equilibrium model. Hence, Keynes's macroeconomic monetary theory of production must contain absolute prices, a fact that went without saying for Keynes because, in a monetary production economy, goods are always exchanged against money; hence, as a rule, relative prices in a macroeconomic context do not matter except for specificcomparativepurposes, to calculate the terms of trade, for example. This is certainly the reason why Keynes, in his General Theory, does not bother in the slightest about relative prices, that is, traditional neoclassical microeconomics. Pricing, that is, the calculation of normal costs and mark-up pricing was, for him, a matter of (practical) business economics, not a matter of economic theory; Sraffa would have agreed on this proposition. However, we argue in this article that Piero Sraffa provided the conceptual underpinning for mark-up prices. Now, it is crucial to note that Sraffa adds an equation for the national income to his equations for the prices of production, which allows him to keep the prices of production in absolute form, as is required for macroeconomic purposes: 'This gives k + 1 equations as compared with k + 2 variables (k [absolute] prices, the wage w and the rate of profits r)' (Sraffa 1960, p. 11). However, Luigi Pasinetti expresses Sraffa's prices of production as relative prices because he excludes Sraffa's additional equation for the national product (Sraffa 1960, p. 11;Pasinetti 1977, p. 73). On the other hand, absolute prices and quantities emerge from the social process of production if distribution (the money wage rate and the rate of profits) and the level of employment are determined (Bortis 2003, pp. 448-467, specifically pp. 451, 457, relations [19.18] and [19.25], based on Pasinetti 1986, pp. 422-423). Expressing Sraffa's prices of production as relative prices is necessary for two main reasons. First, this allows one to solve Ricardo's conundrum of absolute value, independent of distribution, through Sraffa's standard commodity. Second, and crucially, Sraffa's relative prices model allows one to disprove the basic neoclassical-Walrasian claim, namely, that the price system, consisting of relative prices, may, in principle, bring about a full employment situation and simultaneously solve the problem of functional income distribution on the basis of marginal products. This claim has been disproved in the course of the capital-theoretic controversy, initiated and led on the Sraffian side by Luigi Pasinetti (Harcourt 1972). Hence Keynes's principle of effective demand, which determines the quantities of all goods produced on the basis of the labour-value principle, is crucial to establishing a macroeconomic theory with laws of its own, entirely independent of and even in contradiction to the outcome of the behaviour of individuals, the paradox of thrift being a prominent example. Indeed, effective demand is a monetary magnitude and labour values have to be expressed in money form as absolute prices, which, in turn, are defined once the money wage rate is fixed and distribution is regulated through the mark-up containing the normal rate of profits on the level of firms and the social surplus on the macroeconomic level (see the macroeconomic price relation [4] below). Hence, the money wage rate is not the price of labour, as is the case in neoclassical economics; rather, together with the rate of profits, contained in the mark-up, it is a distributional variable. This is an important characteristic of classical-Keynesian political economy. The principle of effective demand and the labour value and surplus principles thus imply each other on the macroeconomic level. Given the above, in Section Five below and in Bortis (2003Bortis ( , 2012 it is argued that Sraffa can be brought together with Keynes's theory, which is essentially macroeconomic, on the basis of the labour-value principle only; this argument is also implied in Bortis (1997). Hence the labour-value principle is, in a way, the unifying principle of the macroeconomic part of classical-Keynesian political economy. Here, Sraffa's prices of production are thus discarded, in fact reduced to their essentials, that is, labour values. This must be so because sensible classical-Keynesian macroeconomics requires vertical integration: an economy must be considered an entity, a huge firm, as Nicholas Kaldor argued in his lectures in the early 1970s. This implies that macroeconomics has laws of its own that cannot be deduced from the behaviour of producers and consumers, the paradox of thrift being just one important instance. In this sense,Keynes was the first real macroeconomist and, given this, the founder of macroeconomics in the full sense of the word. However, Sraffa's prices of production become of primary importance if attention is directed towards industries, final product sectors and individual firms. This leads to Sraffa's constructive contribution. Why is a coherent system of prices of production required given the fact that, in a Ricardian-Marxian vein, labour values are fundamental and the conditions of production are of secondary importance? To explain this, we have to start from the macroeconomic price equation based upon the assumption of vertical integration (equation [4] below). The assumption of vertical integration is required at the macroeconomic level to derive the macroeconomic price equation in order to uncover the basic principles governing value and distribution on the macroeconomic level, that is, the labour-value principle and the surplus principle. However, the assumption of vertical integration evidently does not make sense on the microeconomic level. Firms do not know labour values; they simply take the existing prices on which to base their calculation of normal costs and prices. These prices are not labour values because no vertical integration exists on the micro level. Here, and on the industry level, there are horizontal interfirm and interindustry deliveries and receipts of goods and services, as are exhibited by the Leontief input-output table. Given this, labour values would have to be calculated by making use of the Leontief inverse, with prices having the same structure as the prices exhibited by relations 19.4, 19.5 and 19.6 in Bortis (2003, p. 438); this is impossible as the experience of the socialist economies has shown. Thus, normal cost and price calculations must be based on prices, not on labour values. Now, entrepreneurs and managers, if asked what kind of prices enter normal cost and price calculations, would simply reply that these prices are market prices, with exceptional price movements being abstracted from. However, Sraffa has demonstrated that this is wrong: the prices in question are not the result of the working of the principle of supply and demand, but are formed in the social process of production; hence, the prices in question are prices of production with the conditions of production playing a crucial role. As the classical economists knew, market prices as a rule deviate from the prices of production or from the natural prices; moreover, in commercial schools students are instructed to eliminate exceptional market elements from prices of basic and intermediate goods in order to obtain the prices of production to be used to calculate normal costs and prices. Hence, the assumption of equal conditions of production, required to establish the labour-value principle, cannot be maintained on the microeconomic (firm) level. However, once established in principle, the prices of production may be used on the microeconomic level to study, for example, the pricing behaviour of firms or, on the sectorial level, giving rise to industrial economics. Given all this, Sraffa's prices of production represent an immense theoretical achievement, which is alluded to in Bortis (2013b, pp. 62-66). Hence, Sraffa (1960) sets out the pure theory of the prices of production, and empirical and historical studies in mark-up pricing would be pieces of applied theory, which are likely to be very complex. Consider, for example, the production of a suit somewhere in Italy: the wool, originating in Australia, has been brought to Italy by a Greek ship, which has been produced in Germany, using steel produced in Japan with Swedish iron ore, and so on. Given the immense complexities of social production, pure theory is absolutely necessary to interpret correctly the empirical-historical result in terms of the labour value and the surplus principle, taking account of specific technical and socio-economic conditions of production. This implies that the theoretical system of classical-Keynesian political economy is essentially of a macroeconomic nature; classical-Keynesian microeconomics and industrial economics largely consist of empirical and historical work on the basis of Sraffa's prices of production. Hence, Sraffa provides the link between macroeconomic theory and facts, on the one hand, and empirical-historical microeconomics and industrial economics, on the other, establishing thus the link between the macro-, meso-and micro levels of classical-Keynesian political economy.
