October 26, 2015

Is Keynes acceptable?

Comment on Lars Syll on ‘Did Keynes ‘accept’ the IS-LM model?’

Blog-Reference

You summarize “My own view is that IS-LM doesn’t adequately reflect the width and depth of Keynes’s insights on the workings of modern market economies.” (See intro)

IS-LM never has been acceptable (2014). However, it is not only unacceptable because of Hicks's numerous blunders. It is unacceptable because of Keynes’s original logical blunder which has not been rectified until this very day (2011).

As it happens, the question has been settled a few days ago on David Glasner’s blog Uneasy Money:
— For the full thread see here.
— For Keynes's logical incapacity see the post ‘Keynes and the logical brilliance of Bedlam’.
— For the rectification of Keynes’s conceptual blunder see the post ‘End of confusion’.

The ‘width and depth of Keynes’s insights’ on the workings of modern market economies should not be overrated. His recurring mantra was “we simply do not know” and this is the most appropriate summary of Keynesianism until this day.

“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum, 1991, p. 30)

Neither Keynesianism nor Walrasianism in all their variants delivered the true economic theory — both approaches are unacceptable.

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL
Kakarot-Handtke, E. (2014). Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It. SSRN Working Paper Series, 2392856: 1–19. URL
Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge, MA: MIT Press.

See also 'Interest and profit'