Revisiting a Historical Debate on Pricing Dynamics in the United Kingdom: Further Confirmation of Post Keynesian Pricing Theory

This paper revisits an early econometric debate on pricing dynamics using modern time-series econometric techniques. This debate is a particularly interesting case because it is the only occasion in which excess demand and nonmainstream pricing hypotheses, emphasized in Post Keynesian economics, involving prices being set as a markup on costs, were directly addressed from the same data set. Coupled with a theoretical reassessment of the neoclassical model, the paper argues that these econometric results provide support Post Keynesian pricing theory, and normal-cost pricing in particular.