Given this, Sraffa's prices of production are Janus-faced. The labour-value face (relations 1 to 3 above) looks in the direction of macroeconomics, the prices-of-production face in the direction of meso-economics and microeconomics, that is, in the direction of industries, final product sectors and firms. However, the prices of production build upon labour values (relations 1-3). The labour-value principle thus emerges as a unifying principle of classical-Keynesian political economy, together with the surplus principle of distribution and the principle of effective demand. At this stage we may note that, in the socialist economies, the planning authorities have indeed attempted to directly calculate labour values. This requires, however, knowledge of the immensely complex Leontief inverse (Bortis 2003, relations 19.4-19.6, p. 438). Given this, the labour values cannot be calculated with sufficient precision even if powerful computers are available. The problem would be the definition of sectors and industries and the collection of the data required to calculate the production and labour coefficients, which are not available with sufficient precision. Consequently, the socialist method of calculating prices based on labour values resulted in an irrational price system. Some socialist enterprises made undeserved losses, others undeserved gains, leading to indebtedness between enterprises. This left the workers and the management of the socialist enterprises without real motivation to achieve the best possible price-quality relationship for final goods, with innovations in consumer goods being largely absent; moreover, as a rule, socialist enterprises attempted to keep the Plansoll as low as possible. These were certainly important factors bringing about the breakdown of the socialist economic system. In fact, central planning of quantities and prices is a war and crisis system, entirely inappropriate in normal and peace times. However, Sraffa's prices of production allow, in principle, for entrepreneurial freedom and motivated workers, implying the constant search for the best possible price-quality relationship. However, the social process of production must be regulated through employment and distribution policies, if this process is to continue in a way beneficial to society as a whole. Hence, for reasons of socio-economic expediency, the prices of production prevailing in an economy should be based on the labour principle of value without strictly corresponding to labour values (relations 1-3 above and the prices of production exhibited in Sraffa 1960, p. 11). The socialist aim of bringing about an ideal economic system through realising, in strict terms, the labour-value principle is bound to result in a loss of freedom and an authoritarian society. In fact, the fundamental policy aim must be to favour the coming into being of a good society, that is, to achieve the Common Good as far as this is possible for imperfect human beings with limited and probable knowledge. This is, in fact, Keynes's social liberal message. The attempt to bring about a perfect society in which prices are proportional to labour values would result in an authoritarian society, possibly even a tyranny.
Given this, the fundamental prices are not, and cannot be, determined in the market, be it in a Walrasian or in a Marshallian framework. But these basic prices need not be determined by a central plan either. Sraffa's work implies that price formation is decentralised, that is, prices can be fixed by individual firms through the calculation of normal prices, and, within the limits of the given output, governed by effective demand; this is also true of quantities. Sraffa has thus provided us with the foundations of the price theory pertaining to a theoretical alternative to neoclassical economics and centrally planned socialism, that is, classical-Keynesian political economy [the political economy of Keynes's social liberalism]. (Bortis 2013b, p. 69) This is certainly Sraffa's most important contribution to Keynes's social liberal alternative to liberalism, historically realised through capitalism, and to socialism with central planning. This constructive achievement of Sraffa (1960) is complemented by two critical achievements. First, this book has led to a revival of classical political economy while, at the same time, implying a fundamental critique of neoclassical economics. For classical-Keynesian political economy, which is essentially macroeconomics, the labour-value principle rests on simplifying assumptions: the same conditions of production for all goods and a vertically integrated economy. If the simplifying assumptions are given up, the labourvalue principle still holds, in modified form though (relations 1-3 above and the prices of production system exhibited in Sraffa 1960, p. 11). However, for the neoclassicals, the assumptions of the same conditions of production and vertical integration are crucial; if given up, the marginal productivity theory breaks down; for example, with Samuelson's (1962) surrogate production function, the neoclassical marginal productivity theory holds if the labour-value principle is postulated and breaks down as soon as the conditions of production differ between sectors of production (Bortis 1997, pp. 289-290). Given this, the capital-theoretic debate of the mid-1960s, based on Sraffa (1960) and initiated by Luigi Pasinetti, came out entirely in favour of classical political economy, with Samuelson admitting complete defeat (Samuelson 1966, p. 250). Second, the labour value and the surplus principles can be brought together with the long-period principle of effective demand through the classical-Keynesian super-multiplier relation (Bortis 2003, pp. 460-467), thus completing the classical-Keynesian synthesis. Hence Sraffa has not only rescued the classical labour value-cum-surplus approach, but also Keynes's principle of effective demand, literally snatching Keynes from the jaws of the neoclassical-Walrasian mainstream. (Bortis 2013b, p. 68) However, the fact that Keynes had become a Walrasian disequilibrium theorist for some time illustrates that criticism is not enough; a coherent classical-Keynesian system is required to definitely discard neoclassical economic theory. These considerations of Sraffa imply that Section Five below on classical-Keynesian macroeconomics has a heavily Ricardian flavour, with the labour-value principle put to the fore and capital consisting of fixed capital onlywith vertical integration circulating capital appears in the shape of indirect labour. However, on account of relations 1-3 above and of the equations for the prices of production (Sraffa 1960, p. 11), Sraffa is present on the macroeconomic level through the labour-value principle underlying his prices of production and, implicitly, on the level of industries and firms, precisely on account of his prices of production. Yet one should note that the macroeconomic price equation of a mark-up type (relation I below) rests entirely on the labour-value principle, and the macroeconomic 'mark-up' (k) now becomes the surplus coefficient (k * ), with the surplus being made up of surplus wages above necessary wages; profits; rents, made up of land and labour rents; land rents on intramarginal, more fertile land appear as a surplus; and labour rents, accruing to parts of the labour force on account of special skills, privileges and power positions. It is at this point that Sraffa comes into the picture, on the microeconomic level though, that is, on the level of firms. Here, all prices are prices of production and the various mark-ups contain profits only. However, on account of relations 1-3 above, the prices of production rest on a labour-value basis and profits are linked to the surplus principle. Given this, Sraffa has established the conceptual unity not only of classical-Keynesian political economy but also Marx's system of political economy, set forth in the three volumes of Das Kapital. Here, volumes I and II rest on the labour-value and surplus principles in the form of pure theory; and volume III is based upon prices of production, which in bourgeois (neoclassical) economics appear in alienated (ideological) form, that is, as market prices, and, in the sphere of distribution, as wages, profits and rents (Marx, Das Kapital, vol. III, 'Die trinitarische Formel', pp. 822 ff.). However, Marx and Engels seem to join the Ricardian position: the conditions of production do not produce values, but only modify values, and a modification that can be calculated does not imply a refutation of the law that living labour only produces value and that profits appear as a surplus, also produced by living labour (Engels, quoting P. Fireman, in his introduction to vol. III of Das Kapital, p. 21). Yet, it is not sufficient to claim that the conditions of production modify labour values. A coherent system of prices of production must be set up, and this is entirely to Sraffa's immense merit. Subsequently, Luigi Pasinetti has shown how labour values can be transformed into prices of production (Pasinetti 1977, appendix to the Sraffa system,. Given all this, Luigi Pasinetti and Piero Sraffa have both decisively contributed to advancing the Keynesian revolution and rendering it possible to contribute to an open system of classical-Keynesian political economy (Bortis 1997(Bortis , 2003(Bortis , 2012(Bortis , 2013a, capable of being extended in various directions: money and finance, foreign trade and business cycles, for example.

V. The Basic Equations of Classical-Keynesian Political Economy
It is of the utmost importance to bring together the three fundamental principles underlying classical-Keynesian political economythe classical labour value and surplus principles and the Keynesian principle of effective demandin a coherent theoretical scheme that may be set in opposition to the neoclassical-Walrasian framework. Indeed, as emerges from Keynes's economic and philosophical work, to analyse socioeconomic phenomena, employment and distribution on the basis of pure theories, grounded in turn on principles, is the most appropriate way to prepare rational policy actions in a complex and rapidly evolving real world, about which we have imperfect and probable knowledge only and where uncertainty about the future always prevails.
The analytical basis of classical-Keynesian political economy is set forth in Bortis (2003) and is put into a wider context of the social and political sciences and of history in Bortis (1997). Given this, in this section we present the basic elements of classical-Keynesian political economy, that is, the price and the quantity equations as they emerge from the social and circular process of production.

Value and Distribution: The Macro-Economic Price Equation
The immense complexity of the social process of production emerges from the two aspects under which it may be considered: the nature and the labour aspects. Horizontal or inter-industry models of the Leontief-Sraffa type represent the nature aspect of production: primary products taken from nature and intermediate products moving between industries to enable, in association with direct labour and fixed capital (past labour), the production of final goods (Pasinetti 1977). In vertically-integrated production models, labour is put to the fore. At the different stages of production labour uses up primary and intermediate products to produce final goods. In this, labour is assisted by fixed capital, embodying past labour (Pasinetti 1981(Pasinetti , 1986. In inter-industry models with unequal conditions of production, unequal relations between fixed and variable capital-price equations become immensely complicated. This can be seen immediately from Sraffa equations for the prices of production (Pasinetti 1977, chapter V). Indeed, prices depend on all production coefficients of basic goods and on income distribution represented by the uniform rate of profits.
Given this, the problem now is to bring out the essential elements of value formation and of the regulation of distribution such that a very simple model of value and distribution emerges that can be used for macroeconomic purposes (Bortis 2003, pp. 436-445). The starting point is a Leontief price system (Bortis 2003, relation 19.1, p. 436). Isolating the price vector and applying the Pasinetti transformation (Bortis 2003, relation 19.5, p. 438) yields a series of very simple sectorial price equations (19.6, p. 438). Indeed, each price is given by the product of the money wage rate, the quantity of direct and indirect labour per unit of output and of the mark-up, which has to ensure a target rate of profits on fixed capital; on the macroeconomic level, the mark-up (k) in relation (1) becomes the surplus coefficient and the money wage rate in this equation (w n ) the socially necessary wage rate. Given this, the sectorial price equations lead on to a macroeconomic price equation, based on the labour value and on the surplus principles: Overall, labour productivity (A) is the inverse of the macroeconomic labour coefficient (n) with (A = Q/N) and (n = N/Q), where (N) is the productive labour force active in the social process of production. In a Ricardian-Marxian-Keynesian vein, measuring (N) implies that the 'reduction problem' is solved through the existing wages structure; as a consequence, w n represents the socially necessary wage rate of a unit of simple labour. The social product (Q) is measured in terms of a bundle of socially necessary consumption goods, of which (p) is the price in terms of money. Most importantly, the socially necessary money wage rate (w n ), the surplus coefficient (k * ), and the distribution of the surplus result in the distribution of total incomes. Given this, prices are, in a Ricardian vein, formed in principle on marginal land where the rent for nature basics (agricultural products and raw materials) is zero; given this, land rents occur because less labour is required to produce a certain quantity of nature basics on intramarginal land. Labour rents arise because the wages of certain employees in the production and service sectors exceed socially necessary wages because of exceptional abilities (outstanding football players or very gifted surgeons) or power positions (managers getting very high salaries). Subsequently, the distribution of socially necessary wages and, above all, the distribution of social surplus among the various social classes becomes a fascinating problem of political economy, sociology and politics. Specifically, in this context, the notions of poverty and misery may be defined on the basis of the surplus principle. For those on low incomes, poverty results if the surplus wage tends towards zero and misery occurs if money wages are depressed below socially necessary wages, the main reason for the pressure on wages being permanently existing involuntary unemployment. Now, the (Keynesian) scale aspect of the monetary theory of production requires taking account of absolute prices and quantities. Absolute prices are determined once income distribution is regulated (Bortis 2003, pp. 436-456). To determine absolute quantities requires a theory of employment (Bortis 2003, pp. 456-467). Given this, the determination of the long-period level of employment (N) below full employment, governed by persistent factors, i.e., technology and institutions, will be considered next. This amounts to looking for the factors governing the breadth of the economic circuit or the scale of economic activity in the long term; formally, this amounts to determining the employment scalar by which the full employment level and the associated output quantities have to be multiplied (Bortis 1997, pp. 150-151).

The Scale of Economic Activity and the Employment Issue: The Quantity Equation
The classical-Keynesian long-period theory of output and employment is given by the super-multiplier relation as derived in Bortis (2003, pp. 460-467): This relation governs the position of the normal, trend or 'equilibrium' output (Q), which may be located well below the full employment trend (Q f ) (Bortis 1997, chapter 4, specifically pp. 142-154;2003, specifically pp. 460-467;2021, pp. 106-107, 109-113). Given this, the super-multiplier relation tells us how the long-period employment level is determined in principle by the institutional-technical system, independent of any historical realisation; as such, the super-multiplier pictures a fully-adjusted situation. The supermultiplier links the autonomous variables (government expenditures (G) and exports (X)) with output (Q) and, hence, to economically productive employment (N) because of (Q = AN), where (A) is labour productivity. In fact, economic activity is set in motion by the autonomous variables (G + X), which bring about a cumulative process of output and income creation in the consumption and investment goods sectors, which is constrained by imports. The trend rate of growth of output (Q) is governed by the growth rates of the autonomous variables (G) and (X). The super-multiplier relation is of a long-period nature because, in a classical (Ricardian) vein, all the prices and quantities involved are governed by technology and institutions that are constant or slowly evolving and represent, as such, a system equilibrium. To bring into the open the essential features of the super-multiplier relation, we postulate that socially necessary wages are entirely consumed. The surplus over socially necessary wages consists of ordinary surplus wages, gross profits and land and labour rents, the latter arising on account of special abilities or privileges. Given this, ordinary or normal wages, governed by collective or individual bargaining or simply imposed upon workers and employees, consist of socially necessary wages and ordinary surplus wages; if labour rents are added to ordinary or normal wages, the total wage sum results. The leakage as a fraction of the social surplus is z s = 1-c s = s s + t s (c s , s s, t s = fractions of social surplus consumed, saved and paid for in taxes, respectively). The surplus share in income is 1-(1/k * ), where k * is the surplus coefficient, which is a macroeconomic magnitude, differing from the microeconomic k, which is on unit costs at normal capacity utilisation to bring about a normal rate of profits; b 1 is the propensity to import necessary goods required in the process of production; b 2 stands for the import propensity of non-necessary goods that are related to state and private consumption; π equals the terms of trade; (g + d)v is the gross investmentincome ratio; g is the trend rate of growth of the autonomous variables (G + X); d is the drop-out ratio of fixed capital, depending on physical and technical obsolescence and hence upon the innovative dynamism of entrepreneurs; and v represents the capital coefficient. Given the autonomous variables, output (Q) is, in principle, positively linked with a large investment-output ratio (g + d)v and negatively linked with a strong import dependence, as is reflected in large import coefficients, and in unfavourable terms of trade (π is large). Most importantly, an unequal income distribution, reflected in a relatively large value of the surplus share [1-(1/k * )] is, in principle, associated with a lower level of output and employment; if the surplus is itself unequally distributed, the leakage coefficient z s will be largebecause of a high saving coefficient s swhich further depresses output (Q) and employment (N). The negative link between unequal distribution and output and employment is the crucial feature of the super-multiplier relation.

Extensions
Classical-Keynesian long-period theory, that is, the theory of the long-period output and employment trend, and its implications for the theories of value, distribution and proportions-cum-structures (on this, see Bortis 1997Bortis , 2003, represents the starting point for building up an open-ended classical-Keynesian system of political economy, which, in a first step, would consist of an orderly arrangement of all elements of post-Keynesian-cum-neo-Ricardian theories. Here, the works of Keynes and Sraffa would have to be put in their appropriate place. However, in a second step, the classical-Keynesian system must be open to allow all types of heterodox economics, and of (humanist) Marxist political economy. In this way, most differing aspects of an evolving real world may be tackled. And, to avoid misunderstandings, it should be mentioned that Walras and Marshall will, forever, remain monuments in the history of economic theory because, without knowing about their theoretical systems, we cannot understand the meaning and significance of the twin Keynes-Sraffa revolution (Shackle 1967) and of classical-Keynesian political economy. Hence, the purpose of the classical-Keynesian political economy is essentially positive and constructive; the aim is to gather all the forces required to meet the formidable challenges facing us on a world scale: social problems (poverty and misery), economic issues (employment and distribution), environmental problems and the issue of sustainable development on a world level, the migration problem, and last, but not least, the rebuilding of states. At this stage we mention two possibilities for integrating Keynesian and post-Keynesian elements of analysis into the system of classical-Keynesian political economy. The first kind of theory that can easily be incorporated into the classical-Keynesian framework of political economy is money and finance (Bortis 2013a, pp. 346-352;2015). Both pieces of analysis deal with the role of money and finance in a monetary production economy; specifically, the problem of financialisation is treated on the basis of Keynes's chapter 15 in volume I of his Treatise on Money: 'The Industrial Circulation and the Financial Circulation'. A second topic is the problem of growth and distribution. It would seem that the post-Keynesian rate of growth-rate of profit relationship should not be used as a theory of growth and distribution but as a (pure) theory of business cycles (Bortis 1997, pp. 132-135, 204-220). A short presentation of business cycles interacting with the institutional trend is set out in Bortis (2021, pp. 106-107, 111-113).

An Implication of the Super-Multiplier Equation
To prepare for the analysis in Sections Seven, Eight and Nine below, a specific characteristic of a simplified super-multiplier equation related to the determination of output and employment has to be set out. This property is relevant for the analysis of actually existing situations (what is) and desirable normative states (what ought to be) as well as for policy conclusions. In fact, the super-multiplier relation embodies two output and employment mechanisms, that is, the internal and the external employment mechanism (Bortis 1997, pp. 190-198;2019b, p. 197). The internal mechanism is based upon the fundamental macroeconomic equality (S = I): The economy is set in motion through government expenditures (G). The level of output and employment (Q i ) is governed by (G) and the consumption-output ratio (c), which, in turn, depends on the distribution of incomes. In a Keynes/Beveridge vein, a more equal income distribution enhances the spending power of the population, raises (c), leading thus to a higher output and employment level. The gross investment volume is, like consumption, a derived variable. Since (1-c) equals (s + t), the sum of the saving and tax ratios, and, in macroeconomic equilibrium the gross savings ratio (s) equals the gross investment ratio (a), relation (6) becomes: Hence, in macroeconomic equilibrium, the inverse of the tax-income ratio (t) represents the multiplier associated with government expenditures (G). This is equivalent to saying that government expenditures create the amount of taxes necessary to balance the state budget (G = t Q) as long as (Q) is below (Q f ). The external mechanism is based upon the current account equilibrium (X = M = b Q): The inverse of the import-output ratio (b) represents the familiar export multiplier stating how output (Q e ) and thus employment are governed by the external employment mechanism. This mechanism puts to the fore the essentially neo-mercantilist nature of international trade, characteristic of monopoly capitalism.

VII. Analysis of the Actual Situation on the Basis of the External Employment Mechanism 1
The internal employment mechanism (relation 6) is politically exceedingly difficult to manage in an open economy. There is, first, an inherent difficulty. The internal employment mechanism in fact requires establishing socially appropriate proportions between the state and the private sector, reflected by the ratio (G/Q), and a socially acceptable distribution of incomes, such that economic activity is near to, or ideally at, the full employment level. And, second, internal policies ought to be such that the external balance (X = M) is broadly preserved, which is exceedingly difficult, if not impossible, to realise given the fact that the external output and employment mechanism actually dominates. However, on a fundamental level the internal employment mechanism cannot be put to use systematically because it cannot be reconciled with the presently dominating external employment mechanism, as we shall now argue. The starting point is a modified and simplified version of the super-multiplier (relation 5 above), which, in fact, synthesises the internal and external employment mechanisms: This relation sets forth clearly the mercantilist nature of the external output and employment mechanism. Indeed, if the external mechanism dominates [Q e > Q i , as set out in equations (6) and (8)], then a current account surplus will show up in relation (9) and, contrariwise, a deficit will come into being if (Q e < Q i ) (see Bortis 1997, pp. 191-196). The surplus countries could, in theory, bring the balance of current account into equilibrium through stimulating effective demand, through additional government expenditures (G) and/or enhancing the spending power of the population by a more equitable income distribution to increase (c); however, we shall argue that this kind of Keynesian policy cannot be pursued in a competitive global environment. The deficit countries would, however, have to pursue austerity policies, lowering (G) or raising (t), which, as is evident from relation (7) above, would produce, and is indeed producing, catastrophic results regarding output and employment. In any case, however, a current account surplus stimulates economic activityoutput and employment riseand contrariwise with a deficit. In view of the difficulties associated with the internal employment mechanism it is natural that, with the creation of large freetrade areas and globalisation, almost all countries are forced to rely upon the external employment mechanism to secure levels of employment as high as possible. Given this, remaining competitive on world markets becomes all-important. Densely populated countries lacking primary resources (agricultural products, raw materials and energy resources) are, as a rule, naturally outward-oriented. Obvious examples are Germany, Japan, Singapore, Switzerland and Taiwan. Producers of primary goods are invariably forced to rely on the external mechanism (relation [4] above). With the external employment mechanism, economic activity is governed by exports and the import coefficient. Exports constitute an autonomous variable setting the economy in motion. The import coefficient reflects outside technical and cultural dependence and the terms of trade would constitute a kind of international reduction coefficient (Bortis 1997, pp. 185-189). Favourable terms of trade would imply that the labour of some country is highly valued abroad since, in exchange for given exports, large quantities can be imported. The employment effect of foreign trade will be particularly strong if the bulk of exports consists of high-quality industrial products and services and if imports are, in the main, made up of primary goods; in this case, the terms of trade will, as a rule, be favourable. Sophisticated high-quality industrial goods and services are, as Nicholas Kaldor has emphasised time and again, labour-intensive if account is taken of direct, indirect and past labour (fixed capital) and of research and development activities. However, primaries (agricultural products, raw materials and energy resources) are essentially land-intensive and industrial standard products create few and low-quality workplaces since their production is usually very mechanised, with machines being imported as a rule.
Here, the employment effect of foreign trade will be weak and heavy outside dependence on technologically advanced industrial products will occur. Most importantly, however, there is a contradiction between the external and the internal employment mechanism at the world level. In fact, world economic activity (Q W ) must be governed by the internal employment mechanism since the world as a whole is a closed system: The share of world economic activity attributed to each country is, however, governed by the super-multiplier mechanism (relation [5] above). Hereby, the shares in world industrial production and service activities are, of course, of particular importance; even shares in technologically advanced industrial goods and services are crucial. In order to successfully set to work the external employment mechanism, countries and regions have to offer favourable conditions in order to attract firms, which create additional work places and, subsequently, export the bulk of their production. The workforce has to be of good quality, but wages not too high. The infrastructure should be in a good state and available at low cost to the users. Public services, education in the main, and traffic infrastructure should be of high quality, but taxes not too high. Taxes may, in turn, be lowered if state activities are privatised. Given the endeavour to create, in each country, a favourable environment for exporting firms, it is likely that government expenditures stagnate or even decline at the world level, (G W ) in relation (10) declines. Even more importantly, income distribution has become markedly more unequal in the last thirty years or soand the distribution of wealth even more so; in fact, high involuntary unemployment worldwide and relatively high rates of mobility exert a downward pressure on wages everywhere, above all in the low wage sectors where primaries and industrial standard products, like textiles, are produced. According to relation (10), a more unequal income distribution, associated with a lower world consumptionincome ratio (c W ), and stagnating or eventually declining government expenditures (G w ) both imply that, in principle, long-period world economic activityoutput and employmentremains more or less constant or even declines. As a consequence, the struggle for world market shares, mainly of industrial goods and services, will intensify. Through the external employment mechanism, the few successful exporters of highquality industrial goods and services may nevertheless enjoy a satisfactory, even a booming, economic situation. The great number of losers, however, will be precipitated into the abyss of mass unemployment, increasing indebtedness, and social and political instability. Owing to the law of increasing returns and huge differences in technological standards and dynamism, as well as to the principle of effective demand, there is a cumulative causation of growing disequilibria (Kaldor 1985;Myrdal 1957), resulting in ever larger inequalities in income and wealth and employment opportunities worldwide. Hence, the external employment mechanism associated with large free-trade areas and globalisation is entirely inadequate, since so-called market economies do not produce any tendency towards full employment whatever. Quite the contrary, globalisation and large free-trade areas lead to growing disequilibria: income distribution gets more unequal worldwide, thus reducing spending power everywhere; this goes along with increasing indebtedness of countries experiencing current account and balance of payments deficits and, most importantly, with rising involuntary unemployment as is evident from relations (9) and (10) above. Hence, with the actually dominating external mechanism, distribution and employment are both regulated by social power, complemented by political and, eventually, military power. Indeed, the surplus principle of distribution implies, positively, that in the distributional struggle, weak and largely disorganised workers and employees are faced on a world level with powerful corporations and the big players of finance, and small enterprises have to lower wages too, in order to survive. In a situation of massive involuntary unemployment worldwide, this asymmetric power relation is, probably, the main reason for the continuously widening inequality in wealth and income distribution on the world level. In fact, with globalisation and large free-trade areas and massive involuntary unemployment, the free circulation of the workforce leads to a 'world war between workers and employees' (Sergio Rossi), resulting in a continuous pressure on wages. And, in line with the external mechanism, employment is equally regulated by power relations. Huge corporations, finance big players and, above all, nation states are struggling for market shares for final products, on the one hand, and for raw materials and energy resources, on the other. In this struggle, corruption as well as political and military power plays an eminent role. Since antiquity (the Peloponnesian and Punic Wars) and mercantilism and colonialism since, broadly, 1500, and, most importantly, two world wars, the external employment mechanism has been associated with conflicts, culminating at times in terrifying wars. And since the breakdown of socialism circa 1990, the neoliberal capitalist system seems to have become ever more crisis ridden. How to stop these cumulative destructive processes, leading to conflicts, even civil wars, with the threat of hot wars ever present? In the next two sections we shall argue that the only way out is to switch from the external mechanism to the internal mechanism of the functioning of monetary production economies.

VIII. A Sketch of a Desirable Situation Based on the Internal Employment Mechanism
In the preceding section we suggested that the presently dominating and conflict ridden external employment (and development) mechanism, now associated with globalisation and huge free-trade areas, cannot provide the conceptual basis for sensible distribution and employment policies in the sense of Keynes and Beveridge. Only the internal mechanism associated with the classical-Keynesian super-multiplier (Bortis 1997, pp. 191-194) can provide the appropriate theoretical basis for efficient and sensible socio-economic policies. This is valid universally, since theoretical principles and their associated policy principles are valid prior to their implementation in space and time. The specific way in which policy principles are implemented will depend upon the way of life of some country or region, in fact on institutions that have developed historically, which, in turn, have been shaped by a specific hierarchy of values, being historical expressions of fundamental and immutable values such as striving for truth, beauty and goodness. This was, broadly, also Keynes's view; he perceived with incomparable clarity that the materialist capitalist era must be followed by an epoch dominated by ethics and culture if modern civilisation is to survive. Keynes's vision is in line with the classical-Marxian, material basis-institutional superstructure vision of the economy, society and the state, which ultimately goes back to Aristotle. The classical-Keynesian internal mechanism is thus associated with a fundamental change in the value system: material (economic) values must not dominate, as is the case at present; on the contrary, the economythe material basisshould be but a means, implying that cultural values in the widest sense should dominate and economic values should become of secondary importance.
Given this, what then are the principles underlying employment and distribution policies along classical-Keynesian lines? Regarding distribution, the surplus principle of distribution implies that, positively, distribution is regulated by social forces (social power or mutual agreement), as was alluded to in the preceding section. From a normative perspective, the surplus principle of distribution implies that distribution should be regulated by the principle of distributive justice, which is at the heart of social ethics and regulates part-whole relationships, represented by shares in national income of individuals and social groups. In fact, distributive justice is about socially appropriate proportions (Bortis 2003, pp. 445-460). Two great issues arise with regard to the principle of distributive justice. The first concerns money wage structures (w i /w j ). Most important are wage structures within individual enterprises based upon the evaluation of workplaces. Subsequently, trade unions and entrepreneurial associations have to establish socially appropriate wage structures within and between industries, that is, finally for the economy as a whole. The second great distributional issue is associated with the socially appropriate normal rate of profits. To establish the level of the normal profit rate is a social and political issue in classical-Keynesian political economy, not a market issue as is the case in neoclassical economics. Profits are necessary for various reasons. Profits are primarily a reward for the risk incurred by engaging in production. Moreover, profits have to provide own means to finance gross investment. However, profits are also required to sponsor cultural and sporting events. These ways of spending profits represent aspects of the socially appropriate use of the social surplus of which profits are part.
Classical-Keynesian employment policies are grounded on the principle of effective demand. The distributional policies just mentioned are the most important means to bring about higher levels of output and employment. In fact, socially fair distribution leads to high spending power on the part of the population. This immediately emerges from the super-multiplier relation, set forth by relations (5) and (9) above: higher spending power of the population due to fair distribution of incomes leads, in principle, to a higher consumption-output ratio (c) and thus to a higher level of output and employment. Hence wage rates are not, from a classical-Keynesian perspective, the prices of different types of labour, as is the case in neoclassical economics; rather they represent distributional magnitudes to be determined by social and political considerations in relation to the principle of distributive justice. Given this, distribution emerges as the primary and fundamental problem of political economy, as perceived by both Ricardo and Keynes. The second factor governing the level of output and employment is government expenditures (G), which set the economy in motion as shown by relations (5), (6), (7) and (9) above; a macroeconomic equilibrium is reached once tax receipts equal government expenditures: (G = t Q). This relation expresses the fundamental employment policy principle of classical-Keynesian political economy: with distribution appropriately fixed along the social ethical lines just suggested, government expenditures (G) and the tax rate (t) have to be fixed in such a way that permanent involuntary unemployment is gradually absorbed and full employment is realised. Needless to say, realising this simple principle in the real world is an immensely complex process.
It is an important feature of long-period classical-Keynesian employment policy that there is no need to influence the long-period level of investment. Indeed, with income distribution regulated and government expenditures (G) and the tax rate (t) fixed, investment appears, according to relations (5), (6) and (9), as derived demand. However, it follows from relations (6), (7) and (9) above, that the policy principles associated with the internal mechanism can only be implemented generally if there is a strong and secure device to bring about a persistent tendency to equilibrium in the current account balance and the balance of payments in all countries. To this issue we now turn in the next section.

IX. A New World Economic Order is Required, Based on Keynes's Bancor
The present economic, financial and monetary world order, in principle based on free trade and the free flow of capital within a globalised world, and with the existence of large free-trade unions having a common money, inevitably leads to the domination of the stronger over the weaker and hence to steadily widening gaps between rich and poor continents, countries, regions, social classes and individuals. Eminent political economists have been aware of these cumulative disequilibrium processes at work in so-called free market economies, from Friedrich List to Nicholas Kaldor (1985) and Gunnar Myrdal (1957). The greatest political economist of the 20th century, John Maynard Keynes, was fully aware of this problem and proposed a very simple and ingenious solution: the creation of a supranational money, the bancor, associated with devices that force deficit as well as surplus countries to restore a balance on current account equilibrium and to control international capital flows (Keynes 1980(Keynes /1940. The setting up of Keynes's bancor system is absolutely necessary to render possible the employment and distribution policies based upon the internal employment and development mechanism. Indeed, with the balance on current account in equilibrium (X = M), the super-multiplier relation (5) is transformed into equation (6), which tells us how the internal employment mechanism functions in principle. The application of the internal mechanism would also enable each country to pursue sensible social policies as well as efficient environmental policies worldwide to prevent a global climate disaster. Moreover, migration would largely become voluntary if full employment could be gradually achieved worldwide. All these policies could be pursued because, with the foreign balance (X = M) in equilibrium, it would no longer be necessary to remain competitive at all costs to maintain or increase market shares and secure high employment levels through the conflict-ridden external employment mechanism. To conclude, Keynes's bancor system would make it possible to implement the internal employment and development mechanism, potentially associated with harmony within and between countries. Keynes already suggested at the very end of the General Theory that the possibility to pursue sensible distribution and employment policies would change the nature of international trade. Indeed, international trade would no longer be a desperate struggle for workplaces; rather, it would be associated with increasing the welfare of the trading countries: [If] nations can learn to provide themselves with full employment by their domestic policy there need be no important economic forces calculated to set the interest of one country against that of its neighbours. There would still be room for the international division of labour and for international lending in appropriate conditions. But there would no longer be a pressing motive why one country need force its wares on another or repulse the offerings of its neighbour, not because this was necessary to enable it to pay for what it wished to purchase, but with the express object of upsetting the equilibrium of payments so as to develop a balance of trade in its own favour. International trade would cease to be what it is, namely, a desperate expedient to maintain employment at home by forcing sales on foreign markets and restricting purchases, which, if successful, will merely shift the problem of unemployment to the neighbour which is worsted in the struggle, but a willing and unimpeded exchange of goods and services in conditions of mutual advantage. (Keynes 1936 It is well known that the institution of the US dollar as world currency represents an immense privilege for the United States, and also a very efficient tool of power. Given this, the great policy problem ahead will be to persuade the US to abandon the dollar as world currency and to render possible the setting up of Keynes's bancor as the new, now supranational, world currency. Since the Second World War, the conditions for implementing the bancor system have never been more favourable than at present, at a time when the US is taking drastic measures to reduce its foreign account deficit, and China and Russia are attempting to abandon the US dollar as the dominating currency on the world level.

X. The Social and Political Philosophy Underlying Classical-Keynesian
Political Economy 2 feature of this doctrine is to conceive of Man not only as a rational but also as an essentially social being. This necessarily implies seeing man and society as entities. However, this does in no way imply totalitarianism whereby the individual is, essentially, an exchangeable part of the social machine. On the contrary, according to the doctrine of social liberalism, society and the state are indispensable, but ancillary for the social individuals who can only realise their practical and intellectual potential based on and through society. Based on society means that preconditions or social foundations must exist if all social individuals are to be given the possibility of a good and decent life: full employment, a fair distribution of incomes, a public education system, an appropriate legal system and a diversified and large set of cultural institutions. Through society signifies that the degree of perfection of social individuals is enhanced through activities shaped by society, for example going to school, going to university, discussing, reading, contemplating works of art and architecture, practising sports and, last but not least, enhancing manual skills; in a world with ever more scarce natural resources, skilled tradescraftsmanshipmight become crucial again, as emerges from Richard Sennett's very important book, Handwerk (2008).
The notion of 'the social state of affairs' or, to simplify, 'the social' is thus fundamental to characterising social philosophies (cf Bortis 1997, p. 21). It would seem that two basically different meanings of the social are conceived of and used in a great number of varieties and combinations in systematic thinking on social matters. In the context of the first meaning, implied in Liberalism, the social denotes relationships and interactions between formally equal, autonomous and self-contained individuals and collectives striving to achieve individual aims; specialisation, competition and substitution characterise these relations. Social phenomena come into being through explicit and implicit contracts between individuals and collectives. The relationship between sellers and buyers is a social phenomenon in this sense.
The second meaning of the social stands for the relationship between unequal, incomplete and, therefore, mutually dependent individuals who require each other to achieve common aims, on the one hand, and social groups or entities, including society as a whole, on the other. Such part-whole relationships are characterised by complementarity between various functions, which in turn requires co-operation and co-ordination. Examples of this meaning of the social are the position and function of individuals or groups in some enterprise within which a sophisticated division of labour prevails, the determination of shares in a given national income, or the structure of wages in a monetary production economy. This second, Aristotelian, meaning of the social is relevant to social liberalism.
Each type of the social is associated with a specific kind of institution. The first is linked with individualistic institutions, which include regulated behaviour of individuals (regulated by habits, for example) and permanent and standardised interactions between individuals and collectives (e.g., permanent relationships between buyers and sellers). In this kind of institution, the regulated actions of individuals directed at achieving individual aims are primary and the socialthe interaction between individualsis secondary. The second meaning of the social is associated with social institutions: enterprises, the social process of production, orchestras, football teams; the nation-state is the most complete and complex social entity that summarises all part-whole relationships occuring within the state territory. On the level of the nation or nationalities, state coordination is crucial. Indeed, a stable government is required to realise the fundamental social ethical aim, the Common Good, as perfectly as possible.
Consequently, the social in the sense of Aristotle implies that nation-states are much more than the sum of individuals living in the state territory. There is in each nation-state a specific way of life, a characteristic organisation of social and political life, and there are specific social achievements in the scientific sphere and in the cultural domain: architecture, literature, the fine arts in general. Hence each nation-state is a unique social entity, having developed historically. The existence of a multitude of nation-states results in cultural diversity, which, in turn, renders possible mutual enrichment in the material and cultural spheres. Moreover, to consider a polity (society and the state) an entity has methodological implications. Indeed, to come to grips with the great problems of employment, value and distribution, and money requires a holistic approach based upon the classical-Marxian material basis-cum-institutional superstructure conception (Bortis 1997, pp. 89-103), with the material basis being linked to the institutional superstructure through social surplus. All problems now become immensely complex and Aristotelian abstraction is required to distil principles and pure theories. Kantian abstraction, considering a specific sphere in isolation, the economy for example, as Walras does with his general equilibrium model, is simply not legitimate (see Section Three above). The surplus principle implies that, in the social liberal view, the economy is a means to reach social, political and cultural ends. Keynes has perceived with incomparable clarity that the materialist capitalist era must be followed by an epoch dominated by ethics and culture if modern civilisation is to survive. On this, the Italian Keynes biographer Piero Mini writes: [Even the] most superficial reading of Keynes's writings … should convince anybody that Keynes was not an economist as we understand the term. He was primarily a social philosopher, a cultural leader interested in the cultural amelioration of society. Throughout his life he prodded the people and their leaders to set for themselves standards worthy of men … the promotion of solidarity among people (the opposite of Benthamite individualism and egoism) and the extension of the realm of beauty (the opposite of Benthamite 'push-pin'). Attainment of full employmentvia the agency of the state and through substantial reforms of the systemwas to be the way of attaining these … ends. (Mini 1991, pp. 102-103) Keynes was greatly influenced by 'an anti-rationalistic current associated with certain critics of the emerging commercial England [e.g., Coleridge and Carlyle, who]' (Mini 1991, xvii) 'stressed the primacy of the spiritual over the material, of ends over means, of intuition over the narrowly logical. They were humanists who opposed the claims of [materialistic] individualism with the claims of community and tradition and who had a positive view of the state and of the binding value of culture' (p. 2). This passage implies that cultural diversity and the exchange of ideas between countries, regions and civilisations is absolutely essential. Cultural standardisation along materialist Western, mainly US, lines would herald the decay of the modern world. This vision implies that the role of the state in social liberalism is, on the one hand, a very important one: creating as much social harmony as possible and reducing system-caused alienation, involuntary unemployment and socially unacceptable inequalities in the distribution of income and wealth above all, as far as is humanly possible (Bortis 1997, chapters 6, 7). On the other hand, the citizens should hardly realise that there is a state. Indeed, government activity must, in the first place, be directed towards organising the social system, i.e., towards setting up, or encouraging the coming into being, of socially appropriate institutions, such that the scope of liberty for the social individuals is maximised. This can only be done properly if there is a very solid economic theory from which appropriate policy conceptions may be derived. As has been suggested in the preceding sections of this chapter, this theory can only be classical-Keynesian political economy. The fundamental values, the good state and the good life, the pursuit of truth in all domains and attempts to achieve beauty, can be realised in very different ways. This gives rise to cultural diversity, which, through the exchange of ideas, may lead on to the mutual enrichment of the social individuals of the various countries or regions. To set up a good society in line with human capacities requires good government. Aristotle says at the outset of his Politics that governing is the most difficult of all the arts, the central problem being to bring about social justice, distributive justice in the main. The difficulty of governing has dramatically increased since the coming into being of modern monetary production economies with their very extended division of labour and the crucial role assumed by money and finance. Without understanding how monetary production economies function and how they are related to society and the state, appropriate political action is not possible. Political economy has become and has remained the key social science of the modern era. However, in the social liberal view, policy making is facilitated by the fact that a clearly defined overall policy aim exists, that is, to realise the Common Good as perfectly as is possible for fallible human beings. Since striving for the Common Good is a permanent task, government activity requires constant intellectual support. To create the intellectual preconditions for persuing Common Good-oriented policies, faculties of the social and political sciences would have to be set up, that is, the old German Staatswissenschaften (rerum politicarum) and the British moral sciences in a modern shape.
The immense complexity of modern monetary production economies and modern societies at large, alluded to in the above, leads to a case for the small and mediumsized state: the state should not be too large to be governable. Given this, large states (Brazil, China, India, Russia, the US) would have to decentralise substantially on the basis of the principle of subsidiarity. Stability within each country would produce stability on the continental and global levels. And stable socio-economic and political conditions within countries are the most solid basis for co-operation between countries and for eventually setting up supranational institutions, dealing with common problems of countries participating in loose geographical-historical federations and with co-ordinating activities. However, the individual countries must be and remain sovereign since Common Good-oriented policies must form a harmonious unity adapted to the social institutions and to the way of life of each country. To conclude, Keynes's social liberalism, underlying and shaping classical-Keynesian political economy, represents a humanist alternative to neoliberal capitalism and socialism with central planning.

XI. Conclusion: Implementing Keynes's Social Liberalism
Implementing Keynes's social liberalism necessitates, first, a new monetary and economic world order with a supranational moneyhis bancorat the centre, enabling each country to pursue employment and distribution policies, while broadly preserving a balance on current account equilibrium. In the second place, a fundamental change in the value system is required: ethical, social, political and cultural values must become primary, and the economy ought to be a means of realising these fundamental values, implying that material (economic) values be relegated to secondary importance.
All this requires a Second Great Transformation. To put this transformation into perspective one has to recall that Karl Polanyi's First Great Transformation (1750-1830) concerned transforming traditional feudal and, in part, mercantilist societies into modern industrial and service societies. It should be evident that this immense task requires very solid conceptions, above a very robust system of economic theory. Only classical-Keynesian political economy seems up to the task.
During the transformation process and the setting up of social liberal societies only one guiding star must exist, that is, the Common Good. Bearing this in mind is particularly relevant in view of the very rapid progress that is going on in the hard-and software computer sciences, with artificial intelligence and the use of robots perhaps being most important. Technical change must be Common Good oriented, implying that technology must be put into the service of Man and Society. In no case should the computer associated with artificial intelligence dominate our societies. Indeed, Gregory Daneke, an insider on the matter, writes that practitioners of machine learning might lose track of some of the vital understandings and enhancements that they originally promised. If they have already lost interest in arriving at a full understanding of the human mind and the meaning of consciousness, they might also inadvertently obliterate many ethical and legal considerations in their haste to monetize 'superintelligence'. … [Surveys among AI pioneers, business leaders and policy-makers have] identified a number of negative prospects [of AI]. In addition to privacy and imbedded algorithmic biases, the destruction of 'human agency' was paramount [our emphasis]. Given macroeconomic mismanagement and political disintegration, individuals in developed nations have never felt such a sense of loss of control over their lives, and most experts agree that widespread use of AI will make matters much worse. Toxic levels of anomie and alienation could have immense societal consequences. While the experts have diagnosed the loss of norms [and] personal efficacy … [a lack] of understanding of the social ecology of AI tends to play down its central, yet sublime theme. On its current institutional trajectory, AI is not so about enhancing human intelligence as it is about insisting that humans become more like machines themselves, and reorder their lives to become more compliant cogs in the bigger machine. Once algorithms know us better than we know ourselves, many an on-going effort to interject legal and ethical concerns might fall by the wayside. (Daneke 2020, pp. 23-24) In the course of the Second Great Transformation from neoliberal capitalism, two other problems of frightful complexity will have to be tackled: sustainable development and migration. Ultimately, as has been alluded to, both problems can be solved only within the institutional framework of Keynes's social liberalism, in which a supranational currency exists and economic policies are based on the internal output and employment mechanism. However, in the immediate future global warming is the pressing problem and there is no time to lose. grateful to Miri Taffel, Production Editor Review of Political Economy, whose help with reading the proofs has been invaluable.

Disclosure Statement
No potential conflict of interest was reported by the author.